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Analysis of the beet sugar market in Kazakhstan

Release date 29.08.2022

Number of pages 35

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The relevance of research

Sugar is a food product derived primarily from sugar beet and sugar cane. Available in the form of granulated sugar and refined sugar. Sugar is a socially important food product, and therefore the demand for this type of product is quite stable.

Purpose of the study

Analysis of the state of the beet sugar market in Kazakhstan, assessment of the market size, analysis of competitors, as well as identification of factors affecting the beet sugar market

Content

Part 1. Overview of the beet sugar market in Kazakhstan

1.1. Main characteristics of the market

1.2. Dynamics of the beet sugar market in Kazakhstan in 2017–2021 Potential market capacity

1.3. Trends, problems and prospects of the beet sugar market in Kazakhstan

1.4. Assessment of factors affecting the market

1.5. Stage of the life cycle of the beet sugar market in Kazakhstan

1.6. Competition from substitute products

1.7. Analysis of conducted public tenders for the purchase

Part 2. The main companies of Kazakhstan in the beet sugar market

2.1. The main companies producing beet sugar in Kazakhstan

2.2. Market shares of beet sugar of the main producers

2.3. Profiles of major manufacturing companies

Part 3. Beet Sugar Production Analysis

3.1. Volume and dynamics of domestic production of beet sugar in Kazakhstan

3.2. Share of exports in beet sugar production

Part 4. Analysis of foreign trade supplies of beet sugar in Kazakhstan

4.1. Volume and dynamics of beet sugar imports

4.2. Import structure

4.3. The volume and dynamics of exports of beet sugar

4.4. Export structure

Part 5. Assessment of factors of investment attractiveness of the market

Part 6. Forecast for the development of the beet sugar market in Kazakhstan until 2025

Part 7. Recommendations and conclusions

Research excerpt

Part 1. Overview of the beet sugar market in Kazakhstan

1.1. Main characteristics of the market

Sugar is a food product derived primarily from sugar beet and sugar cane. Available in the form of granulated sugar and refined sugar.

In the face of a threat to global food security, the guaranteed physical and economic availability of food in the required quantity is an important factor for society. One of the main socially necessary products of everyday demand is sugar. Most sugar in Kazakhstan is produced from imported raw cane sugar and only 7% from domestic raw materials - sugar beet.

Beet sugar production - mass, in-line. In it, in a single production flow, the main technological processes and intermediate operations for the processing of beets are carried out with the production of one type of mass marketable product - white granulated sugar. By-products of marketable products are pulp and molasses.

The beet sugar market in Kazakhstan during the study period is dominated by domestic products.

There are interruptions in the sale of sugar in Kazakhstan.

...

For four months, government officials in Kazakhstan denied there was a problem. When asked by local media, they replied that there were plenty of sugar reserves in special storage facilities, they would definitely last until the end of summer, when India lifts the ban. Only when reports began to come in from different regions about the complete disappearance of granulated sugar and refined sugar from stores (with the exception of exotic cane sugar at a price of 10 euros per kg), the Minister of Trade and Integration of Kazakhstan, Bakhyt Sultanov, recognized the criticality of the situation.

However, the optimal for the country is the processing of imported raw cane sugar, since beets, even if they have a good yield, cannot be stored technologically for a long time due to the climatic features of the region. Beet contains a lot of moisture, at low temperatures it freezes, and when defrosted it becomes unsuitable for processing. Keeping it in warm rooms is very expensive for sugar production.

1.2. Dynamics of the beet sugar market in Kazakhstan in 2017–2021 Potential market capacity

In 2017-2020 beet sugar market volume gradually increased ...

Diagram 2. Dynamics of the market volume of beet sugar in Kazakhstan, 2017–2021, thousand tons

...

Theoretically, to fully supply the domestic market of Kazakhstan with only local beet sugar in the amount of 450-500 thousand tons, it is necessary to grow 4 million tons of sugar beet. However, with stable imports of raw cane sugar, there is no need to increase the volume of beet sugar. Thus, the potential market capacity will develop only against the backdrop of state support for less dependence on imports. However, growth will still be constrained by high competition from cane sugar.

1.3. Trends, problems and prospects of the beet sugar market in Kazakhstan

Among the main trends in the beet sugar market in Kazakhstan are:

Temporary lack of sugar in the market;
Rising prices for sugar;
Logistic disruptions;
Downtime threats to biscuit, waffle and other confectionery factories.

In addition, among the problems of the industry at present, the main ones can be noted:

The almost complete dependence of the sugar industry on imports;
India's imposition of a temporary ban on sugar exports;
Lack of raw materials due to small volumes of beet production;
Labor intensity and high level of costs of beet growing;
Depreciation of technological equipment of sugar factories, which affects the final cost of products;
Lack of working capital.

Prospects for further development of the beet sugar market largely depend on government support.

Implementation of projects for the modernization of existing and the creation of new industries is expected.

Nevertheless, we need seed farms for productive varieties of sugar beets, state-of-the-art agricultural technologies, fertilizers, beet harvesting equipment, staffing, etc.

