SWEETENERS Used by the DAIRY INDUSTRY

Crops Protection Hesearch Branch -"■^\"^- ^'^^^seaPGh Division, ARS ■ J'- Jepartment of Agriculture -ei^sville, Maryland

SWEETENERS used by the DAIRY INDUSTRY

Agricultural Economie Report No. 30 Economie Research Service U.S. DEPARTMENT OF AGRICULTURE PREFACE

This is the second of a group of reports dealing with the use of sweeteners and their competitive position in the various food industries. The first, "Sweeteners Used by Food Processing Industries in the United States: Their Competitive Position in the Canning Industry/* Agricultural Economic Report No. 20, was published in November 1962. Other publications dealing with (1) the beverage industry, (2) the baking industry, and (3) the confectionery industry are planned, A final report summarizing the principal findings for each industry also is planned.

Research analyzing and evaluating trends in production and consum.ption of various sweeteners and in competition among sweeteners has been recommended by the Sugar Research and Marketing Advisory Com.mittee,

CONTENTS

Page

S-uxrimary ••••••••• ,•••«,. «o»««««»»««»«,.,. iv Introduction »»ao«oaaooaeo««o0>*oaoooBoooeooaoo9« 1 Size and location of the sweetened dairy products industry »ooo^aaao.e. 2 Quantities of sweeteners used .o.. ..••»..•«» ••• 2 Geographic distribution of the use of sweeteners ».o»»»«»,» 7 Government regulation of sweetener use in dairy products «.««»oa«««», 10 Industry practices in the use of sweeteners, «•««««•«o«»««.»«««« 11 Use of none alo ric sweeteners • • « » » « « • 13 Fornas of sweeteners used •••...••••••o^o»», 13 Sweetener procurement practices »•••«•«••««»«««««ooa.»« IS Cost of sweeteners relative to other raw materials used in sweetened dairy products • , . . , , , . • » • » « • o • , » • • • 16 Economic implications ••••••.•» .«••••••••• 17

Washington, Do C. April 1963

- Ill SUMMARY Manufacturers of sweetened dairy products used about 4,7 percent of the total quantity of sugar, corn sirup, and dextrose delivered to cansumers in the United States in 1961» Smaller quantities of noncaloric sweeteners (principally succharin and sucaryl) and sorMtol were used in producing various dietetic dairy products*

TKe principal dairy products for which sweeteners are important are ice cream, other frozen desserts, and sweetened condensed milk. The production of frozen desserts, including ice cream, has been increasing in the United States since 1952, but the output of sweetened condensed milk has declined« The m^anufacture of ice cream tends to be concentrated near centers of population because of the expense of transporting it long distanceso Plants producing sweetened condensed milk are m.ó^tly situated in areas of heavy milk production, since it is less expensive to transport the m.anuiactured product than fresh milk. From 1952 to 1961, the use of sweeteners (sugar, dextrose, and corn sirup) in dairy products has increased at an average rate of about Í8,000 tons, or 4,7 percent a year. The use of corn sirup in sweetened dairy products increased from 1952 through 1961 at anaverage rate of about 5,000 tons, 12,5 percent per year, as compared with 14,000 tons or 4,0 percent, for sugar. The use of dextrose declined at an average rate of about 6,7 percent a year.

The relatively slow rate of increase in the use of sugar com^pared to that for corn sirup was the result of (1) the decline in the output of sweetened condensed milk for which sugar is almost the sole sweetener, (2) the rapid increase in the output of frozen desserts which are sweetened, in part, with corn sirup, and (3) the trend towards the use of a higher proportion of corn sirup in the mixtures used to sweeten frozen desserts. The principal cause of this trend is the declining price of corn sirup relative to that of sugar, 1Í trends in the use of sweeteners continue for the next 5 years, consiimption of sweeteners in sweetened dairy products in 1966 will be about 551,000 tons, of which 82,3 percent would be sugar, 0,7 percent dextrose, and 17,0 percent corn sirup.

The increase in the use af sweeteners in dairy products from 1952 through 1961 was considerably more rapid than the rise in population in the United States, Per capita use of sugar rose about 0,8 pound from 1952 to 1961 as compared with 0.5 pound for corn sirup. Shifts in consumption away from the use of home prepared products toward the purchase of similar items indicate that part of the increased use of sweeteners in the industry has been offset by a reduction in household consumption. Per capita use of sweeteners in manufactured dairy products increased at an average rate of about 3,0 percent. Assuming that the increase continues at this rate, per capita consumption of sugar, dextrose, and corn sirup in sweetened dairy products in 1966 will be about 5,7 poxinds.

Trends toward the use of more sugar in dry bulk and liquid form and the purchase of blends of liquid sugar and corn sirup seem likely to continue. In part, this is dependent on distributors continuing to nnake products in these forms available in new locations througliout the country.

