Focus: Sudan conflict threatens supply of key soft drink ingredient
28/04/2023 07:00
By Richa Naidu and Jessica DiNapoli
LONDON/NEW YORK, April 28 (Reuters) - Sudan's eruption
into conflict has left international consumer goods makers
racing to shore up supplies of gum arabic, one of the country's
most sought-after products and a key ingredient in everything
from fizzy drinks to candy and cosmetics.
About 70% of the world's supply of gum arabic, for which
there are few substitutes, comes from the acacia trees in the
Sahel region that runs through Africa's third-largest country,
which is being torn apart by fighting between the army and a
paramilitary force.
Wary of Sudan's persistent insecurity, companies dependent
on the product, such as Coca Cola KO.N and Pepsico PEP.O ,
have long stockpiled supplies, some keeping between
three-to-six-months worth to avoid being caught short, exporters
and industry sources told Reuters.
However, prior conflicts have tended to be focused in
far-flung regions such as Darfur. This time, the capital
Khartoum has been brought to a standstill in the fighting that
broke out on April 15, paralysing the economy and disrupting
basic communications.
"Depending on how long the conflict continues there may well
be ramifications for finished goods on the shelf - branded goods
made by household names," said Richard Finnegan, a procurement
manager at Kerry Group KYGa.I , a supplier of gum arabic to
most major food and beverage firms.
Finnegan estimated that current stockpiles will run out in
five-to-six months, a view echoed by Martijn Bergkamp, a partner
at Dutch supplier FOGA Gum who estimated between three-to-six
months.
Cloetta AB, CLOEb.ST a Swedish confectioner which
makes Lakerol lozenges that use gum arabic, has "ample" stock of
the ingredient, a spokesperson said in an email.
Global production of gum arabic is about 120,000 tonnes a
year, worth $1.1 billion, according to estimates cited by Kerry
Group. Most is found in the "gum belt" that stretches 500 miles
from the East to the West of Africa where the arable land meets
the desert, including in Ethiopia, Chad, Somalia and Eritrea.
Twelve exporters, suppliers and distributors contacted by
Reuters said trade in the gum, which helps bind together food
and drink ingredients, has ground to a halt.
Right now it’s "impossible” to source additional gum arabic
from rural parts of Sudan because of the turmoil and road
blockages, said Mohamad Alnoor, who runs Gum Arabic USA, which
sells the product to consumers as a health supplement.
'CAN'T EXIST WITHOUT GUM ARABIC'
Kerry Group and other suppliers, including Sweden's Gum
Sudan, said communicating with contacts on the ground has been
difficult and Port Sudan - from where product is shipped - has
been prioritising civilian evacuations.
“Our suppliers are struggling to secure necessities because
of the conflict," Jinesh Doshi, managing director of Vijay Bros,
an importer based in Mumbai, said. "Both buyers and sellers are
clueless on when things will normalise.”
Alwaleed Ali, who owns AGP Innovations Co Ltd, a gum arabic
exporting business, said his customers are looking for
alternative countries to source gum arabic.
He said he sells the gum to Nexira SAS, based in Rouen,
France, and Westchester, Illinois-based Ingredion Inc INGR.N ,
two major ingredients suppliers to makers of products such as
pet food, fizzy drinks and nutrition bars.
A spokesperson for Ingredion said in an email, "We have
proactive measures in place across our business to ensure the
continuity of supply for our customers."
PepsiCo declined to comment on supply chain and commodity
issues, while Coca-Cola did not return a request for comment.
"For companies like Pepsi and Coke, they can't exist without
having gum arabic in their formulations," Dani Haddad, marketing
and development director of Agrigum, a global top-ten supplier,
said.
In their manufacturing process, food and drink companies use
a spray-dried version of the gum that is powder-like, industry
sources said. While cosmetics and printing manufacturers may be
able to use substitutes, there is no alternative to gum arabic
in fizzy drinks, where it prevents ingredients from separating.
In a sign of its importance to the consumer goods industry,
gum arabic has been exempt from U.S. sanctions against Sudan
since the 1990s, both because it's a critical commodity and for
fear of creating a black market.
Sudanese nomads tap the pebbly, amber-colored gum from
acacia trees, which is then refined and packaged throughout the
country. It accounts for the livelihoods of thousands of people
and the more expensive variety can cost about $3,000 a tonne,
according to Gum Sudan.
There is a poorer quality, cheaper gum from outside of
Sudan, but the preferred ingredient is only found in acacia
trees in Sudan, South Sudan and Chad, Alnoor said.
Fawaz Abbaro, the general manager of Savannah Life Company
in Khartoum, said he had purchase orders and plans to export 60
to 70 tonnes of gum arabic but doubts he'll be able to due to
the conflict.
"It's not stable even to get food or drink. It's not going
to be stable for business," Abbaro said. "All trading will be
jammed for the time being."
(Reporting by Richa Naidu in London, Jessica DiNapoli in New
York AND Rajendra Jadhav in Mumbai; Editing by Sharon Singleton)
((mailto:Jessica.DiNapoli@thomsonreuters.com; 845-591-4428;))