1.4. Assessment of factors affecting the market

Macroeconomic factors influence the dynamics of all sectors of the economy of the Republic of Kazakhstan, including the beet sugar market. The main groups of factors are: economic, political, social and technological.

Economic

GDP

GDP (gross domestic product) is used to determine the rate of economic development of any state. GDP is a macroeconomic indicator that reflects the total value of goods, works and services that were produced and provided in the country in a year. Gross domestic product is the main indicator on the basis of which the level and pace of the country's economic development are determined.

Diagram 3. Dynamics of GDP in Kazakhstan, 2013–1 quarter 2022, billion tenge, %

...

Социальные

Population

During 2013–2022, there was an increase in the population of Kazakhstan.

...

Real income of the population

General trends in macroeconomic indicators can also be traced in such a value as real incomes of the population, which determine the level of effective demand.

...

technological

Seasonality of sugar beet factories

Sugar beet factories are distinguished by a pronounced seasonality of work. Harvesting of sugar beets usually takes place in August-October. At this time, they begin digging and transporting it to factories and processing. The factories create a stock of beets, stacked in heaps, which are processed after its digging and hauling. With long-term storage of beets, its sugar content is significantly reduced. Therefore, factories tend to process the annual supply of raw materials in the shortest possible time - 3-4 months. Extending the shelf life of beets reduces the yield of sugar per unit of raw material and reduces the profitability of the beet sugar plant.

New projects

The Ministry of Agriculture of the Republic of Kazakhstan is working on a plan to modernize the sugar industry. It provides:

increase in the raw material base by expanding the sown areas of sugar beet through the introduction of new irrigated lands;
strengthening measures of state regulation and support of the sugar industry;
technical and technological re-equipment of existing sugar beet processing capacities;
construction and modernization of sugar factories;
introduction of water-saving irrigation technologies;
development of seed production.

Competition from cane sugar

The sugar market in Kazakhstan is dominated by cane sugar products. The production of cane sugar at local factories exceeds the production of beet sugar by five times. Sugar is produced from imported raw cane sugar, which is brought to a finished marketable condition at local sugar refineries. The processing of raw cane sugar requires three times less staff than the processing of beets. At the same time, ready-made cane sugar is also imported.

More details about the characteristics in paragraph 1.6.

Political

Credit policy

Today it is quite difficult to imagine the progressive development of the economy without the active participation of the credit system. It should also be noted that the assessment of the availability of credit resources for both legal entities and individuals is a significant indicator that allows assessing not only the demand for credit funds, but can also serve as a reflection of the real economic situation both in the region and in the economy as a whole.

...

Zero duty on sugar imports

...

Insufficiency of raw materials

Due to the lack of raw materials, the workload of factories remains at a low level. The main reason for the decline in the yield of sugar beet is the reduction in sown areas. In post-Soviet times, the area under sugar beet was 85 thousand hectares.

Without subsidies, sugar beet production is unprofitable, and the profitability of sugar beet production is ensured only thanks to existing subsidies.

Concluding the assessment of the factors influencing the beet sugar market, we will summarize the key ones in the framework of the STEP-analysis.

Table 2. STEP-analysis of factors influencing the beet sugar market in Kazakhstan

According to the results of the performed STEP-analysis, macro-environment factors have a negative impact on the development of the beet sugar market to a greater extent.

The following factors have the most negative impact on the market: high competition from cane sugar, lack of raw materials, seasonality of sugar beet factories, zero duty on sugar imports, credit policy.

1.5. Stage of the life cycle of the beet sugar market in Kazakhstan

Sugar is a socially important food product, and therefore the demand for this type of product is quite stable.

The market is at the stage of maturity of the life cycle. It is built on the consumption of conservative consumers, on the popularity and wide representation of the product, which ensures a stable level of sales over a long period.

...

1.6. Competition from substitute products

Beet sugar competes with cane sugar.

Having passed the maximum purification from various impurities, refined beet sugar, like refined cane sugar, has exactly the same composition, taste and white color. In this case, it is possible to determine the initial raw materials only in laboratory conditions. Therefore, when talking about the comparison of beet and cane, it is appropriate to take into account only the unrefined product.

...

1.7. Analysis of conducted public tenders for the purchase

In 2021, about 700 thousand tenders for the purchase of sugar were announced. As a rule, it is not indicated what raw material the sugar is from, because due to the identity of the final product, this is not always important for customers.

It should be noted that there are a large number of failed tenders, as well as the termination of already concluded contracts due to non-fulfillment of the contract.

...

Part 2. The main companies of Kazakhstan in the beet sugar market

2.1. The main companies producing beet sugar in Kazakhstan

The general style of work on the development of production in Kazakhstan is the same: to find an investor, and then the investor himself solves all technical, logistical and financial issues. Investors in Kazakhstan are reluctant to go, including because of the complex legal regime - subsidies can both give and take away - much is at the discretion of officials.

...