Although the prices of sugar and other sweeteners have been comparatively stable since sugar quotas were reestablished in 1948, manufacturers of sweetened dairy products indicate that price fluctuations are sufficiently important to cause them to give careful attention to their buying practices. They are m.ore concerned with purchasing sweeteners at prices no higher than those paid by their cornpet it or s than with m.inor changes in the general level of sweetener prices,

- iv - SWEETENERS USED BY THE DAIRY INDUSTRY

THEIR COMPETITIVE POSITION IN THE UNITED STATES

By Roy Ao Balling er and Lo C* Larkin agricultural economists Marketing Economics Division Economic Research Service

INTRODUCTION

Although several products of the dairy industry use no sweeteners, producers of ice cream and various other manufactured dairy products have becom^e increasingly important users of these products since World War IL j^/ In 1961 the industry used about 8,6 percent of the corn sirup, 5»1 percent of the sugar, and 2,1 percent of the dextrose delivered to consumers in the United States, In addition, noncaloric sweeteners are used in som.e manufactured dairy products, principally ice cream*

Sweeteners are important in the production of ice cream., other frozen desserts, and sweetened condensed m.ilko In addition to sweetening these products, they serve as a preservative and contribute texture and body to the products in which they are usedo Changing conditions in the industry, particularly the com.petition among sugar, corn sirup, and other sweeteners, have created a need for additional information on these shifts and their probable effects on the sugar and corn sweetener industries» A previous publication of the U« S. Department of Agriculture contains information of a related nature for an earlier period, Zj

Sugar still is the principal sweetener used in dairy products but its position am.ong the several com.peting sweeteners has been weakening slowly since World War II, particularly in frozen desserts. In contrast uses of corn sirup in frozen desserts have been rising rapidly» The extent and causes of these changes need investigation and analysis and are of great importance to all m.anufacturers of sweeteners and sweetened dairy products*

The specific purposes of this report are (1) to determine trends in the quantity of each type of sweetener used in the dairy industry, (2) to provide inform.ation useful to producers on the problems and practices of various segm.ents of the industry in the purchase and use of sweeteners, and (3) to analyze competition am.ong producers of sweeteners in selling their products to m.anxifacturers of various dairy products*

1/ These include various frozen desserts, sweetened condensed milk, and sweetened milk products. 2/ Jones, P. E*, and Thomason, F* G« Competitive Relationships Between Sugar and Corn Sweeteners. U. S* Dept. Agr., Agr. Inform* Bui. 48, 245 pp* 1951, The information on which this report is based was obtained from a survey of representative dairy firm.s and from secondary sources* The industry survey covered 45 firms in 13 States and included representative raanufactur er s of each of the principal sweetened dairy products.

SIZE AND LOCATION OF THE SWEETENED DAIRY PRODUCTS INDUSTRY

Most of the sweeteners purchased by the dairy industry are used in the production of condensed m.ilk, ice cream, other frozen desserts, and sweetened milk and fruit drinks. A few of these products naay contain no m.ilk or other dairy products, but they are directly competitive with dairy products and usually are manufactured in plants devoted prinaarily to the manufacture of one or more dairy products.

The annual output of m.ost of the dairy products containing added sweeteners has increased substantially since 1952 (table 1). The principal exception is sweetened condensed milk, the production of which declined nnore than one-third from 1952 to 1961. The production of ice cream and other frozen desserts increased more than one«*third during the saiaae period, as did the production of various mixes purchased by some plajits which freeze and nriarket these products.

Ice cream is, by far, the most important of the frozen desserts. Its production increased from 1952 through 1961, although at a slower rate than that of other frozen desserts. Its proportion of the total declined from 86 percent in 1952 to 73 percent in 1961. The production of ice milk increased from 8 percent of total frozen desserts in 1952 to 17 percent in 1961. Mellorine production rose more than 300 percent between 1952 and 1961, when it reached about 5 percent of the total output of aH frozen desserts.

Plants m.anufacturing condensed and evaporated m.ilk and those producing ice creana and other frozen desserts, as reported in the Census of Manufactures, are scattered widely throughout the United States (table 2). It is expensive to transport frozen desserts for long distances, and plants producing them tend to be concentrated in or near centers of population. The manufacture of condensed m.ilk is concentrated in areas of heavy m.ilk production because transportation of condensed milk to consuming centers is relatively inexpensive.

The classification used by the Bureau of the Census onaits many plants which produce only sm.all quantities of a product that is only a minor part of the plant's output. Because of this method of classification, other estimates of the number of plants producing sweetened dairy products frequently are much larger. For instance, the total number of plants in the United States producing ice cream for sale in I960 has been estimated at nearly 17,000 and those producing ice milk at 24,000. 3/

Quantities of Sweeteners Used

The principal sweetener used in dairy products is sugar, although large quantities of corn sirup and some dextrose are also consumed. In addition, small quantities of noncaloric sweeteners, naostly saccharin and calcium cyclam.ate (sucaryl) are used to sweeten certain dietetic frozen desserts. Sorbitol, or occasionally manitol, is used as a sweetener in certain frozen desserts primarily for consum.ption by persons with diabetes. 3/ U. S. Department of Agriculture, Crop Reporting Board. Production of Manu- factured Dairy Products, 1961. Da 2-1(62). 63 pp. July 1962. (See p. 16.)

- 2 - Table 1. Production of ice cream and other sweetened dairy products in the United States, I952-6I

Frozen desserts Mixes Sweetened Other . Water condensed \"Mellorine\ Ice ; Ice \ Milk Year ; : Ice : Milk frozen : ices :"Mellorine Ice ' type" ' ' Total cream milk sherbet • Total milk sherbet , dairy- : type" mix . cream : milk : desserts ' mix mix mix products

1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 pounds gallons gallons gallons gallons gallons gallons gallons gallons gallons gallons gallons gallons

