British Sugar taps supply from great rival to help plug shortage

British Sugar is turning to alternative suppliers, including rival producer Tate & Lyle Sugars, to fulfill contracts after a poor harvest led to shortages.

The incredibly rare step by the UK’s only processor of sugar beets — the type of crop grown there — comes after last summer’s drought and winter frost hurt output across Europe. It’s also another example of how local and global supply deficits are impacting the industry.

The company is prioritizing its own output for its Silver Spoon retail brand, according to people familiar with the matter who asked not to be identified. It’s using some sugar from Tate & Lyle Sugars — which turns raw supply into refined sugar — and other imports to meet contracts with industrial buyers such as food manufacturers, the people said.

A tight world sugar market has seen prices surge to the highest in more than a decade, threatening to raise costs for makers of everything from fizzy drinks to baked goods and to keep grocery bills high. In a sign of worries that supplies will remain stretched later this year, British Sugar has also offered UK farmers a premium to harvest some beets early for next season.

As the two dominant sugar producers in the UK, British Sugar and Tate & Lyle Sugars have had a competitive rivalry going back decades. In recent years, executives have shared tense panels at conferences, and the companies have had differing views on various issues, including post-Brexit trade.

British Sugar, owned by Associated British Foods Plc, said it doesn’t comment on contractual arrangements. Tate & Lyle Sugars owner American Sugar Refining Inc. said the company doesn’t comment on commercial matters. 

AB Foods earlier this year cut its estimate for UK sugar output in the current season by about 18% to 0.74 million tons after bad weather hit the crop. British Sugar has previously said that it’s buying imported supplies from a number of sources to meet long-term contracts, without elaborating.

In addition to British Sugar processing local beets that start being harvested from October, Tate & Lyle Sugars imports raw supplies for refining in Britain. The UK relies on imports from places like the European Union and African, Caribbean and Pacific countries to meet demand.