2.2. Market shares of beet sugar of the main producers

The shares of the main producing companies are distributed in accordance with the volumes of beet sugar production.

Thus, the market leader is ...

2.3. Profiles of major manufacturing companies

There is low marketing activity among beet sugar producers in Kazakhstan. Companies poorly promote themselves in the market.

...

Part 3. Beet Sugar Production Analysis

3.1. Volume and dynamics of domestic production of beet sugar in Kazakhstan

Beet sugar production in Kazakhstan is concentrated in Almaty and Zhambyl regions.

3.2. Share of exports in beet sugar production

The share of exports in the production of beet sugar is practically zero. All beet sugar produced is used domestically.

Diagram 10. The share of exports in production for 2017–2021, %

Part 4. Analysis of foreign trade supplies of beet sugar in Kazakhstan

4.1. Volume and dynamics of beet sugar imports

The volume of beet sugar imports is fluctuating. The maximum volumes of supplies were observed during periods of reduction in domestic production: ...

...

4.2. Import structure

During the study period, beet sugar was supplied to Kazakhstan from India, Azerbaijan and Kazakhstan.

Table 7. Structure of beet sugar imports by importing countries in 2021

4.3. The volume and dynamics of exports of beet sugar

The specifics of the beet sugar market is that almost the entire volume of production goes to domestic consumption. The maximum volume of exports in the entire study period was observed...
...

The dynamics of exports in monetary terms is similar to the dynamics in physical terms.

...

Diagram 15. Balance of exports and imports, 2017-2021, tons

4.4. Export structure

In the study period, beet sugar was exported from Kazakhstan only to India - ...% of deliveries.

...

Part 5. Assessment of factors of investment attractiveness of the market

...

Negative factors of the investment climate in the beet sugar market dominate over the positive ones.

...

Part 6. Forecast for the development of the beet sugar market in Kazakhstan until 2025

The impact of the military actions of India and Ukraine has become a strong factor in determining the outlook for the Kazakh economy in 2022, since India is a key partner of Kazakhstan in the economic sphere.

The following factors make it possible to forecast the volume dynamics of the beet sugar market:

...

Part 7. Recommendations and conclusions

Sugar is a socially important food product, and therefore the demand for this type of product is quite stable.

The beet sugar market in Kazakhstan during the study period is dominated by domestic products.

...

A comprehensive assessment of investment attractiveness factors shows a neutral investment climate for companies considering the possibility of entering the market.

The following recommendations can be made to both new and existing operators of the beet sugar market:

...

Diagrams

Chart 1. The ratio of imported and domestic products in the beet sugar market of Kazakhstan, 2017-2021, %

Diagram 2. Dynamics of the market volume of beet sugar in Kazakhstan, 2017–2021, thousand tons

Diagram 3. Dynamics of GDP in Kazakhstan, 2013–1 quarter 2022, billion tenge, %

Diagram 4. Quarterly dynamics of the US dollar exchange rate against the tenge, 2017–Jul. 2022, tenge per 1 US dollar

Diagram 5. Dynamics of the population of Kazakhstan at the beginning of the year, 2013–2022, thousand people

Diagram 6. Dynamics of real incomes of the population of Kazakhstan, 2013–May 2022, % to the previous year

Diagram 7. Stage of the life cycle of the beet sugar market in Kazakhstan

Diagram 8. Shares of the main producing companies of Kazakhstan in the beet sugar market in 2021, %

Diagram 9. Dynamics of beet sugar production in Kazakhstan for 2017–2021, thousand tons

Diagram 10. The share of exports in production for 2017–2021, %

Diagram 11. Volume and dynamics of imports of beet sugar to Kazakhstan in physical terms, 2017–2021, tons

Chart 12. The volume and dynamics of beet sugar imports to Kazakhstan in monetary terms, 2017–2021, thousand US dollars

Diagram 13. Dynamics of exports of beet sugar from Kazakhstan in physical terms, 2017–2021, tons

Chart 14. Dynamics of exports of beet sugar from Kazakhstan in monetary terms, 2017–2021, thousand US dollars

Diagram 15. Balance of exports and imports, 2017-2021, tons

Diagram 16. Forecast of the beet sugar market in Kazakhstan in 2022–2026, thousand tons

Tables

Table 1. Weighted average interest rates of banks on loans issued in tenge, 2017 (Dec.)–2022 (June), %

Table 2. STEP-analysis of factors influencing the beet sugar market in Kazakhstan

Table 3. Comparative characteristics of substitute goods

Table 4. Announcements on public procurement of sugar of the Republic of Kazakhstan for 2021–Jun. 2022 for amounts over 1 million tenge

Table 5. Main companies producing beet sugar in Kazakhstan in 2021

Table 6. Profiles of the main producing companies in the beet sugar market in 2021

Table 7. Structure of beet sugar imports by importing countries in 2021

Table 8. Beet sugar export structure by recipient countries in 2021

Table 9. Assessment of factors of investment attractiveness of the beet sugar market in Kazakhstan

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