1952... Í 268,963 592,705 53,702 25,637 9,172 11,188 692,404 26,315 322,876 46,369 1/ 369,245 1953--. . 225,186 605,051 64-, 710 31,079 9,2¿^0 24,20? 734,287 26,851 323,483 57,688 ilH 381,171 OJ H 12,328 195^.- : 163,236 596,821 80,019 3^,170 4,787 31,379 747,176 26,555 320,321 66,641 399,290 u 426,081 1955-.. : 16¿^,197 628,525 90,185 37,365 3,¿^0 32,261 791,776 28,158 331,820 76,688 1/ 17,573 1956.-. : 193,655 6¿H,333 103,052 35,721 3,430 33,473 817,009 27,464 341,771 62,741 21,228 17,717 443,457 1957... : 190,201 650,583 111,165 36,712 3,317 34,161 835,938 28,149 346,341 70,460 22,101 18,522 457,424 1958.-. ; 180,191 658,026 117,^O^f- 37,083 3,936 39,690 856,139 28,405 347,698 75,261 21,560 21,068 465,587. 1959-.. : 179,^39 698,931 13^,216 ¿(-0,396 4,434 42,399 920,376 35,111 374,106 84,855 23,502 22,354 504,817 i960... : 171,702 697,552 14¿J',629 ^0,575 4,913 45,214 932,883 33,361 367,813 91,660 24,070 24,397 507,940 1961..c : l6¿f,807 69^,712 161,163 39,878 4,463 48,025 948,241 32,866 366,404 103,857 23,358 25,051 518,670

1/ Included with ice milk mix. 2/ Not available.

Statistical Reporting Service, USDA Table £•—Niimber of plants producing condensed and evaporated milk or ice cream and other frozen desserts in the United States in 1958, by Census regions

Region ; Condensed and Ice cream and other evaporated milk frozen desserts

Plants Plants New England. ..,, ! 3 113 Middle Atlantic 46 255 East North Central : 122 335 West North Central, 55 153 South Atlantic•.••••••.•..•• 20 125 last South Central : 25 92 West South Central...... : 6 119 Mountain. o.... : 11 63 Pacific. o : 25 127 United States. : 313 1,382

Reported under Standard Industry Classification by the Bureau of the Census, I958 Census of Manufactures.

The quantities of sugar and corn sirup delivered to the dairy industry by primary distributors (continental cane sugar refiners, domestic beet processors, importers of direct-consum.ption sugar, and producers of corn sirup) increased substantially during the period 1952-61, while deliveries of dextrose declined (table 3)« In addition to these deliveries, some producers of sweetened dairy products, particularly those with small plants, purchase part or all of their sweeteners through wholesalers« Also, som.e purchases are miade in the form, of blends of sugar and corn sirup or dextrose« Reliable inform.ation about the quantities of such purchases is not available* However, it is doubtful if the inclusion of such data would materially change the trends and relationships shown in table 3 except to make the tonnage figures somewhat larger.

Adequate information on the quantities of noncaloric sweeteners used by food processing industries is not available and almost none is obtainable for the dairy industry, 4/ However, total sales of such sweeteners were about 2 million pounds in 1957 and 2,5 million pounds in 1959a It is not possible to determine the equivalent of these quantities in sweetening power conapared with sugar or corn sirup, since the sweetening power of a pound of saccharin is much greater than that of a pound of sucaryl, and the proportion of each in total noncaloric sweetener sales is not known«

The total quantity of sugar, dextrose, and corn sirup used in sweetening dairy products increased at an average rate of about 18,000 tons a year from 1952 through 1961 (fig« 1), The increase for sugar averaged about 14,000 tons a year, for corn sirup, 5,000 tons, while the use of dextrose declined slightly« The most rapid increase, 12.5 percent a year, was in the use of corn sirup« The increase for sugar averaged only 4«0 percent a year, while the use of dextrose declined at an average rate of about 6a7 percent annually.

4/ "Use" in this report is enaployed as a synonyna for deliveries«

= 4 - Table 3.—Deliveries of sugar, dextrose (corn sugar), and com sirup by primary distributors to manufacturers of sweetened dairy products in the United States, 1952-61

Year Sugar Dextrose Total

1,000 1,000 1,000 1,000 tons 1/ tons 1/ tons 1/ tons 1/

1952 277 li^ 18 309 1953 281 12 25 318 195¿^ 293 12 30 335 1955 298 11 37 346 1956 321 11 36 368 1957 330 9 42 381 1958... 3kk 8 47 399 1959 -.• 370 8 55 433 i960 366 9 62 437 1961 395 8 70 473

Percentage distribution Percent Percent Percent Percent

1952 : 89.7 ¿^.5 5.8 100 1953 ....•: 88.3 3.8 7.9 100 195^... Î 87.5 3.6 8.9 100 1955.... - 86.1 3.2 10.7 100 1956 : 87.2 3.0 9.8 100 1957. Î 86.6 11.0 100 1958 ....: 86.2 2.0 11.8 100 1959 : 85.5 1.8 12.7 100 i960 ...: 83.7 2.1 1^.2 100 1961 .....: 83.5 1.7 1¿^.8 100

1/ Dry basis. Sugar, refined weight as produced; dextrose 92.0 percent; and corn sirup 80.3 percent of weight as produced.

Sugar Reports, Sugar Division, Agricultural Stabilization and Conservation Service, U. S. Department of Agriculture.

