Far from its original use of fruit preservation, you can find sugar in soft drinks, candies, baked goods, breakfast cereals, flavored yogurts, sauces, condiments, frozen desserts, instant oatmeal, granola and snack bars. It activates the brain's reward system, releasing dopamine, a.k.a. the "feel-good" neurotransmitter. Maybe this is why the average American consumes 17 teaspoons of sugar daily!
As a consumer staple seemingly in perpetual demand, it makes sense that investors are intrigued by the idea of adding sugar stocks to their portfolios. But how do you determine which ones are right for your portfolio? Choosing the right sugar stock comes down to individual preferences for risk and international diversification.
Read on to learn more about the sugar industry, how to buy sugar stocks and the top sugar stocks that could boost your portfolio's performance this year.
Sugar stocks: An overview
Sugar stocks are the publicly traded shares of companies that operate in various segments of the sugar supply chain, including cultivation, processing and distribution. This market segment includes businesses that grow sugarcane or sugar beets, refine raw sugar into consumable products or operate in related areas such as molasses and ethanol production.
The performance of sugar stocks is influenced by a wide variety of factors, such as international commodity prices, weather conditions affecting crop yields, challenges related to sustainability and ethical practices, geopolitical events influencing trade dynamics, regulatory environment changes and evolving consumer preference, especially as we learn more about the role sugar plays in our overall health.
You can incorporate sugar stock exposure into your portfolio through agricultural companies, consumer goods companies or sugar exchange-traded funds (ETFs).
- Agricultural companies: Agricultural companies are involved directly in producing, manufacturing or processing sugar. The world's largest agricultural companies dealing in sugar production are outside the United States.
- Consumer goods companies: Many consumer goods companies can be classified as sugar stocks because they rely on sugar as a primary product ingredient. Changes in cane stock price can influence these stocks, as sugar shortages can cause problems in the overall supply chain.
- Sugar ETFs: Sugar ETFs typically invest in financial instruments related to the sugar industry, such as futures contracts for sugar or agricultural projects that produce or refine sugar. These funds expose investors to the sugar market without directly holding physical sugar.
Understanding the sugar industry
The sugar industry plays a vital role in the global commodities market, encompassing sugar cultivation, processing and distribution. Before you invest in a sugar stock, you must understand how this industry works.
Sugar, as we know it, is a processed form of sugarcane, a tall, tropical crop primarily grown in warm regions like South America and Southeastern Asia. Sugar is one of the most important global products in the world, with production and processing making up about 22% of Brazil's economic output. Global sugar consumption should grow around 1.4% annually, reaching an expected annual demand of 196 million metric tons in 2030.
Sugar production depends heavily on weather conditions and agricultural practices, making it vulnerable to crop yields and fluctuations in supply. Climate change patterns, natural disasters and diseases can all impact sugar production and prices. As sugar is a globally traded commodity, international trade policies, import-export regulations and changes in demand from major consuming countries can influence its prices.
While forecasts for the sugar industry indicate continued demand growth, recent trends reveal a shift toward alternative sweeteners and an increasing emphasis on sustainability practices. Successful companies are diversifying their product offerings to align with changing consumer preferences.
Similar to "Big Pharma" or "Big Tobacco," "Big Sugar" is a term used to describe major players and entities within the sugar industry, particularly those with significant influence, economic power and lobbying capabilities. These entities include major sugar-producing companies, agricultural conglomerates and industry associations working together to protect their interests, influence policy decisions and shape public perceptions of the sugar industry. The term is sometimes used in discussions about these powerful entities' impact on public health, environmental sustainability and government policies related to sugar consumption and production.
Critics of "Big Sugar" argue that these companies have lobbied against regulations to reduce sugar consumption, influenced dietary guidelines and contributed to health issues associated with excessive sugar intake. The term discusses public health campaigns, sugar taxes and efforts to address the health consequences of high sugar consumption in various parts of the world.
Investing in sugar stocks
Is including sugar stocks in your investment portfolio a smart move? The answer depends on your risk tolerance and investment goals.
Consumer staples, including sugar-related products, are often considered defensive investments, meaning they tend to have stable demand regardless of economic conditions. As such, investing in sugar stocks can contribute to long-term portfolio stability by facilitating exposure to a globally-traded commodity with consistent demand driven by population growth and changing dietary habits. If you are seeking reliable income, make sure to take a look at the sugar-centered companies that offer dividends to shareholders, like The Hershey Company.
