Rising sugar prices are putting fresh pressure on packaged food companies, with manufacturers considering another round of price increases or smaller pack sizes to protect margins ahead of the festive season.
Bikaji Foods has begun rolling out an approximately 2% price increase across its sweet’s portfolio, according to CFO Rishabh Jain. He said sugar procurement costs remain around 20% higher than they were a few months ago, despite government measures aimed at containing prices.
The impact could be more significant for companies operating in sugar-intensive categories such as beverages, biscuits, chocolates and confectionery. A senior executive at a large packaged food company said the sharp rise in input costs has disrupted companies’ cost calculations and budgets.
With consumers remaining sensitive to price increases, companies may also resort to shrinkflation, reducing the quantity of products while maintaining existing price points. The executive said lower price-point products are likely to see grammage cuts, while higher raw material costs could also force companies to reduce marketing expenditure.
Packaged food companies are already dealing with broader commodity inflation. Companies including Hindustan Unilever, Marico and Dabur have implemented price increases of around 2-7% across products.
Analysts at Anand Rathi expect rising sugar, tea and coffee prices to trigger another 2-5% round of price hikes or grammage reductions, particularly in packaged foods.
Data from the Consumer Affairs Ministry showed that India’s average retail sugar price rose to around ₹62 per kg in September from ₹47 per kg in June. Average wholesale prices also increased to about ₹5,747 per quintal from ₹4,350 over the same period.
Meanwhile, domestic sugar production for the current October-September season is estimated at around 306 lakh metric tonnes (LMT), below the initial estimate of 343 LMT. Pest infestation and waterlogging have contributed to the lower production outlook.
The government has allowed raw sugar imports for the first time in a decade and introduced stock limits to ease supply pressures. However, analysts caution that these measures may provide only temporary relief, particularly during the festive demand period.
The pressure could continue in the longer term as declining sugar recovery rates add to concerns over domestic production. According to Crisil Intelligence, sugar recovery in India has fallen from 10% in the 2022 season to 9.3% in 2026.
For consumers, the combination of higher prices and smaller packs could make every day sweet treats, from biscuits and chocolates to traditional mithai, increasingly expensive.