While the total quantity of sugar used in sweetening dairy products increased more than 40 percent from 1952 to 1961, the proportion which sugar was of the total, shown m table 3, declined from 89«7 percent in 1952 to 83«5 percent in 1961 o If the proportions of sugar, dextrose, and corn sirup had been the same in 1961 as in 1952, the quantity of sugar used in sweetening dairy products in 1961 would have been 29,000 tons or 7o3 percent greater than it was, dextrose deliveries would have been 13,000 tons, or 62 percent,, larger, and deliveries of corn sirup 43,000 tons, or 61 percent, smallero These quantities for a single year may appear insignificant, but the cumulative effect over a period of years is important«

The use of sweeteners in ice cream and other dairy products increased considerably faster than the population of the United States from 1952 through 1961, and per capita use rose about 31 percent during the period {table 4)o The increase SWEETENERS IN AAANUFACTURED DAIRY PRODUCTS THOUS. TONS THOÜS. TONS

- TOTAL / '- 500 - -

450 / - / - 400 - - ^ 350 / / - 300 V -

250 I I .L,..^. UJ--i_J_La.,-i_--L-LJ 1952 '56 '60 '64 1952 '56 '60 '64 g. S. DEPARTMENT OF AGRICULTURE NEC. ERS î70V-63(3) ECONOMIC RESEARCH SERVICE Figure 1

- 6 - Table 4.—Per capita use of sugar, dextrose (corn sugar), and corn sirup by manufacturers of sweetened dairy products in the United States, 1952-61

Year Sugar ; Dextrose \ Corn sirup ; Total • m •

Pounds 1/ Pounds 1/ Pounds 1/ Pounds

1952. 3.53 0.18 0.23 3.94 1953. 3.52 .15 .31 3.98 1954. 3.61 .15 .37 4.13 1955. 3.61 .13 .45 4.19 1956. 3.82 .13 .43 4.38 1957. 3.86 .10 .49 4.45 1958. 3.95 .09 .5^ 4.58 1959. 4.18 .09 .62 4.89 i960. 4.05 .10 .69 4.84 1961. 4.31 .09 .76 5.16

1/ Dry basis. Sugar, refined weight as produced; dextrose 92.0 percent; and corn sirup 80.3 percent of weight as produced.

Adapted from Sugar Reports, Sugar Division, Agricultural Stabilization and Con- servation Service, U. S. Department of Agriculture. for sugar was 22 percent and for corn sirup 230 percent, while the per capita use of dextrose declined about 50 percento

The increase in the per capita use of sugar in the dairy industry appears to have been offset, in part at least, by reductions in per capita purchases of sugar for household use in preparing similar products although infornaation needed to measure this is not available«,

The increase in the use of sweeteners in dairy products since 1952 has been at a relatively constant rate, as indicated in figúrelo If the straight line trends shown in these charts are extended for 5 years to 1966, the total indicated consumption of sweeteners in dairy products is 551,000 tons^ of which 454,000 tons would be sugar, 4,000 tons dextrose, and 93,000 tons corn sirup^

The per capita consximption of sweeteners in dairy products would approximate 5«7 pounds by 1966 if the trends since 1952 shown in table 4 should continue. Of the total, about 4,7 pounds would consist of sugar, UO pound of corn sirup, and less than 0.05 pound of dextrose (figo 2)«

Geographic Distribution of the Use of Sweeteners

The quantities of both sugar and dextrose delivered to producers of sweetened dairy products in the North Central States during 1952 = 61 were larger than those used in any other section of the United States (table 5)« 5/ Similar data for corn sirup are not available. Producers in the North Central States used slightly more than one-third of the sugar delivered to the dairy industry, and this proportion remained relatively constant during the 10=year period (table 5)« V See figure 3 for area boundaries.

- 7 - PER CAPITA USE OF SWEETENERS IN MANUFACTURED DAIRY PRODUCTS LB. LB. SUGAR DEXTROSE 4.8 .18

4.5 .15 -

4.2 .12

3.9 .09

3.6 .06

3.3 .03 J-J-xJ-L-UI. I-J.I. XJ ■—i^'^^'*^""^""»*■««—4, <■-il- iF- I I ,f - " 1.05 6.0 CORN SIRUP - TOTAL .90 / / - - .75 / 5.2 — - / - - .60 / 4.8 - / . - .45 J^ 4.4 - .30 -."i r 4.0 / — - - .15 1 .Í.J.. -.L.l.,-i.- L J i^-J-^ 3.6 -I -L ..l-J L q. 1952 '56 '60 '64 1952 "56 '60 "64

U. S. DEPARTMENT OF AGRICULTURE NEC. ERS 1702-63 <3) ECONOMIC RESEARCH SERVICE Figure 2

- 8 - Table 5.—Use of sugar and dextrose (corn sugar) in ice cream and other dairy products, by geographic areas, 1952-61 l/

; New Middle North United Year South West \ England Atlantic Central States

1,000 1,000 1,000 1,000 1,000 1,000 tons tons tons tons tons tons

Sugar, refined: : 1952 c: 17 72 99 48 41 277 281 1953 : 15 83 88 55 40 195^ Î 16 80 92 65 40 293 298 1955 : 17 78 104 62 37 1956 ..: 17 78 113 66 47 321 1957....•.....: 16 83 112 69 50 330 1958 : 16 84 116 76 52 344 370 1959 : 18 92 124 82 54 i960 •.: 21 87 125 86 47 366 1961 : 20 97 135 88 55 395

Dextrose, dry : basis: : 1952 : 2.72 4.78 4.11 1.53 13.60 12.46 1953 .36 2.62 3.90 4.08 1.50 1954 : .37 2.32 3.90 3.68 1.26 11.53 1955 : .m 1.99 3.94 3.22 1.06 10.65 .1956 .: .42 1.95 3.77 3.13 1.34 10.61 9.28 1957 .40 1.79 3.41 2.76 .92 1958 : .36 1.21 3.18 2.13 1.08 7.96 X.yjy ••••••••• • • .39 1.12 3.14 1.75 1.14 1.55 i960 : .63 1.96 3.60 1.55 .97 8.71 1961 .51 1.97 3.59 1.05 1.02 8.13

1/ Area boundaries shown in figure 3.