Agricultural commodities, including sugar, are often viewed as a hedge against inflation. When prices increase, the value of tangible assets like sugar may also increase, providing a potential safeguard against the eroding purchasing power of currency. Because of this, sugar often reaps the benefits from increasing prices during rising-rate environments.
Sugar stocks can also provide diversification benefits, especially if they are part of a well-rounded portfolio. Diversifying further within this market segment (across different industries) can help spread risk and reduce the impact of poor performance by any single investment or sector. For example, including sugar companies involved in bioenergy and ethanol production in your portfolio, like Cosan S.A., may present unique growth opportunities.
Features to look for in sugar stocks
Before purchasing any stock, it's important to do your due diligence by looking at a company's key financial metrics (including revenue growth, profitability and debt levels), risk management strategies, dividend history and industry trends. But when evaluating a sugar company, it’s essential also to consider the following:
Geographic presence
Companies with a diversified and well-established presence in key sugar-producing regions are typically better positioned to navigate market dynamics. For example, emerging markets have proven to be an excellent opportunity for products with high sugar content. Additionally, companies operating in multiple countries may have an advantage in accessing diverse markets and mitigating risks associated with localized events, such as adverse weather or political instability.
Diverse operations
Some sugar companies add value to their primary products, such as refining raw sugar into specialty sugars or producing ethanol from sugar byproducts. Value-added products often command higher prices and improve profit margins, making them more stable long-term investments.
Market position
Look for companies that are leading players in the industry, with a significant market share and a strong competitive position.
Research and development
Companies focused on innovation may have a competitive edge regarding crop yields, processing efficiency and product development.
Regulatory environment
Changes in government policies, subsidies and trade agreements can significantly impact the sugar industry, so it's essential to stay informed about regulatory developments.
Global demand outlook
Factors such as population growth, changing dietary habits and emerging market dynamics may influence the demand for sugar products.
Industry trends
Companies that adapt to changing consumer preferences, technological advancements and sustainability trends (such as environmentally friendly and socially responsible practices) may be better positioned for long-term success and could align with ethical investing principles.
10 best sugar stocks
With all the options, how do you determine which sugar companies are worth the investment right now? Look at some of the top sugar companies in today's ever-changing stock market.
1. The Hershey Company
If you're an American, chances are you have a favorite product produced by The Hershey Company NYSE: HSY. Hershey's is one of the world's largest manufacturers of chocolate and confectionery products. It is best known for its chocolate-based candy bars and other consumer products, including Jolly Rancher, Ice Breakers, SkinnyPop and Pirate's Booty.
While not primarily a sugar producer, almost all of Hershey's products use or contain sugar in some capacity. Direct communication with sugar producers can help Hershey's streamline its supply chain, providing more insight into changing consumer trends.
2. Tootsie Roll Industries
Another option for American consumer discretionary investors, Tootsie Roll Industries NYSE: TR is best known for its eponymous line of Tootsie Roll products. However, the company's offerings go far beyond the chocolate-flavored taffy, with companies like Junior Mints and DOTS complementing its lineup of confectionery products. In July 2023, Tootsie Roll Industries boasted a total market capitalization of $2.38 billion, making it a more affordable choice when compared to Hershey.
3. Whole Earth Brands Inc.
Whole Earth Brands Inc. NASDAQ: FREE is a global food company looking to meet the growing demand for better-for-you alternatives in the food industry. The company, based in Chicago, focuses on products sweetened with stevia or monk fruit rather than cane sugar or high-fructose corn syrup. Whole Earth operates through two segments, branded CPG and flavors and ingredients. Branded CPG sells products under the Whole Earth, Pure Via, Wholesome, Swerve, Canderel and Equal brands. According to analysts, Whole Earth's stock has a predicted upside of 166.85% based on their 12-month stock forecasts.
