Bittersweet symphony

Consumers, says Malachy McReynolds, are sick of being treated like morons. "They know, when they pick up a chocolate bar, that it's a treat, an indulgence," he says. "And they resent being treated like idiots."

Needless, to say, the new president of the BCCCA is not entirely convinced that a front-of-pack 'signposting' system will prove a key weapon in the fight against obesity.

Slapping a red sticker on a Mars bar, adds McReynolds, who led a management buyout team to take over chocolate maker Elizabeth Shaw five years ago, is "hardly the most sophisticated form of consumer education"

Politicians, points out McReynolds, who has since dragged his ailing chocolate company from the red firmly back into the black, did not put salads on to the menu at McDonalds or turn Diet Coke into a bigger seller than the standard variety. "Consumers did. Telling people what to eat is not the answer." And neither is blaming the country's chocolate and cake makers for the nation's expanding waistline, he suggests.

"Consumption of sweets, biscuits and cakes has actually remained pretty stable over the last few years."

Not surprisingly, some of the decision-makers in Brussels are not top of McReynolds' Christmas card list either, especially the ones behind the proposed nutrition and health claims regulation.

The European Commission's (EC's) refusal to accept amendments to the regulation laid down by the European Parliament is particularly frustrating, he says. "It's an interesting version of democracy when the EC is telling elected members [MEPs] that they are wrong."

Nutrient profiling, which would prevent manufacturers from making positive claims about ingredients if the overall profile of the product were deemed to be unhealthy, could stifle much needed innovation in the industry if it stays in the final version of the regulation, he says. "It's crazy. It doesn't even let manufacturers make factual statements about ingredients, never mind health claims."

An equally frustrating issue is the lack of competition in the sugar regime, which the Environment, Food and Rural Affairs Select committee recently claimed was "one of the most important factors" contributing to the loss of 16,000 jobs in the UK biscuit, cake, chocolate, and confectionery industry over the last five years, says McReynolds.

Because of an archaic system of national production quotas, the cost of shipping sugar across the channel and the fact that two sugar producers -- Tate & Lyle and British Sugar -- have the UK market to themselves, UK manufacturers pay 10% more for sugar than their continental counterparts, he claims. As a result, we have a trade deficit in biscuits, cakes, chocolates and confectionery, for the first time in decades.

Meanwhile, the European Union (EU) subsidy regime keeps European sugar prices at almost three times the world price through guaranteed prices for European growers. This has in turn led to huge surpluses, which are then dumped on the world market, distorting prices, and earning European producers still more cash through export refunds.

While the proposed reforms to this regime won't tackle the price differential between the UK and its continental counterparts, it will reduce European sugar prices by up to 40% by the end of the decade, says McReynolds.

However, as sugar typically represents about 5-10% of the selling price of cakes and biscuits, the impact of this should not be over-played, he says. "Even a 40% cut in European prices only translates to 2-4% off selling prices." The savings will move down the supply chain, with consumers the ultimate beneficiaries, and not manufacturers' margins, he says.

As to the job prospects for staff employed by BCCCA member companies, there is still a lot of confidence in the trade, despite the large number of job losses in recent years, he says. "Many job losses have been driven by factory efficiencies, so are not necessarily a reflection of a drop in volumes. There has been some off-shoring, but people are also investing in plants over here. Cadbury is pumping £40m into its Bournville factory."

While you can truck cakes over to the UK from lower wage economies like Poland pretty quickly, we shouldn't underestimate the importance of short, responsive (ie domestic), supply chains, he says. "It's unusual for branded suppliers to have more than a two-to-three day order book."

There is still overcapacity in the European confectionery market, he says. "But this is not a council of despair. Companies that remain close to their customers, maintain competitiveness and run an efficient supply chain will continue to win business." FM