Sugar Reports, Sugar Division, Agricultural Stablization and Conservation Service, U, S. Department of Agriculture.

The tonnage of dextrose consumed in dairy plants in the North Central States; declined somewhat from 1952 to 1961, but the decline was less m.arked than for th^e rest of the United States, particularly the South« As a result, the proportion of dextrose delivered to dairy plants in the North Cent ral States increased considerably -- from 35 percent of the total in 1952 to 44 percent in 196lo Most of the plants producing dextrose in the United States are in the Corn Belt area of the North Central States,;

The use of sugar in sweetened dairy products increased in the South at a slightly faster rate than in the rest of the United States; this is largely a reflection of the Gom.paratively rapid econonciic development of the South in recent years« In contrast,^^ the use of dextrose in sweetened dairy products declined much more rapidly in the; South than in other sections of the United States»

9 - CHANGE IN SUGAR AND DEXTROSE USE, ^¿r^ DAIRY INDUSTRY-1952 TO 1961

NEW n/ ENGLAND +2.6% +3.0% MM

Uo S. DEPARTMENT OF AGRICULTURE NEC. ERS 1703-63(3) ECONOMIC RESEARCH SERVICE

Figure 3

GOVERNMENT REGULATION OF SWEETENER USE IN DAIRY PRODUCTS

The Federal Goveriunent, through the Food and Drug Administration, and agencies of State and local governments issue regulations concerning the use of sweeteners in dairy products. The regulations of the Food and Drug Administration are general 4n nature and appear to have less influence on trade practices than many of the State and local controls»

Regulations of the Food and Drug Administration permit condensed milk to be sweetened with sugar, dextrose, or corn sirup, or a combination of sugar and dextrose, or sugar and corn sirup in quantities sufficient to prevent spoilage« If corn sirup is used as a sweetener, this must be specified in the labels on the containers.

For ice cream and other frozen desserts, the regulations of the Food and Drug administration do not specify either the minimum or maximxim proportions of any sweetener that may be used or the identity of the sweeteners. The regulations state: It is unnecesary in definitions and standards of identity for ice cream, frozen custard, sherbets, etc, to prescribe rigid specifications for the sweetening ingredients designated by^ their common names. Sweetening ingredients may be used in various combinations,** kj

Food and Drug regulations also state that sugar, a combination of sugar and dextrose, or sugar and corn sirup are the sweetening agents most commonly used 6/ Section 17, Part 20, Title 21, Code of Federal Regulations,

- 10 in ice créanlo Additional optional sweetening ingredients permitted in ice cream are invert sugar (in paste or sirup forna), sugar sirup, dried corn sirup, glucose sirup, maple sirup, maple sugar, honey, brown sugar, malt sirup, naaltose sirup, nn.alt extract, dried malt sirup, dried maltose sirup, dried malt extract, refiner's sirup, molasses (other than blackstrap), and lactose« The sam.e sweetening in*- gredients permitted in ice cream naay be used in other frozen dairy products, with the exception of refiner's sirup, molasses, and lactose«

All States have laws and regulations concerning the use of sweeteners in various dairy products« Soncie States have adopted the Federal regulations, in whole or in large parto These controls are important to producers of ice creana and other frozen desserts, but are conaparatively unimportant in the production of sweetened condensed milk«

All States permit ice cream and other frozen desserts, with the exception of dietary products, to be sweetened with sugar« The regulations of all but a few States also specify that various other sweetening agents may be usedo Nearly half the States permit the same or nearly the same sweetening agents as the Food and Drug Adnainistrationo

The regulations of about one-third of the States contain specific provisions concerning sweetening agents for use in frozen des sert s produced as dietetic products« These vary from merely prohibiting the use of sugar to nanaing the specific sub- stances allowed« In several States the regulations provide that the use of artificial or none alo ric sweeteners may be approved by a State official© The none alo ric sweeteners miost frequently mentioned are saccharin and sucaryl« Some States limit the use of sorbitol and manitol in dietary frozen desserts to specified maximuna proportions«

Most States have laws or regulations specifying the minimuna weight of a gallon of ice creana, the minimum weight of the total food solids in a gallon, and the naini« nauna percentage which total milk solids naust constitute of the weight per gallon© The most comnaon standards for these factors are (1) weight per gallon, 4o5 pounds; (2) weight of total food solids per gallon, 1«6 pounds; and (3) proportion of total milk solids in ice cream, 20 percent« In 1962, 25 States had regulations specifying each of these figures« In several other States the figures differed only slightly frona theseo

One effect of these standards is that solids, other than milk solids, naust weigh at least 0«? pound per gallon or just under 16 percent of the weight of the ice cream« Most of these solids are supplied by sweeteners and the most common practice of ice cream manufacturers is to use 16 percent of sweetener solids in preparing their producto

Sweetener requirements of frozen desserts other than ice cream are generally sinailar to those for ice cream, except, of course, for dietary products which have special requirements*

INDUSTRY PRACTICES IN THE USE OF SWEETENERS

Information obtained frona a sample of firnas that produce sweetened dairy products in 13 States indicates that,the regulations of the Food and Drug Adnainis- tration have little effect on the quantities of sweeteners used in the industry« Various State and local regulations are inaportant in the area affected but have slight overall effect on the use of sweeteners«

- 11 - Keeping up standards of quality necessary to meet competition and maintain consumer acceptance of their product was mentioned most frequently by the processors interviewed as the most important consideration determining the type and quantity of sweeteners used in various products* Maintaining quality, however, has not prevented changes in practice in the use of sweetenerso These changes have been most marked in the maniifacture of ice cream and other frozen desserts, where there has been considerable substitution of corn sijrup for sugar, as indicated in table 3»

The increasing proportion of corn sirup used in sweetening frozen desserts appears to have been the result of several factors operating more or less simultaneously» These include a widening price differential between sugar and corn sirup, improvements in the quality of corn sirup, and increased knowledge by producers of the effects of corn sirup on the flavor, texture, and appearance of their producto It is not possible with available information to measure the importance of each of these factors<» However, the 83-percent increase in the differential between the price of sugar and corn sirup from 1952 to 1961, shown in table 6, suggests that lower prices of corn sirup were a major consideration in substituting it for sugar«.

