Examination of Witnesses (Questions 60-79)
MR MARK
WHITE AND
MS PATRICIA
JAMIESON
19 OCTOBER 2005
Q60 David Lepper: Fewer people doing
the job?
Mr White: Yes.
Q61 David Lepper: Back in 1998 Tate
& Lyle was one of a number of companies which were fined by
the European Commission for price fixing, rigging the market in
granulated white sugar during the 1980s. Am I right there?
Mr White: Yes, you are.
Q62 David Lepper: Is one unforeseen—or
perhaps foreseen—consequence of the reforms increased scope
for price fixing among a smaller number of people involved in
the industry?
Mr White: The core values of our
business are safety, knowledge, integrity and innovation and I
do not think any Tate & Lyle executive manager or director
would ever do what was alluded to have happened back in the 1980s.
Tate & Lyle would never ever, in the future, with the values
we have in our business, do that sort of thing. To the other part
of your question, yes, these proposals will increase the concentration
of the business across Europe.
Q63 Lynne Jones: Are you denying
that you did this in the past?
Mr White: This happened in the
1980s and the court case was eventually in 1998, which was before
my time.
Q64 David Lepper: I was casting no
doubt on your rectitude whatsoever; I was just trying to make
sure I had got it right. Did this happen in the past?
Mr White: It did.
Q65 David Lepper: I was not suggesting
that Tate & Lyle would be involved but that if there were
fewer people doing the job, there would be a chance of them getting
together to fix things.
Mr White: I do not think that
ever happens.
Q66 David Lepper: I have in mind
that when this Committee produced a report on the sugar regime
a year or so ago[3],
the Government, in its response, told us that if progress was
not made on increasing competition, then the competition authorities
should consider the case for an investigation into the market.[4]
Should there be such an investigation, are you confident that
the market would have nothing to fear?
Mr White: Absolutely.
Q67 Mr Rogerson: If we are talking
about concentration of the industry, from what you are saying,
if these proposals were to go through and these effects you are
describing were to happen, that concentration might well be at
the expense of the cane refiners rather than necessarily the beet
industry.
Mr White: It is fair to say that
the French industry, part of the German industry and the UK industry
will be very happy with this proposal. The more inefficient areas
of Europe actually might be happy with the proposal as well because
there is a restructuring fund where you can get
730 per tonne, which is a good payment. They might
be happy as well, but there are certain players who will come
out. There is also a danger that certain cane refiners might come
out as well. Yes, there will be fewer players within the European
market.
Q68 Mr Rogerson: Changing the subject
quite considerably, we are in the middle of a UK Presidency of
the EU and therefore when matters such as this are discussed we
have a UK Presidency of that. What sort of effect do you think
that is likely to have in terms of the UK Presidency at those
negotiations in terms of being able to argue the effects domestically?
Mr White: It is a difficult question
and a bit of a double-edged sword. We need the British Government
to stand up for the needs of British industry and British farmers
and also the ACP and the LDCs. They also have another task which
is as UK President they obviously want to try to get this through.
We are not sure; I am sure we will be able to answer that question
better in January, but there is a worry there.
Q69 Mr Rogerson: Do you think it
would have been better for your industry if a deal had been struck
outside the UK Presidency?
Mr White: It is very hard to answer
that; it really is very, very hard to answer that.
Q70 Mr Vara: You say that there is
no possibility of price fixing. Two points: you would say that
would you not? Secondly, you say you are the biggest refiners
in the world, how often do you meet with your colleagues who are
also world refiners? When you do meet, what do you talk about?
Mr White: We have a business called
Tate & Lyle Process Technology and we have some proprietary
technology about how to make refining industries all over the
world. So we actually have a business which builds refineries.
We are just building one in Egypt, we are building one in Jeddah,
we have one in Dubai and we are looking at several projects across
the world. Then we use outside studies to measure the efficiency
and benchmark those refineries against others in the sugar industry.
Effectively, when we do meet other refiners across the world,
what we are talking about is improving technology, trying to get
our costs down, all the sorts of things you do in industry. We
operate in a very different market. Within our own company, as
we own assets in Canada and we own assets in a joint venture Saudi
Arabia, we obviously share more information.
Q71 Mr Vara: Because you have this
global reach, there is nevertheless a possibility of price fixing
because you are such a huge multinational player.
Mr White: I would not say we are
a huge multinational player.
Q72 Mr Vara: Did you not say earlier
on that you are the world's biggest refiner.
Mr White: The biggest refiner
but in a market of 145 million tonnes, we process about 3.5 million
tonnes. So in a market of 145 million tonnes the whole of Tate
& Lyle across the world processes 3.5 million tonnes and the
whole world market is 145 million. Although we have the biggest
refinery in the world, we are not the biggest sugar company in
the world and our total share would be 3.5 divided by 145.
Q73 Chairman: Just a couple of little
points to conclude. In paragraph 12 of your evidence you say "The
resulting refining margin would allow the refinery to cover the
fixed and variable production costs, as well as allowing for an
acceptable return on capital invested in the plant".[5]
What is "an acceptable return" as far as Tate &
Lyle are concerned?
Mr White: In line with other food
processors, a return on net operating assets of 20%. That would
be in line with other food processing businesses within the UK.
Q74 Chairman: Given that you have
a range of refineries outside the United Kingdom, do they make
that kind of return or is there a variation?
Mr White: Our businesses vary
between 20 and 25%.
Q75 Chairman: I could not find in
your evidence the word "isoglucose". Why?
Mr White: Because Tate & Lyle
Sugars, Europe do not produce or have anything to do with isoglucose.
That is a different part of the business called Tate & Lyle
Food and Industrial Ingredients.
Q76 Chairman: Do you not talk to
the other part of your own business?
Mr White: We do, but they are
based in Europe and their submissions have actually gone through
mainly to the Belgian Government and Dutch Government, although
we do have a small factory the other side of the Thames.
Q77 Chairman: They might like an
increase in the isoglucose quota? Does that not throw a spanner
into your works?
Mr White: The proposal has a small
increase in the isoglucose quota. However, the real issue on isoglucose—obviously
we do talk and we know the key issues—is that as the sugar
price within the sugar market decreases—the white price,
but also the raw price, whether it is beet or cane; within the
isoglucose market the price is set by the sugar price and it is
slightly under, but the wheat or corn price has not moved at all—so
the margins in isoglucose will fall and that is partly compensated
by the proposals which increase the quota for isoglucose.
Q78 Chairman: Is it right that that
part of the sweetening market should be constrained by a quota?
Mr White: The whole market is
constrained by quota; the beet production is and we are constrained
by the amount of sugar "raws" we can get.
Q79 Chairman: The increase is very
small. If they said in the farming industry that they would grow
less sugar beet but they could compensate for that by growing
more crop for the isoglucose market, they would go after that,
they would be constrained by the size of the market by virtue
of the quota. What happens if they fiddle about and persuade the
Commission to increase the amount of isoglucose quota? Does that
unbalance the market or does it have to be a zero sum game that
it still comes back to the same quantity of sugar produced?
Mr White: The isoglucose figures
are actually in the whole demand/supply balance, so if isoglucose
went up further, then sugar would have to come down further.
3 Environment, Food and Rural Affairs Committee, Twelfth
Report of Session 2003-04, Reform of the Sugar Regime,
HC 550-I. Back
4
Environment, Food and Rural Affairs Committee, Sixteenth Special
Report of Session 2003-04, Reform of the Sugar Regime: Government
Reply to the Committee's Report, HC 1129. Back
5
Ev 2 Back
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