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Sugar prices expected to drop as Mumias resumes operations

By Hezron Ochiel | Published Fri, January 9th 2015 at 00:00, Updated January 8th 2015 at 21:31 GMT +3

Kenya: Sugar prices are expected to drop as Mumias Sugar Company makes a comeback after two months of closure for maintenance. Currently sugar is retailing at Sh4,000 for a 50kg bag, a drop from last week's Sh4,300.

For the last two months, the cash-strapped company has shut operations in what the company officials termed as out-of-crop maintenance reasons to enhance efficiency and enable its canes to mature. Mumias Sugar, the largest miller in the country that accounts for 60 per cent of production, according to its officials, has normalised operations and now produces between 400 and 500 tonnes of sugar per day.

"With our entry into the market, we expect the price of sugar to drastically come down. This is good news for consumers but a bitter pill for millers," said Managing Director Coutts Otolo. In the past months, the firm's shelves in major supermarket outlets have remained empty.

"This has encouraged an increase in counterfeits and upsurge in volumes of in-house brands as other entrepreneurs sought to occupy the shelve space for our brands," said Mr Otolo. "Most companies have increased their branding levels for better margins," he added.

Kenya Sugarcane Growers' Association (Kesga) Secretary General Richard Ogendo welcomed the resumption of operations, noting that the re-entry of Mumias is likely to stabilise the market and thus making it predictable.

"The prices are likely to remain stable through February unless Mumias offers customers price discounts. Should they do the latter, the prices will drop significantly," he added.

Even though the company is upbeat to reclaim the market share it once held, its officials are worried by a move by key supermarkets to slowly shift towards in-house branding, thus threatening the shelf space for major brands.

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Cash injection

So far, the sugar firm has taken measures to help it strengthen its position in the market following resumption of full operations, including developing cane and persuading Government for a cash injection of about Sh2.3 billion to meet 'urgent financial needs'.

National Treasury Cabinet Secretary Henry Rotich said on Wednesday that the Government would work jointly with the Mumias management to see how to support it financially.

Ogendo said the move would help stabilise the industry, adding, "When Mumias is healthy, all other companies are also healthy."


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