New entrant brings competition and innovation to Canadian sugar market

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The appetite for sugar is increasing in Canada, even as per-capita consumption is declining, due to demand largely driven by food manufacturers of high-sugar-content products like chocolate. In Canada, where sugar can be sourced at a lower cost than the United States, the lucrative opportunity for food manufacturers to export their products south of the border is fueling industry growth.

Despite the sweet market opportunity, Canada’s sugar refining production volumes have remained relatively flat, which may stymie food processers unable to procure the crucial ingredient when they want it – particularly if there is maxed-out capacity. Anti-dumping and countervailing duties on refined sugar imports from the United States effectively keep out cheaper subsidized sugar, but potentially limit domestic competition.

The Canadian market is dominated by just two industry incumbents, which have historically represented 100 per cent of domestic refined sugar production. This led Jonathan Taylor, a sugar trader at the time, to recognize a chance to shake up the industry.

In 2014, the founder and CEO of Sucro Can entered the market with a liquid sugar refinery built in an old warehouse in the Port of Hamilton – the largest port in Ontario and the primary marine gateway to the Toronto and Hamilton areas. Since it’s too cold to grow sugar cane domestically, raw cane sugar is imported in large quantities by bulk ocean vessels from South and Central America, so refineries need to be located at ports on or near coastlines.

Even with a limited budget and compact operations, Sucro attracted forward-thinking food producers that jumped at a chance to buy from the startup.

“We had three critical customers that gave us long-term supply contracts before we even built the facility,” says Sucro chairman Don Hill. “That highlights how desperate customers were to get added competition in the Canadian market.”

Five years later, in 2019, Sucro added a granular sugar refinery and storage facility to the site, marking the first successful sugar refinery built in Canada since 1958.

With its focus on micro refineries and lean operations, Sucro Can is positioned to increase capacity at a significantly lower capital cost than its competitors, and to provide competition and innovation in the Canadian sugar market.

“We have that competitive market advantage where we establish these smaller refineries close to where customers are located further inland,” Hill says. “For significantly less capital investment, Sucro provides much needed product and service alternatives.”

The Canadian landscape

The Canadian sugar industry currently runs at almost 100-per-cent capacity with just-in-time inventories, potentially leaving customers vulnerable to production disruptions and supply shortages. Hill says no other major economy in the world relies on such minimal refined sugar inventories, which adds significant supply chain risk for food manufacturers, as experienced in Canada in recent years.

“There’s been this friction in the market the past few years because of food manufacturers that want to grow and create jobs in Canada, but face severe capacity limitations and worries about the physical supply of essential ingredients and how competitive the market is,” Hill says. “When you take the physical logistical challenges of importing refined sugar from far away, combined with the lack of refined sugar inventory that’s kept at any one time due to cost, it’s a massive risk.”

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The result, Hill says, has been strong customer loyalty to Sucro. The company is slated to ship 132,000 tonnes this year. “How would that have been supplied if it wasn’t for us? The customers we speak with have been very encouraging to Sucro about adding even more capacity.”

Growing and innovating

In 2021, Sucro announced a major investment in the former Bethlehem Steel complex in Lackawanna, N.Y., which will cost approximately $50-million and includes adding a sugar refinery and warehouses for raw and finished goods. With an expected capacity to produce 350,000 tonnes a year by 2024, Sucro is poised to distribute sugar to food and beverage customers across the Great Lakes region.

This development makes Sucro Can the only sugar refinery in Canada that is logistically interconnected, with two nearby cross-border refineries, offering unparalleled opportunities for North American food manufacturers.

In May, 2022, Sucro announced it will more than double the sugar refining capacity at its Hamilton refinery, reaching a projected 200,000 tonnes of annual capacity by 2024, to meet increasing refined sugar demand from Ontario food manufacturers. This will be its third major expansion in five years.

What’s more, Sucro is quickly becoming the market leader in organic sugar, which is the fastest-growing segment of the refined sugar market. “We did that through supply chain innovation and Sucro’s commitment to constantly re-investing its earnings,” Hill says.

“We’re the small guys. But we’re visibly growing, investing and expanding.”

Sucro Can is an affiliated company of Sucro Can Sourcing LLC, which was founded in Coral Gables, Fla., in 2014, and is a sugar trade partner for mills, processors, distributors and food/beverage manufacturers. It has operations in Canada, Mexico, the Caribbean and South America.

Advertising feature produced by Globe Content Studio with Sucro. The Globe’s editorial department was not involved.