Sugar Demand Surges in India Amid Summer Heat and General Elections

During the scorching summer months in India, which typically span from mid-March to mid-June, the consumption of cold beverages and ice cream experiences a notable uptick. This trend is primarily driven by the desire to seek relief from the sweltering heat, with many consumers turning to sugary products such as refreshing drinks and frozen treats to stay cool. In turn, this increased consumption of sugary products leads to a surge in demand for sugar. However, this year, the surge in demand for these products has surpassed expectations due to several contributing factors.

Factors Driving Increased Sugar Demand

Firstly, the prevalence of heat waves across various regions of the country has intensified the need for cooling beverages and ice cream, prompting consumers to stock up on these items more than usual. With maximum temperatures soaring above 40 degrees Celsius in many areas, people are actively seeking ways to combat the oppressive heat, and sugary beverages and treats offer a quick and enjoyable solution.

Additionally, the timing of the surge in demand coincides with the world's largest democratic exercise—the Indian general elections. With nearly a billion eligible voters participating in the electoral process, political parties are actively engaged in extensive campaigning efforts. These campaigns often involve large-scale rallies and gatherings, where attendees are provided with beverages and snacks, further contributing to the increased consumption of sugary products. For example, following energetic election rallies held in the blistering afternoon sun, dedicated workers of political parties seek respite in nearby establishments, indulging in refreshing soft drinks to rejuvenate themselves. This heightened demand for beverages during election-related activities further contributes to the overall increase in sugar consumption.

Impact on Sugar Consumption and Prices

The combination of these factors has led to a significant increase in sugar demand during the summer months of April to June, with sugar consumption expected to rise to 7.5 million metric tons (mmt) during this period, a 5% increase compared to the previous year. As a result, sugar consumption for 2023/24 is expected to rise by % year on year (YoY) to 30.5 mmt, according to data from Statista and the Indian Sugar Mills Association (ISMA).

Figure 1: Indian Sugar Consumption (2017/18 to 2023/24)

Local sugar prices are expected to rise in response to the heightened demand, providing a boon to sugar producers across the country. According to Chini Mandi, a media platform focused on providing information and insights related to the Indian sugar industry, wholesale prices of sugar in Dehli rose to USD 0.51 per kilogram (INR 42.30/kg) on April 19, a 2.4% increase compared to USD 0.50/kg (INR 41.30/kg) on March 21. Companies such as Balrampur Chini Mills, Shree Renuka Sugars, Bajaj Hindusthan, and Dwarikesh Sugar will likely benefit from increased margins and profitability. Additionally, the higher consumption levels enable sugar producers to make timely payments to cane farmers, ensuring the sustainability of the agricultural supply chain.

Figure 2: Wholesale Sugar Prices in Delhi, India

Market Outlook

Tridge anticipates that sugar prices will remain elevated for the duration of the summer months, which are expected to last until the end of June. While the elevated sugar prices during the summer months may pose challenges for some consumers, they present opportunities for sugar producers to capitalize on increased demand and bolster their financial performance. As the summer season comes to an end and demand normalizes, sugar prices are expected to stabilize, providing a more balanced market outlook for producers and consumers alike.