Nigerians may pay more for drinks if Sudan crisis lingers

The conflict in Sudan is threatening the supply gum arabic, a key ingredient used in the consumer goods industry, from drinks, food, pharmaceutical to cosmetics.

Gum arabic is particularly common in fizzy drinks produced by companies such as Coca-Cola and Pepsico, where it helps to bind other ingredients together. It has no clear substitute.

Analysts say prolonged disruption in the supply chain of the ingredient may see companies raise the prices of their goods to cover any additional cost of sourcing the ingredient. Nigeria is one of the world’s biggest consumers of soft drinks.

– Big supplier

About 120,000 tonnes of gum arabic is produced globally each year, worth $1.1 billion, according to estimates cited by Kerry Group, a major supplier. Of that figure, about 70% comes from Sudan.

Other suppliers include Ethiopia, Chad, Somalia, and Eritrea. Supplies from those regions tend to be as volatile as those from Sudan and possess inferior quality, according to Reuters.

In Sudan, nomads extract the gum from acacia trees. The commodity supports the livelihoods of thousands of people, and the higher quality can cost up to $3,000 per tonne, according to Gum Sudan, a trading company.

– Conflict

Violence erupted in Sudan two weeks ago after two generals fell out over a deal with democracy activists, part of which required the incorporation of the paramilitary Rapid Support Forces (RSF) into the military, as the early steps towards civilian rule.

Companies dependent on gum arabic, such as Coca-Cola and Pepsico, have long stockpiled supplies, wary of Sudan’s instability. Some companies keep between three to six months’ worth to avoid being caught short, exporters and industry sources told Reuters.

– Traders speak

Reuters quoted Mohamad Alnoor, who runs Gum Arabic USA as saying it is “impossible” now to source additional gum arabic from rural parts of Sudan because of the ongoing fighting and road blockages.

Richard Finnegan, a procurement manager at Kerry Group, a supplier of gum arabic to most major food and drink firms, told Reuters current stockpiles will run out in five to six months.

Martijn Bergkamp, a partner at Dutch supplier FOGA Gum, echoed the same view and estimated supplies would last for three to six months.

Alwaleed Ali, who owns AGP Innovations Co Ltd, a gum arabic exporting business, said his customers are looking for alternative countries to supply the product.

US-based Ingredion Inc, an ingredients supplier in Illinois, told Reuters: “We have proactive measures in place across our business to ensure the continuity of supply for our customers.”

Reuters said PepsiCo declined to comment on supply chain and commodity issues, while Coca-Cola did not return a request for comment.