The sugar and corn sirup prices in table 6 are quotations from wholesale mar- kets in New York, Probably few, if any, producers of sweetened dairy products ever paid exactly these prices« Nevertheless, the trends in prices shown indicate the direction of changes in prices of these products in other parts of the country.

About one-third of the manufacturers of sweetened dairy products, primarily those producing frozen desserts, who expressed an opinion indicated that they would increase the proportion of corn sirup in the blends of sweeteners they were using if the price of sugar should increase 10 to 25 percent and the increase were maintained for 2 months or more« Some of these producers said they would also shift to liquid sugar or purchase a blend of sugar and corn sirup*

Table 6.—Prices of sugar, corn sirup, and corn, 1952-61

Wholesale, New York, per cwt« * Corn, per bushel, ^^"^ : Refined • ^^^^ ^^^^P» .' Differential ' ^^^^^^ average susar • carlots in ; (sugar minus * P^^^® received ; drums * corn sirup) * ^^ farmers

gg:::::::::::; Ta %% *i:g IM 195^ o.: 8,55 7.32 1.23 1./J.3 "Sa ^ : ^s l■^^ í:í? í:« 1956 .....: 8.59 7.15 l.¿í4 1.21 1957 : 8.97 7.36 1.61 1.12 ^958 : 9.10 7.37 1.73 1.12 1959 : 9.1^ 7.31 1.83 1960... : 9.25 7.32 1 Q-5 1.04 1.00 19«^ 9.21 Í.33 \:% {-z aJltfSuStpôrti s';r°iS:*"°"* ■" ''»-'-"-. ■^—= »—. *rvlo.

- 12 - Use of Noncaloric Sweeteners

Approximately 25 percent of the producers of sweetened dairy products who were interviewed purchased one or more noncaloric sweeteners, used naostly in producing frozen desserts« All of them also manufactured products sweetened with sugar, corn sirup, dextrose, or combinations of these« However, there was no nxixing of noncaloric sweeteners with other types« Calcium, cyclamate was the most cona^ monly used noncaloric sweetener, although some use of saccharin was also reported«

In addition to strictly noncaloric sweeteners, sorbitol was used by nearly 15 percent of the producers interviewed to sweeten ice cream« Sorbitol has properties which are desirable for persons with diabetes, although its caloric content is not greatly different from that of sugar«

Products manufactured with noncaloric sweeteners or sorbitol are intended for use for dietetic purposes« Their naarket is largely separate from that of dairy products sweetened with sugar or corn sweeteners« Consequently, questions of conaparative costs, convenience, and quality had little influence on producers* decisions to use these sweeteners« The naarket for these dietetic products is comparatively linciited, and producers indicated that the prices at which they sold such products were higher than the prices received for products sweetened in other ways« However, it does not necessarily follow that producers made higher profits on dietetic products because soncie of their costs, particularly distribution costs, were higher for these small-volume items«

Of course, some competition prevails at the retail level between dairy products manufactured with noncaloric sweeteners and those sweetened with sugar or corn sirup« Many of the consumers who purchase products made with noncaloric sweeteners or with sorbitol doubtless do so for m.edical reasons which nao re or less preclude the use of products sweetened with sugar, corn sirup, or dextrose« However, some portion of these products is purchased and used by people who have a choice anaong types of sweeteners, and beliefs concerning weight control and health may be important factors in deternaining the choice naade« No information is available con*- cerning the proportion of dairy products prepared with noncaloric sweeteners purchased for strictly medical reasons«

Fornas of Sweeteners Used

All of the plants producing frozen desserts used sugar as a sweetening agent, nearly always in combination with dextrose or corn sirup« Only two plants used sugar as the sole sweetener; output of these plants was limited to a few specialt^r products of minor importance to the industry«

Although the producers interviewed indicated that there was a definite trend toward the use of liquid and dry bulk sugar, about one-half of them still used sugar in bags only, one-fourth used liquid sugar, and nearly all of the remainder used both bagged and liquid sugaro Among the more inaportant reasons mentioned by producers for using bagged sugar, for at least part of their supply were:

1 « The snaall quantity of sugar used by some plants which naakes deliveries in dry bulk or liquid form uneconomic« Many plants, because they are snaall or lack suitable storage space, are unable to use sugar in either dry bulk or liquid forna« The cost of installing the equipnaent necessary to handle sugar in either of these forms is too large to be econonaic for

- 13 - plants using only small quantities of sugar» The advantage of using sugar in bags nnay be increased when it is possible to haul sugar to the plant as a return load for a truck used for other purposes by the plant. Back- hauling is not feasible for liquid or bulk sugar because special types of trucks are needed to transport sugar in these formso

2o The use of brands available only in bags» Sonae producers use refined or senairefined imported sugar or partly refined domestic sugar» Ordinarily, sugar of these types is available only in bags» It usually sells at a somewhat lower price than sugar refined in naainland plants, the discount varying with the quality of the sugar and the quantity available when needed« Amend- naents to the Sugar Act in recent years have greatly reduced the quantity of refined or senairefined sugar which naay be imported into the United States«

