The price that U.S. grocery stores pay for sugar peaked in 2010 after shortages hit the global market and needed imports were difficult to attract. As a result, grocery stores charged shoppers more for bagged sugar at the checkout line in order to maintain their profit margins.
But market conditions quickly changed. Foreign exporters increased production with the aid of subsidies, turning shortages into surpluses, and prices on the world and U.S. sugar markets fell rapidly. However, the price that shoppers pay didn’t follow suit. Instead, it continued to climb.
It’s important to remember that bagged sugar equals a pure profit opportunity for grocery stores. U.S. sugar producers make the sugar, bag the sugar, store the sugar until buyers request it, and ship the sugar as part of the price they receive. Grocers, in turn, apply a new price tag to the product and pocket the difference between the wholesale and retail prices.
That’s why retail sugar prices rarely retreat. To do so would require grocers to voluntarily lower their profit potential. Of course, grocery stores aren’t the only ones enjoying this sweet set-up. Food manufacturers, too, steadily increase the price of sugar-containing products regardless of what’s occurring with wholesale sugar prices.
Check out this chart from a recent paper by Dr. Alexander Triantis, the dean of the University of Maryland’s business school.
He also made an excellent point about how inconsequential the price of sugar is to the financial wellbeing of candy makers and other food manufacturers.
“Public data provided by the National Confectioners Association on their website in 2013 indicated that for every $1 of confectionery product sold in 2010, only about 4 cents is attributable to the cost of sugar, another 9 cents is due to other commodity costs, and the remaining 87 cents covers other costs as well as the companies’ profit margins,” he explained.
And those figures were from 2010, when sugar prices were much higher than they are today, and candy bars didn’t cost as much.
Makes you wonder what all the fuss is about as opponents of sugar policy complain on Capitol Hill and say U.S. policy is harming grocery shoppers.
Grocers and food makers are doing quite well under the current arrangement and have widened sugar related profits since 2010 because they refuse to share any of their sugar savings with consumers. Meanwhile, the policy that is keeping sugar jobs in America and ensuring that we aren’t 100 percent dependent on subsidized imports continues to operate at no cost to U.S. taxpayers.