Profit On Sugar

Press, Volume CIV, Issue 30737, 29 April 1965, Page 18

Profit On Sugar

The aura of mystery with which some persons seem determined to endow the sugar market cannot be justified except, perhaps, by acknowledging that buying raw sugar, refining, and reselling it is a complicated business. Most of the argument about the implications of the price rises which began two years ago was unnecessary. Suspicion could have been allayed by prompt, simple explanations by the Government and the New Zealand Sugar Company. When explanations were made they were made too late to convince many. The Federation of Labour remains among the sceptical. It has now seized on the calculation of grocers’ profits during 11 months of high sugar prices, made public by the grocers’ own organisation, as an excuse to demand a Government inquiry.

The simple fact is that sugar is sold under a system of price control which has worked satisfactorily for many years. It is, indeed, very much the kind of price-control system that might be expected to appeal to the doctrinaire socialist. It would not be surprising to find the federation advocating it for other commodities. Grocers are allowed a percentage margin for gross profit; and when the price of sugar changes the profits of the grocers go up—or down. During the period of high prices, the growers of sugar cane made more money; the millers made more; the refiners in New Zealand worked on the same, controlled rates and sold less sugar; the grocers made more according to a long-established and well-understood formula. When the price doubled, their gross profit doubled; that represented an increase from 1.2 d per lb, when the retail price was 7|d, to 2.4 d per lb when the retail price rose to Is 3d. The £220,000 extra profit referred to in the “ Grocers’ Review ” came from approximately id per lb added to grocers’ profits when the sugar price rose from lOd to Is 3d. There is no mystery about this. No inquiry is needed to explain it. The point made in the “ Grocers’ Review ” was that the percentage mark-up benefits the grocer when the price rises. Under an earlier formula, the grocer worked for a fixed profit, regardless of price variations. The Federation of Labour may argue that profit control along the lines of the former arrangement for a fixed return is preferable. But as sugar is a commodity on which the 13} per cent mark-up is lower than the margin on almost every item on the grocers’ shelves this hardly seems to be the starting point for an exercise in profit control.