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Sweetener settlement for ADM

18-Jun-2004

Ingredients supplier Archer Daniels Midland (ADM) said on Thursday that it had reached a $400 million (€333m) settlement in an anti-trust case that claimed the US firm conspired to fix the price of the food sweetener high fructose corn syrup used expansively in food and soft drink products.

Ignited in the early 1990s the proposed settlement has its roots in a law case filed by over 20 plaintiffs, including soft drink giants Coca-Cola and PepsiCo, that accused the agribusiness of linking up with other manufacturers to fix prices of the sugar substitute, high-fructose corn syrup.

"In light of the potential exposure inherent in litigation, the board of directors concluded that it was in the best interests of the company to dispose of this matter," said G. Allen Andreas, chairman of ADM.

 

The class-action lawsuit filed in 1995 alleged that ADM's actions cost them $1.6 billion. The case had been scheduled for a September jury trial and ADM could have faced damages three times this amount at nearly $5 billion, as jurors could have tripled any award if they found the company guilty.

 

"We are pleased to have reached a resolution with our customers in the food and beverage industries," added Andreas.

 

High fructose syrups, known as isoglucose in Europe, kicked off in the US in the 1970s when the country developed new technologies to process this bulk calorific sweetener. The ingredient, an alternative to sucrose, rapidly gained in popularity and is now used extensively by the soft drinks giants Coca-Cola and Pepsi-Co.

 

A recent study found that in the 20 years from 1970 to 1990 the consumption of the popular soft drink sweetener, high fructose corn syrup, leapt by a massive 1000 per cent.

 

"HFCS now represents more that 40 per cent of caloric sweeteners added to foods and beverages and is the sole caloric sweetener in soft drinks in the US," said George Bray and colleagues in a recent issue of the American Journal of Clinical Nutrition.

 

The researchers suggest that this rapid trajectory of HFCS consumption, and processed carbohydrates in general, through food and drinks could be to blame for the steep rise in obesity.

 

But the industry hotly refuted this, and other, claims. "It is incorrect and even misleading to suggest the consumption of a specific food or food ingredient is the cause of obesity and the rising rate of type 2 diabetes in this country," Robert Earl, a director of nutrition policy for the $500 billion industry body, the National Food Processors Association, said at the time.

 

According to the US corn refining industry, in 2003 corn sweeteners, sourced from US corn farmers and the leading global corn suppliers, supplied more than 56 per cent of the US nutritive sweetener market.

 

Investment bank Goldman Sachs postulated today that ADM has approximately one-third of the US HFCS market andthe US unit, Staley, of UK sugar group Tate & Lyle has an estimated 20 per cent market share.

 

"Based on market shares, we believe Tate & Lyle could be liable for a $200-250 million payment to settle this case," said the bank today. We estimate that HFCS accounts for around 15 per cent of ADM's profit and 35 per cent of Tate & Lyle's profit.

 

In Europe HFCS use, known as isoglucose in the EU, falls far behind the US, principally due protectionist policies that seek to secure the EU's sugar regime and control sucrose alternatives, such as isoglucose. This means that isoglucose, used as well as soft drinks in canned fruits, condiments, ice cream and frozen desserts, is entitled to only a small niche market.

 

F.O.Licht tells FoodNavigator.com that the leading isoglucose suppliers in Europe are Amylum - which is also a subsidiary of UK sugar giant Tate & Lyle - and US agri-titan Cargill.

 

The recent acquisition of French starch and derivatives firm Cerestar bolstered Cargill's position in the largely monopolised European isoglucose market.

 

Production of isoglucose in the EU 25 topped 540,000 tonnes last year, a figure similar to consumption because the ingredient can not be easily stored, and resulting in little stock changes from one year to the next.

 

New EU member state Hungary tops the bill as the leading producer in the bloc, turning out 137,000 tonnes of isoglucose. Spain falls into the number two position with 82,000 tonnes, followed by Belgium with 70,000 and Slovakia producing 55,000 tonnes.

 

Tate & Lyle and Agrana have a joint isoglucose venture in Hungary called Hungrana.

 

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