4. Mondelez International
Another Chicago-based company, Mondelez International NASDAQ: MDLZ is a global food and beverage company with a diverse portfolio of popular brands, including famous names like Sour Patch Kids, Oreo, Clif BAR, Tate's Bake Shop, Toblerone, Trident, Cadbury, Chips Ahoy and more. Mondelez International maintains a total market capitalization of more than $102 billion and analysts predict that the company's upcoming quarterly earnings report will show a 77-cent per share increase (a 5.5% year-over-year increase) and that revenues will be $9.27 billion (a 6.6% compared to the year-ago quarter).
Mondelez International was known as Kraft Inc. until 2012, when the corporation split into Mondelez International and the Kraft Foods Group Inc. (which went on to merge with H.J. Heinz Company in 2015 to form Kraft Heinz Co. NYSE: KHE).
5. Cosan S.A.
Brazil-based multinational conglomerate Cosan S.A. NYSE: CZZ offers a diverse range of operations, including sugar and ethanol production, fuel distribution, natural gas pipelines and logistics. One of the largest sugar producers in the world, Cosan is a major component of Brazil's economy. As of January 2024, the company boasted a total market capitalization of $7.04 billion.
Cosan benefits from Brazil's favorable climate for sugarcane cultivation and is a major exporter of sugar and ethanol products. This international presence and domestic dominance can make it an appealing choice for investors looking to add non-U.S. assets to diversify their accounts.
6. Adecoagro
Another pick for agricultural investors, Adecoagro S.A. NYSE: ARGO, is a general competitor of Cosan, with operations in many of the same sectors. Like Cosan, Adecoagro divides its business between the energy and agricultural sectors, with a significant portion of its operations devoted to sugar and ethanol production in South America. The company also operates co-generation plants that produce electricity from biomass, a byproduct of sugar and ethanol processing. It is an excellent option to intersect sugar and energy company investments.
7. Teucrium Sugar Fund
Teucrium Sugar Fund NYSE: CANE is a sugar futures ETF that does not invest directly in sugar, sugar-producing companies or companies that use sugar like Hershey's or Tootsie Roll. Instead, this fund holds futures contracts of sugar, allowing investors to gain exposure to the price movements of sugar without directly dealing with physical commodities.
Investing in the Teucrium Sugar Fund can be an excellent place for beginner investors to learn more about the futures market.
8. PepsiCo Inc.
While not a sugar company stock directly, PepsiCo Inc. NASDAQ: PEP is another option for investors looking to keep their domestic investments while capitalizing on public sugar consumption. Like Hershey's and Tootsie Roll, PepsiCo requires large amounts of processed sugar to produce its namesake soft drinks. While the company has been expanding its portfolio to include healthier options and low-calorie beverages, traditional sugary drinks remain a significant part of its business. As of January 2024, PepsiCo Inc. had a total market capitalization of $229 billion, making it a blue-chip pick for sugar investors.
9. Shree Renuka Sugars Ltd.
With operations spanning multiple countries (including India, Brazil, and Canada), Shree Renuka Sugars Ltd. NSE: RENUKA is one of the leading global sugar manufacturers.
Headquartered in Mumbai, the company is engaged in producing and selling sugar, ethanol and other related products. Beyond sugar, Shree Renuka Sugars has diversified its portfolio to include the co-generation of power and the production of bioproducts. Shree Renuka Sugars contributes significantly to the agribusiness sector, catering to domestic and international markets.
10. Bunge Limited
While you can invest in sugar most directly via stocks like Cosan, agricultural companies can add a wider breadth of exposure to international crop sales. Bunge Limited NYSE: BG is a leading global agribusiness and food company that operates in various segments, including sugar. But unlike Cosan, Bunge is not primarily known for its sugar operations; its primary product is consumer oils. While raw and refined sugar makes up a relatively small percentage of Bunge's overall portfolio, it can provide a more diverse choice for conservative-leaning investors.
Future outlook and trends
The future of sugar stocks is undeniably influenced by the growing emphasis on sustainability, driven by a shift in consumer preferences towards eco-friendly and socially responsible investments – and investors are paying attention. Consumers are increasingly conscious of environmental and ethical considerations and purchase products from companies that share their beliefs. As such, companies that adopt environmentally friendly cultivation methods, utilize ethical labor practices, pursue certifications like Fair Trade or organic labeling, and have transparent and sustainable supply chains are likely to gain a competitive advantage.
