Sugar shock could turn festive season bitter as food makers consider price hikes

The festive season is approaching, but consumers could face higher prices for sweets, biscuits, cookies, chocolates and other sugar-heavy products as food companies grapple with elevated sugar costs.

Sugar prices have risen sharply in recent months, putting pressure on manufacturers and sweet makers just as demand typically increases ahead of the festive season. Companies are now weighing higher retail prices and smaller pack sizes as they try to absorb the increase in raw-material costs.

For consumers, that could mean paying more for some festive treats — or getting a smaller quantity for the same price.

Data from the Consumer Affairs Ministry showed the all-India average retail price of sugar at around Rs 62 per kg in September, compared with Rs 47 per kg in June. The increase has come as domestic availability has tightened ahead of the festive season.

Sugar prices had risen particularly sharply through August. The all-India average retail price increased from 48.18 per kg on July 20 to Rs 55.70 per kg on August 20, according to government data.

There has been some easing since then. The average retail price fell 3.85% in the week to September 2 to Rs 62.57 per kg, while wholesale prices also declined. However, the reduction has yet to fully feed through to the costs faced by food companies.

WHY HAS SUGAR BECOME EXPENSIVE?

One of the main reasons is a tighter domestic supply outlook.

Sugar production for the 2025-26 season is now estimated at around 30.6 million tonnes, significantly below the initial estimate of 34.3 million tonnes. Excessive rainfall, crop diseases and other disruptions have affected sugarcane production in key growing regions.

At the same time, sugar demand typically rises before major festivals as households, sweet shops and food manufacturers stock up.

The result is a basic supply-demand squeeze: there is less sugar available than initially expected at a time when buyers are looking for more of it.

India is also heading towards the end of the sugar season with relatively low stocks. That has added to concerns among traders and manufacturers about availability during the high-demand festive period.

COMPANIES FEEL THE PRESSURE

Higher sugar prices do not automatically translate into an equivalent increase in the price of every food product. Companies can absorb some of the additional cost, cut other expenses, improve efficiencies, raise prices or reduce the quantity in a pack.

But some companies have already started adjusting prices.

Bikaji Foods, for instance, has begun implementing a roughly 2% price increase across its sweets portfolio. Its CFO Rishabh Jain said sugar procurement costs remained around 20% higher than they were a few months ago.

The impact could be greater on products that use relatively large quantities of sugar. Biscuits, cookies, confectionery, chocolates and beverages could therefore face greater cost pressure if sugar prices remain elevated.

For sweet shops and bakeries, the pressure can be even more immediate because sugar is a direct ingredient in many products and margins can be relatively thin.

PRICE HIKE LIKELY FOR FESTIVE TREATS

There are two broad ways higher input costs can reach consumers.

The first is a direct price increase. A company may raise the price of a biscuit packet, chocolate or box of sweets to recover part of the additional cost.

The second is shrinkflation. Instead of increasing the price, a company can keep the price unchanged while reducing the quantity inside the packet.

Industry analysts have indicated that packaged-food companies could consider smaller packs as a way of managing higher input costs without making the headline price appear significantly higher.

That does not mean every sweet, biscuit or chocolate will become more expensive. Companies also have to consider competition and how much of a price increase consumers are willing to accept.

But if sugar prices remain high for an extended period, manufacturers will face greater pressure to pass at least some of the additional cost on to consumers.

The government has taken several measures to increase sugar availability and prevent prices from rising further.

The government has allowed duty-free imports of raw sugar to supplement domestic supplies ahead of the festive season. India has opened applications for the remaining 202,550 tonnes under a one-million-tonne duty-free raw sugar import quota approved earlier. The quota is intended to help meet higher seasonal demand.

The government has also tightened stockholding rules to discourage hoarding and speculative stocking.

From September 1, large sugar users were restricted to holding stocks equivalent to 15 days of their consumption. Separately, the government has announced that the stock limit for dealers will be reduced from 4,000 quintals to 2,000 quintals from September 15 to November 30.

The measures appear to have helped ease prices somewhat, but the decline has not yet translated into an equivalent reduction in costs across the supply chain.