3o Plant located in areas where deliveries in dry bulk or liquid forna are not available» Sonae plants are located in areas where it is difficult, or im- possible, to obtain deliveries of sugar in dry bulk or liquid form, usually because of the distance the sugar naust be shipped in special trucks or railway cars» This, together with the small volume of sugar required, would naake the use of the special equipnaent uneconomic» Some producers are able to obtain carlot rail deliveries of sugar in bags but not in liquid or bulk forna»

4» Production of specialty itenas such as toppings and dry ice cream, mix» Dry sugar is necessary in the production of toppings and dry ice cream naixeso Sales of these products are snaall, and plants where they are produced frequently are too snaall to make economical use of sugar delivered in bulk»

Sweeteners in liquid form. -- both sugar and corn sirup -- are delivered to plants in covered containers, usually tank trucks, from which they are pumped to enclosed storage tanks» The sweeteners conanaonly are conveyed from these tanks by gravity or other means to the point of use in the plant» With this system, manual handling is reduced or eliminated, sanitary conditions can be maintained more easily, and the uniformity and rate of sweetening is better controlled» High quality products are easier to produce under such conditions» Also, most plants using 500,000 pounds or naore of sugar a year are able to realize more than enough savings in the cost of handling the sweetener to offset the annual cost of the required additional investm.ent in equipment»

Bagged sugar is comparatively simple to use in plants equipped for handling liquid sugar» This is inaportant in processing plants where one or more of the products requires dry sugar in its preparation, or where the product requires a higher proportion of solids in the sweetener than is present in liquid sugar as pur- chasedo

Some dairy processing plants reduce the cost of transporting liquid sugar by using milk tank trucks, which are similar to those used for liquid sugar^ A few plant operators reported that the firms from which they purchased liquid sugar have absorbed enough of the freight charged by common carriers to make the delivery cost to the buyer the sanae as for dry sugar»

Corn sirup naay be purchased in either liquid or dry (corn sirup solids) form» The advantages of purchasing it in liquid form are nauch the same as for liquid sugar.

14 - Also, corn sirup solids are highly hygroscopic and need to be kept in moisture- proof bags, "which increases the cost of using the dry form«

About one-fourth of the producers interviewed used dextrose in combination with sugar in making frozen desserts* The principal reason for using dextrose is to improve the body of the dessert, rather than to add sweetness« Dextrose is available only in bags and is handled manually«

Sweetener Procurement Practices

About 80 percent of the producers of sweetened dairy products reported that they purchased sugar, dextrose, and corn sirup through some type of broker. About 20 percent of the producers reported the use of long-term, purchase agreements ordinarily extending for a year from the date of the contract« Even when purchase contracts or other special purchasing arrangem.ents were made, deliveries of sweeteners to most plants were on an **as needed'* basis»

Most producers reported that sm.all changes in the relative prices of different forms of sugar and corn sirup had no immediate influence on the miethod of purchase or delivery« The size of storage facilities in the plant, ease of access to public warehouses or bulk installations, and plant operating procedures were the principal factors, of immediate concern in determining m.ethods of pur cha sing and handling sweeteners« Price differentials which persist long enough encourage plant managers to make changes in their physical plant or operating procedures that will enable them to take advantage of lower prices«

Ijocal naanagers of plants which were part of an organization served by a central purchasing office com.monly obtained their sweeteners through purchase orders handled through the central office« They had no control over the prices paid or the source of sweeteners«

Most purchasers of sugar and corn sweeteners relied to a large extent on market information provided by brokers and other naarket middlemen in making decisions regarding the purchase of sweeteners« This was less true of large concerns with central buying offices than of single=plant concerns« In nearly all plants, variations in the quantity of sweeteners in plant storage or on order for prompt delivery were related prim.arily to shifts in seasonal usage rather than to anticipated price changes.

Most of the sweeteners used in the production of ice cream and other sweetened dairy products are purchased without precise specifications for quality« Purchasing agents usually buy only granulated sugar or its equivalent in liquid form, and some standard brand of corn sirup or dextrose« Offshore refined or semirefined sugars, even when of a som.ewhat lower quality than those produced in mainland plants, were generally suitable for ice cream and other frozen desserts and were used when available at discount prices«

Nearly two-thirds of the plant managers interviewed reported that they had made no significant changes in their use of sweeteners in the past 5 years and that they did not expect to m.ake any in the next 5 years« The remainder reported sub-- stituting. liquid sweeteners -- sugar, corn sirup, or a blend of these -- for the dry sweeteners previously used« A few plant managers reported shifting in recent years

- 15 to a corn sirup with a lower desdro^e equivalent than that formerly usedo 7/ Several operators indicated that they would be interrested in installing facilities for handling liquid sweeteners if sweeteners in this form beeome available in their area*

COST OF SWEETENERS RELATIVE TO OTHER RAW MATERIALS USED IN SWEETENED DAIRY PRODUCTS

Sugar and other sweeteners are part of the raw material purchased by manufacturers of sweetened dairy products« Sweeteners represent about 5 percent to 70 percent of the total weight of the raw îïiaterial used, depending on the producto For noncaloric sweeteners^ the proportion is much lower, generally less than 1 percento When noncaloric sweeteners are used, additional solids, usually milk solids, inay be added to the producto

In the plants surveyed, the weight of the total added: sweeteners in ice cream, ice cream mix, and ice milk ranged from 13 to 19 percent and in sherbets from 19 to 26 percent; sweeteners averaged 43 percent of the weight of sweetened condensed milko Sweeteners represented up to 5 percent of the weight of sweetened fruit and dairy drinks, and as much as 70 percent of some water ices.