Additionally, technological innovations are crucial in shaping the sugar industry's sustainability landscape. Precision agriculture, using drones and data analytics, allows for more efficient and environmentally conscious sugarcane farming.
Furthermore, advancements in biotechnology may lead to genetically modified sugarcane varieties, impacting yields and resistance. The diversification of sugar companies into bioenergy and ethanol production aligns with global renewable energy goals and presents additional opportunities for investors seeking sustainable portfolios.
The intersection of sustainability, consumer preferences and technological innovation is reshaping the future of sugar stocks, prompting investors to consider the long-term viability of companies committed to ethical and environmentally conscious practices.
Tips for investing in sugar stocks
Market analysis before investing in sugar stocks is essential for making informed decisions. Here are some practical tips to help you find the right sugar stock to add to your portfolio:
- Understand the sugar market dynamics: Research global and regional sugar production and consumption trends.
- Assess current and predicted supply and demand factors: Consider factors like weather conditions, geopolitical events, changing consumer preferences, production levels in major sugar-producing countries, global trade dynamics and the impact of governmental policies.
- Track historical and current sugar price trends: Understand the key drivers of price movements and how external factors can impact sugar prices.
- Evaluate competitor landscape: Identify key players, their market share and any competitive advantages they may have.
- Consider technological innovations: Technological advancements in farming practices, processing technologies and sustainable production methods can impact the efficiency and competitiveness of sugar companies.
- Review financial performance: Assess key metrics, such as revenue growth, profit margins and debt levels, prioritizing companies with a strong track record of financial stability.
- Look into product offerings: Companies who have diversified into bioenergy, ethanol production or sustainable practices may present additional growth opportunities.
- Consider sustainability practices: Companies aligned with consumer preferences may be better positioned for long-term success.
- Monitor mitigation strategies: Assess how a company prepares for changes in weather patterns, diseases affecting sugarcane crops or global economic conditions.
- Stay informed about trade agreements: Changes in international trade agreements can influence the competitiveness of sugar exporters and importers.
- Utilize industry reports and analysis: These reports can provide valuable insights into market trends, challenges, and growth opportunities within the sugar sector.
A balanced investment approach ensures resilience against market volatility and enhances the long-term stability of the investment portfolio. When diversifying your investment portfolio with sugar stocks, it is crucial to adopt a balanced approach to manage risk effectively by:
- Spreading investments across various sectors, combining sugar stocks with assets from different industries to minimize sector-specific risks.
- Including sugar stocks from different geographic regions to mitigate regional economic fluctuations.
- Regularly rebalancing your portfolio to adjust to changing market conditions.
Will sugar stocks provide sweet returns?
Society's love affair with sugar is deeply ingrained, transcending cultural and geographical boundaries. The sweetener's ability to enhance flavors and evoke comfort and indulgence has solidified its place in our diets and culinary traditions. And because sugar enters almost every food consumer category, mainly processed foods and confectioneries, it will surely catch the eye of savvy investors looking to boost their portfolio.
However, remember that factors ranging from global demand and supply dynamics to evolving consumer preferences and sustainability practices influence the sugar industry. Finding a sugar stock that will sweeten your portfolio's returns is all about thoroughly researching individual companies, analyzing industry trends, understanding the influence of external factors on the industry, and employing a balanced strategy.
FAQs
Still have questions about how to invest in sugar stocks and sugar companies in USA and abroad? We don't blame you. The sugar industry has many moving parts, and various factors influence sugar stocks. Here are some frequently asked questions about the sugar industry that satisfy our sweet tooth.
Which is the best sugar stock?
No single stock can be named the "best" sugar stock because the best stock for your needs might vary depending on individual circumstances. For example, if you're a higher-value investor looking for blue-chip sugar companies, The Hershey Company could be the best sugar stock due to its high market capitalization. If you're looking for stocks with more growth potential, international options like Cosan S.A. could be better.
Can I invest in sugar?
Yes, as an investor, you can gain exposure to the sugar market in multiple ways. You can invest in sugar-related stocks of companies engaged in sugar production, and you can also invest in sugar or agricultural ETFs for more diverse market exposure.
What is the largest sugar company?
Südzucker AG is a German company and the largest sugar producer in the world. As of January 2024, the company had a total market capitalization of $2.72 billion, with an annual production of around 4.8 million tons of sugar.
