Sugar prices have emerged as one of the biggest raw material cost pressures for companies across candies, confectionery, chocolates, biscuits, baked goods, sweets and beverages. According to Mint, sugar prices are about 20% higher than a year ago and 20% higher sequentially, making it a significant challenge for packaged food manufacturers ahead of the festive season. Companies are now weighing price increases and smaller pack sizes as they try to absorb higher input costs without hurting demand. As noted by Rishabh Jain, CFO of Bikaji Foods International, "Sugar has seen a sharper rise over the past few weeks, putting pressure on our sweets portfolio." The company has built procurement coverage ahead of the festive season, providing some cushion, while evaluating procurement coverage, product mix, operational efficiencies and calibrated pack sizes.
The surge in sugar and milk prices has significantly disrupted cost calculations and budget planning for packaged food manufacturers. According to Mint, companies now have to decide how much of the higher cost to pass on to consumers and how much to absorb through margins, pack sizes, procurement or product mix. Not so sweet - the pressure is broader than sugar this festive season, with palm oil prices up 21% year-on-year and cocoa prices up 48% quarter-on-quarter, while crude oil is 38% higher year-on-year and HDPE prices are up 30%, adding to packaging costs. Companies can buy raw materials at spot prices or lock in quantities through forward procurement, meaning the impact varies across brands - a company that has secured supplies earlier can be insulated from a spike, while spot buyers feel the increase faster.
According to data from the consumer affairs ministry, all India average monthly retail sugar prices reached ₹62 per kg in September compared to ₹47 in June. Average wholesale rates stood at ₹5,747 per quintal in September versus ₹4,350 in June. The government expects sugar production for 2025-26 at 30.6 million tonnes, 11% below the initial estimate of 34.3 million tonnes due to weather-related damage to sugarcane crop. Sugar availability has also tightened amid these production challenges. The government has allowed raw sugar imports for the first time in a decade and imposed stock limits to contain prices, though these measures may not provide long-term price relief for consumers.
Sugar production for the current season (October to September) is expected at around 306 lakh metric tonnes (LMT), significantly lower than the initial estimate of 343 LMT due to pest infestation and waterlogging affecting production. As noted by Crisil Intelligence's Pushan Sharma, India's sugar recovery has declined from 10% to 9.3% between seasons 2022 to 2026. The company suggests India needs to move towards better sugar varieties to increase production capacity. Supply disruptions have also affected imported dry fruits, particularly pistachios and almonds, adding to the cost pressures facing mithai manufacturers. Industry leaders emphasize that maintaining adequate supplies would be key to price stability, with mill owners calling for urgent measures to resolve fuel crisis and LC-related complications.
The sugar price surge adds to existing commodity inflation pressures facing consumer goods companies. According to analysts at Anand Rathi, price rises in sugar, tea, and coffee over the past three months could potentially trigger another 2-5% round of price hikes or shrinkflation particularly in packaged foods. Companies like Hindustan Unilever, Marico, and Dabur have already implemented multiple price hikes in the range of 2-7% due to war-triggered commodity inflation. However, analysts at Nomura expect near-term margin pressure on FMCG companies to be partly offset by pricing, cost savings and operating leverage, keeping earnings growth healthy at around 15% for FY26-FY28. "We remain positive about consumption over the next two quarters, with the festive period expected to support FMCG demand," said Jyotiroop Barua of DS Group. The pressure could make the second quarter challenging for companies dependent on sugar and jaggery, with companies having already shrunk ₹5 and ₹10 packs, leaving little room for further reductions.
