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September 6, 2022

Germany green-lights sugar cooperation plan as gas supply shortages bite

The competition watchdog said the deal is a “one-time temporary cooperation project”.

By Andy Coyne

Germany’s competition regulator has given the green-light for the country’s major sugar manufacturers to cooperate in the event of gas supply shortages worsening.

But the Bundeskartellamt has stressed the deal – proposed by the sugar firms – is a “one-time temporary cooperation project”.

Four companies – Nordzucker, Südzucker, Pfeifer & Langen and Cosun Beet – are planning to work together in order to ensure the continued processing of sugar beets if a shortage occurs. The German sugar industry association, Verein der Zuckerindustrie (VdZ), is also included in the cooperation agreement.

The 18 sugar factories run by the four companies are for the most part powered by natural gas. Some 35% of Germany’s gas imports come from Russia via the Nord Stream 1 pipeline and supplies have been intermittent of late.

Russia has said it will not resume gas supplies to Europe in full until the West lifts its sanctions against Moscow, imposed as a result of Vladimir Putin’s invasion of Ukraine.

The Bundeskartellamt agreement provides for the companies to make production capacities available to each other in the event of gas supply cut-offs and ensuing production stoppages at the factories affected.

The regulator said it is responding to a “unique and exceptional geopolitical situation”.

Andreas Mundt, president of the Bundeskartellamt, said: “We support crisis-management initiatives within the framework of competition law. In these difficult times, the cooperation between sugar producers is intended to mitigate the effects of possible gas shortages on production.

“A number of sugar factories are currently powered by natural gas. A lack of gas would lead to production stoppages with serious consequences as large parts of the beet harvest would then be likely to rot.”

He added: “[That} this is a one-time temporary cooperation project to deal with possible gas supply shortages was central to our assessment under competition law. The flow of information between the companies will be limited to what is necessary by means of accompanying measures.”

Free production capacities are to be made available to each party within the framework of the cooperation only if energy management measures imposed by the government lead to reduced or suspended gas supply, and, as a result, to production stoppages at one of the factories.

However, the companies must first use all free production capacities available to them at their own factories in Germany and Europe and try to process the sugar beets at one of their other factories not powered by gas.

The Bundeskartellamt said in agreeing to the move it took into account that due to the impending emergency situation in the supply of natural gas the companies have made considerable efforts to switch from natural gas to other fuels, such as heating oil and coal in particular, to power their sugar factories. For some factories, however, this was not possible in view of the short time remaining until the upcoming harvest.

The VdZ is to obtain information from the sugar companies about the processing capacities available at the individual factories and introduce continuous capacity monitoring to determine which capacities can be made available on a voluntary basis.

In a statement, the VdZ chairman, Dr. Lars Gorissen, said: “This cooperation complements our companies’ efforts to further reduce the risks of a gas halt. This helps us to process the beets from all growers and to supply our customers with regional sugar and other products.”

In a statement sent to Just Food, Südzucker said: “We see this measure by the Federal Cartel Office as a supplement to the other preparatory measures that we have taken to counteract possible gas bottlenecks. We welcome the decision of the Federal Cartel Office, as it essentially provides for the supply of the population with regionally produced sugar to be guaranteed. It would also be irresponsible not to process the harvested beets and thus let them spoil.”

The cooperation is limited to the upcoming sugar beet campaign and the subsequent settlement period until June 2023.

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