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Push for sugar alternatives as European cultivation declines

Global consultancy firm Roland Berger’s latest research on the sugar industry demonstrates Europe’s need for diverse product portfolios.

In its report Transformation in the European sugar industry: A leader’s guide to success, the company described the European sugar sector as being at a “pivotal juncture”, presenting manufacturers with opportunities to diversify and grow.

It also sets out the key challenge facing the region's sugar sector: balancing a fall in interest with the risk of chronic oversupply. Driven by regulatory requirements, sustainability advancements, and changing consumer preferences, Europe’s production capacity currently outpaces its decreasing demand.

“The European sugar industry needs to change,” the authors wrote. “The abolition of EU quotas and shift to a demand-driven market has exposed both vulnerabilities and new avenues for growth, leaving producers with big decisions to make.”

​While the sugar landscape is intimidating, it offers European producers the potential to position themselves as global leaders in a sector increasingly focused on sustainability and value add. Producers can embrace new manufacturing technologies and product applications, and shift from a supply-led to a demand-driven mindset.

The ‘Beet-Belt Five’ dominate European production

Despite its challenges, the global sugar market is anticipated to grow by 5.2% annually through to 2029. However, while Asia-Pacific (APAC) is the fastest-growing region, Europe struggles to achieve the same success due to its sugar surplus.

Most of the sugar produced in the EU is sold to food and beverage manufacturers. These manufacturers rely on industrial sugar for processed food and beverages, amounting to 77% of the agricultural commodity’s total volume in 2023/24.

Confectionery, baked goods, soft drinks, and fruit juices are among the leading sectors. Rising populations, urbanisation, and increasing incomes are driving food and beverage growth and diversification, leading to increased demand for industrial sugar.

However, in Europe, the “Beet-Belt Five” dominate both sugar production and sugar beet cultivation. These five countries account for 82% of the region’s sugar production and collectively make up 80% of its sugar beet production.

Covering an area of 1.5 million hectares, France and Germany lead sugar beet development in the continent, accounting for 28% and 26%, respectively. The Beet-Belt Five also includes Poland (17%), the Netherlands (5%), and Belgium (4%).

Europe struggles with sugar surplus worries

In Europe, there are close connections between sugar cultivation and production. Led by a handful of major companies, European sugar developers are largely traditional businesses and cooperatives with direct links to farmers.

These strong relationships are helpful in the scenario that has played out in recent years, wherein a sugar deficit has shifted into a potential oversupply issue.

The highest sugar deficit was recorded during the 2022/23 season, at 1.4 million tonnes. Yet, in the two most recent seasons, a rise in cultivation areas and stable yields pushed production up, while consumption declined.

Last season saw a slight increase in consumption. As a result, cultivation areas are expected to drop in the 2025/26 season and beyond to stabilise the sugar sector.

Diversifying product portfolios

In recent years, producers have diversified their product portfolios, moving into functional ingredients and alternative sweeteners. Consumption figures have dropped, in large part due to a rise in healthier alternatives and better-for-you product launches.

Consumers demand value-added sugar alternatives, prompting manufacturers to adapt and differentiate their product offerings.

We can expect to see sugar-related products that appeal to consumers’ calls for sugar alternatives enter the market. Launches that incorporate microproteins, flavoured products and alternative sweeteners are key growth areas.

Furthermore, products using sugar beets will grow in popularity. Solutions that focus on enhancing nutrition and wellbeing, such as scFOS, a dietary fibre syrup produced from beet sugar by enzymatic rearrangement, and organic sugar from beet sources will emerge.

Boosting the sugar business: Fame, formats, and fermentation

Furthermore, appealing to consumer demand for familiar household names fosters trust and credibility. Branded sugar can increase margins through premiumisation, ensuring authenticity and product recognition.

Customised solutions can also spur new ideas, contributing to novel launches that capture consumers’ attention.

On-the-go formats can address their need for convenience, with producers exploring practical, smaller, or resealable product formats. Sugar remains a key ingredient in convenience products and precooked meals, adding taste, texture, and shelf life to finished formulations.

“The disruptive demand changes enforce a mindset shift toward demand-driven end-to-end thinking, growing the core operating model to a full valorisation engine,” said Nicolas Wüthrich, partner at Roland Berger.

For sugar producers with a wide range of applications, fermentation offers a promising route to valorisation. Lactic acid fermentation and alkaline fermentation are of particular interest to sugar producers, as lactic acid and citric acid are core acidulants, with anticipated growth of 6% per annum.

“Precision fermentation offers game-changing potential for specialty molecules, but economic viability remains challenging for commoditised products, even with significant yield improvements,” said Alexander Belderok, senior partner at Roland Berger.