Following a sharp hike in sugar price, confectionery makers in India may opt for price hikes in the next two months. The rise in sugar prices has resulted in sharp increase inthe production cost, thereby, leading to the erosion of profit margins. ?This situation has left confectioners with little option but to impose a price increase,” said an industry analyst based in Mumbai. While leading confectionery majors are evaluating the current situation, small players in this sector are hiking prices to protect their profit margins. Sugar price hike seems to be a bitter pill for many confectionery makers in India.
Chitaranjan Dhar, CEO of ITC Foods told FE, ?We will wait and watch the situation for a while and then take a decision”. In the confectionery industry, sugar today accounts for 40-50% of the weight of the product and 20% of the total production cost. ?Poor monsoon will have a negative impact on theFMCG industry this year,? said an industry analyst based in Mumbai.
According to a leading retailer in south Mumbai, the price of sugar has gone up by 25 % after the government announced its decision.? Prior to the price hike, 1 kilo sugar was available at Rs 24. And now the price has gone up to Rs 30,? he added.
Like ITC Foods, Parle Products is also tracking the situation carefully before any price hikes.
On the impact of the price hike of sugar on the confectionery industry Praveen Kulkarni, general manager (marketing) Parle Products said, ?It will certainly have a major impact on the confectionery business as sugar is a very important raw material. And the recent price hike will impact our profit.?
Kulkarni added they are not looking at price hikes immediately. ?We will track the situation and then take a decision,? he said. Sharing similar sentiments, RS Sodhi, general manager (marketing), Amul said, ?The price hike has affected our overall business-ice creams, chocolates and dairy whitener. We are waiting and watching the situation now,? he said.
Meanwhile, FMCG majors Cadbury India and Godrej Hersheys are also evaluating the current situation before taking a final call on price hikes.
?The confectionery industry in India has taken a hit now. We will see a fall in demand for high-priced sugary products and sales will plunge for confectionery goods in the coming days,? said a Mumbai-based industry analyst.