October 2011 - Indian sugar consumption set to rise

Population growth and strong economy underpin the trend

India is the world’s biggest sugar consumer, with a population of 1.2bn consuming one-third more sugar than the EU and over 60% more than China. Demand growth in India has slowed in recent years, but economic trends signify strong prospects for a return to demand growth.

Demand growth among lower income consumers will be driven by rising incomes, while middle class consumers will demand more non-essential food items and processed foods as their affluence increases. Underlying population and economic growth should see demand growth in India return to higher levels.

Indian sugar consumption has grown over the past decade at an annual average rate of 3.5%.
Indian per capita consumption is around 20-22kg, below the global average of 24kg.
This is due to popular artisan sweeteners such as gur and khandsari, as well as 37.2% of the population living below the poverty line.
As prices stabilise, sugar should become more affordable to Indian consumers.
As India’s population is set to exceed China’s in the next ten years, total consumption in India looks set to continue to rise.

Background to Indian Consumption

Sugar is an integral part of the diet in India and is consumed as an everyday luxury as well as a cheap source of calories.
Sugar is consumed in a wide range of traditional products like artisan sweets, sweet tea and lime juice, and newer products such as sachet-sized biscuit packets and Rs.5 bottles of soft drinks.
Sugar also plays an indispensible role in Indian culture and customs via the practice of gifting and serving sweets at festivals, religious and social events.
Consumption growth has traditionally been higher than the population growth rate, which has been 1.4%.

Impact of Rising prices

The price of sugar in India has risen recently, hitting a high of Rs.44 per kg in January 2010, from Rs.16 in January 2008, before stabilising around Rs.30.
Consumption growth has slowed due to price volatility and government measures to restrict pipeline inventory.
However, consumption has been relatively resilient due to government-subsidised sugar sold to lower income consumers and the relative price-inelastic demand of more affluent consumers.
With sugar prices stabilizing there is the potential for increased affordability in the year ahead, which may see accelerated consumption growth.

Peter de Klerk, Czarnikow analyst, said: “The trend towards greater sugar consumption will cement India’s position as the world’s most important sugar consumer.”

Toby Cohen, Czarnikow director, said: “Although recently Indian demand growth has not been as high as we have seen in the past, the combination of population growth and a strong economy means that we are positive about the future of sugar demand in India.”

Notes to Editors

For further information please contact:

Czarnikow 020 7972 6600
Toby Cohen
Peter de Klerk

Cubitt Consulting 0207 367 5100
Abby Munson
Fergus Brady

About Czarnikow:

Czarnikow Group is one of the most respected names in agricultural commodity markets and has been providing high quality market services since 1861. Czarnikow operates in three core areas; sugar, biofuels and corporate finance. Its success is built upon knowledge of the market, confidentiality, reliability and independence.

Czarnikow deals with around 10% of the 50 million tonnes of sugar that is traded annually, which means that it has a first hand presence in all major sugar markets of the world. Czarnikow works throughout the entire supply chain providing services to growers, millers, refiners, beet producers, traders, merchants and industrial users.

Czarnikow operates from a head office in London and a network of 10 regional offices to service clients and customers globally.