Sugar prices put festive sweets at risk of a hike

As the festive season approaches, consumers in India may face higher prices for their favorite sweets and confectionery due to a rise in sugar costs. Sugar demand typically peaks during the festival period, which spans from late August to January, as people indulge in traditional treats and other sweet foods. However, this year, the rising cost of sugar and milk is putting pressure on manufacturers and mithai makers.

According to a report by Equirus Securities, sugar prices have surged by 19% year-on-year and 20% from the previous quarter. This has increased the cost burden for various categories, including biscuits, confectionery, malted beverages, and carbonated drinks. Although the prices have eased slightly following recent government measures, such as allowing imports and tightening stockholding norms for bulk users and dealers, they remain 27% higher than last month's level.

Bikaji Foods, for instance, is planning a 2% price increase across its sweets portfolio. Despite the government's efforts to control price hikes, the cost of procuring sugar remains 20% higher compared to the last couple of months. Companies are left with little choice but to pass on the increased costs to consumers, potentially cutting down on grammage and reducing value realization.

Mithai makers are also feeling the pinch, as milk prices have risen by around 16% in the past four months. Sugar prices have skyrocketed, with some sellers now charging up to Rs76 per kg, up from the previous price of around Rs38 per kg. As a result, popular sweets like peda, which used to be priced at Rs550–560 per kg, are now being sold for Rs750–780 per kg.

The government has taken several measures to address the issue, including imposing a stock limit of 400 tonnes on sugar dealers and restricting bulk consumers from holding sugar stocks for more than 15 days. Additionally, duty-free import of raw sugar has been allowed to boost domestic availability. The government is also encouraging states and sugar mills to begin crushing by October 15, which could raise October production from the usual 3-4 LMT to over 10 LMT.