Tereos, France’s largest ethanol and sugar group, is reorganizing in light of bitter prospects for a key crop. The company states that it will cease sugar operations at Escaudoeuvres, one of its sugar processing factories in northern France.
Over the last few years, environmental factors have caused a steady decline in sugar beet volume, which is a main driver of the company’s decision to restructure.
An alcohol distillery in Morains on a separate site will cease processing “underutilized” substrates as production moves instead toward an increase in sugar production.
The supplier is also seeking a buyer for its potato starch mill in Haussimont, in eastern France.
Tereos says this reorganization is “in response to the challenges of decarbonization and modernizing its infrastructures, as well as future agricultural developments,” as part of a strategy it launched in 2021 to “regain financial flexibility to maintain its competitiveness.”
The reorganization of these plants comes despite significant investments made over the past five years in both the Escaudoeuvres plant, with a total investment of €62 million (US$65.6 million, and €30 million (US$31.7 million) in its potato starch mill.
“Tereos is responsible for investing in its industrial facilities to maintain a high-efficiency rate compared to European and global competition while also pursuing its objective of paying the best possible remuneration for its cooperative members’ production,” says Gérard Clay, chairman of the Board of Directors.
Sugar beet faces difficulties
Such investments have not been enough to face off global shifts in sugar beet production, as regulatory and environmental factors bite into yields.
Tereos notes: “The profitability of growing beet is certainly improving at Tereos, but cooperative members are facing regulatory (legislative, health and environmental) and economic constraints resulting in a sustained reduction in sown areas.”
As a result of this, cooperative commitments have decreased. Tereos says it will receive 10% less yield from its beet co-operatives for the upcoming season.
“Tereos has also seen a continuous decline in yields since the 2018/19 campaign,” says the company. “At the same time, an analysis of the industrial footprint found that the beet volumes available do not allow certain plants to operate at full capacity during the campaign.”
Since sugar quotas ended in 2017, the plant has recorded a decrease in the beet volumes committed, which can primarily be explained by agronomic reasons, such as crop rotation, drought and beet yellows virus, notes Tereos.
“As a result, this has significantly reduced the campaign duration, estimated between 25 to 45 days for 2023/24, compared to an average duration of 110 days.”
Rising energy costs have also been a broad factor in the reorganization strategy.
Tereos notes that to achieve its ambition of being carbon neutral by 2050, it is “vital” to adapt its industrial footprint, control its production costs, and make significant investments to maintain its competitiveness and ensure the energy transition of its industrial plants.
Tereos says it will endeavor to redeploy employees displaced by this reorganization into other positions within Tereos.
Bitter crop outcomes
Sugar beet grown in Europe has suffered from worsening environmental factors over the last few years, especially droughts. In 2019, Danish sugar processor Nordic Sugar said it expected its sugar beet harvest to have “Very strong regional differences” due to low precipitation levels in Poland and Germany.
This drought, and the poor sugar harvest of 2018, were a mere precursor to the scorching heat of 2022, which caused crippling droughts that placed extreme stress on agricultural farmland.
The majority of the F&B industry weathered the heatwave, showing extreme resilience in the face of climate change, rising prices and the impact of the invasion of Ukraine. However, the heatwave of 2022, which caused the “Worst drought in 500 years,” led to “multi-billion farm losses across continents.”
By James Davies
Source: foodingredientsfirst.com
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