The most comnaon proportion of sugar in raixtures of sugar and corn sirup or sugar and dextrose was 75 percent sugar and 25 percent corn sweetener, measured by weight of sweetener solids, when liquid sweeteíiers were used« Because of manufacturing problenas and the desire to m.aintain consumer acceptance for their products, niost producers appear to have little leeway in changing these proportions, except gradually over a long period of tirae*. However, some producers indicated that, because of rising prices of sugar relative to other sweeteners, they were interested ill using more corn sirup or noncaloric swe^teners^ Government regulations on the sale of dairy products limit the use of noncaloric sweeteners to dietetic products.

Producers of sweetened dairy products indicated that the cost of sweeteners used in manufacturing ice cream varied from 7 to 12 percent of the total raw material costa The cost ranged from approximately 10 to 25 percent for ice milk and from 10 to 70 percent for sherbet^ and averaged about 30 perceiit for sweetened condensed rciilko Sweetener costs for water ices may be as high as 90 percent of total raw miaterial costso These vaxiations are caused partly by differences in the physical proportions of sweeteners used in different products, and partly by the wide differences which prevail in the prices of the other raw materials used« The relatively low ratio of the cost of sweeteners to other material costs in ice cream is largely a reflection of the cpmparatively high cost of the high-fat dairy ingredient «

Quality considerations greatly limit the extent of changes that producers of sweetened dairy products are able to make, especially during short periods of time, in the quantity of the various sweeteners they use. As a result, the quantity of sweeteners purchased for current use is affected only slightly by the moderate changes in the price of sugar or other sweeteners that have occurred in recent years. Several managers of plants manufaçturing sweetened dairy products indicated that they were more interested in purchasing sugar and other sweeteners at prices no higher than those paid by their competitors than in the publicly announced changes in the general level of sugar prices which affected everyone,

7/ Dextrose equivalent is a measure of the degree to which the starch, from which the sirup is made, has been converted to dextrose» A lower dextrose equivalent ineans Ijess conversion,

. 16 - Changes in ingredient prices which affect all producers of a commodity more or less equally may be offset by changes in the price received for the final product* A snaall percentage change in the price of the finished product, -which may hardly be noticed by buyers or sellers because of other factors affecting prices naore or less simultaneously, may be sufficient to offset the change in sweetener cost* This is conamLOnly the case with ice cream.* It is less likely with certain sherbets and ices where sweetener costs account for a nauch larger proportion of the total costs*

If, however, amanufacturer should pay a higher price for sugar or other sweetener than his competitors, he would not be in a position to adjust the price of his product to take care of the increased cost* While sweetener costs have varied less than those of many other agricultural commodities in recent years, changes have been sufficiently large and frequent enough to cause nriost purchasing agents to give careful attention to their buying practices*

Larger concipanies, particularly those operating several plants, are likely to have one or nn.ore specialists who devote almost continuous attention to the market for sugar and other sweeteners and who attencipt to naake purchases at the m.ost favorable times and on the most favorable terms« Deliveries of sugar may be made at intervals extending for several months after purchase agreem.ents are made* Other companies, usually of small or medium size, nciay rely on a single supplier for one or more of the sweeteners used, hoping that the prices they pay will be at least no higher than the average for the season and their location* The smallest companies use such a small volume of sweeteners that they nierely make purchases as needed from local dealers*

Because of the expert help they are able to employ, the larger conapanies probably enjoy certain advantages in the purchase of sweeteners«

ECONOMIC IMPLICATIONS

Current trends in the use of sweeteners in sweetened dairy products appear considerably more favorable to corn sirup producers than to the sugar industry* This is partly a result of the declining output of condensed nailk, which is sweetened almost exclusively with sugar« While definite statistics on the total quantity of sugar used in sweetened condensed milk in the United States are not available^ calculations based on the average percentage of added sweetener and the reduced output of sweetened condensed milk, shown in table 1, indicate that the decline in the use of sugar for this purpose for the 10 years 1952-61 probably was only about 25,000 tons* A change of this nciagnitude, as shown in table 3, would lower the quantity of sugar used in dairy products in 1961 by about 6 percent.

The increasing use of corn sirup in ice cream and other frozen desserts and the increasing consaanaption of these products relative to other naanufactured dairy products requiring the addition of sweeteners are the readily apparent causes of the rising percentage of corn sirup in total usage of sweeteners by the dairy industry* A naore basic cause, however, naay be the widening differentials in prices of corn sirup and sugar* Fronci 1952 to 1961 the average annual differential in wholesale prices of sugar and corn sirup, on an equivalent basis, rose from $1.08 to $1*98 per 100 pounds (table 6)* Furthermore, about a third of the dairy products manufacturers interviewed in this study stated that they planned to make further sub« stitution of corn sirup for sugarrnainly because of this trend in price differences*

17 So far, the total impact of price and other factors on the quantity of sugar used by the dairy industry appears to have been slight« Nevertheless^ the trends in uses and price differentials are significant to all sweetener manufacturers and users* Often the full economic impacts of relative prices develop slowly, but they also rnay becom.e perm.anenta As consunaers beconae accustomed to the taste and other characteristics resulting from the use of larger quantities of corn sirup and smaller quantities of sugar in various frozen dairy products they may resist any attempt by ncianufacturers to return to the earlier proportions of the sweeteners used. The resulting shift in the pattern of sweetener uses may be expected to improve the econonaic position of some producers of sweeteners at the expense of others«