Material Insights · Understanding the Material World

Food and beverage processing and Sugar

Institutional buyers, mainly food and drink makers, took about 60 to 65% of India's sugar in 2023 to 2024, so their input cost is set by a sugar market the government manages through a minimum selling price, export quotas and cane prices, while higher GST on sugared drinks since 2025 pushes the other way.

Food and beverage processing (industry) and Sugar (commodity): 4 relationships.

How they are linked

1. Sweetener and bulking agent

Physical flow · Strong · Sugar to food and beverage processing

Sugar sweetens, preserves and gives bulk and texture to soft drinks, biscuits, confectionery, bakery and dairy products; the site finds 4 enterprise types in food processing that depend on it, rating it 4 of 5 for commodity traders and 3 of 5 for packaged food and beverage makers.

  • 60 to 65% institutional share of India's sugar consumption, 2023 to 2024
  • 50 to 55% same share, 2018 to 2019
  • 4 of 5 highest criticality, commodity traders

An ISMA study found the institutional share rose by about 10 percentage points over five years as soft drinks, confectionery, bakery, biscuits and dairy took more of the market, so bulk buyers rather than households now set the pace of Indian sugar demand.

Enterprise types that depend on it:

  • Agricultural commodity traders and aggregators: traded soft (criticality 4 of 5)
  • Flour mills, oilseed crushers, sugar mills and dairies: cane and beet (criticality 3 of 5)
  • Packaged food manufacturers: sweetener (criticality 3 of 5)
  • Beverage makers and bottlers: sweetener (criticality 3 of 5)

Sources: Material Insights; Storyboard18

2. Sugar price floor and export quotas

Policy · High in India · Government sugar controls set food makers' sugar supply and price

India sets a minimum price at which mills may sell sugar in the home market and decides each season how much may be exported, so domestic availability and the floor price paid by food makers are policy outcomes, not only market ones.

  • ₹31 per kg minimum selling price of sugar, unchanged from February 2019 to late 2025
  • 15 lakh t export quota for the 2025 to 2026 season
  • about 8 lakh t exports in 2024 to 2025 against a 10 lakh t allocation

When production is high, as ISMA projected for 2025 to 2026 at 343.5 lakh t before ethanol diversion, the government allows exports and ethanol use to clear surplus, and it sets each season's export quota with domestic prices in mind. Food makers therefore face a price that is partly shielded from world swings but would step up if the minimum selling price were raised, which the government said in late 2025 it would consider.

Sources: Outlook Business (PTI)

3. Cane price to sugar price

Cost and price · Medium · Higher cane prices push up the sugar price food makers pay

Mills must pay farmers at least the government's fair and remunerative price for cane, which has risen faster than the minimum selling price of sugar, so pressure builds to raise the sugar floor that bulk buyers pay.

  • ₹355 per quintal fair and remunerative cane price, 2025 to 2026
  • 29% rise in that cane price from ₹275 per quintal
  • ₹40.24 per kg ISMA estimate of sugar production cost

With ISMA's estimated cost of production well above the ₹31 floor, the industry asked for a minimum selling price of at least ₹40.2 per kg, and the food minister said the government would consider the demand. A rise in the floor would pass through to biscuit, confectionery and beverage costs.

Sources: Outlook Business (PTI)

4. Tax on sugared drinks

Policy · Rising · Higher GST on sugar-added drinks discourages sugar use in beverages

India's 2025 GST reform put carbonated and sugar-added drinks in the top 40% slab while cutting tax on fruit-based drinks, which gives beverage makers a reason to reformulate and shift their portfolios away from added sugar.

  • 28% to 40% GST on carbonated and sugar-added beverages, approved September 2025
  • 12% to 5% GST on fruit pulp or juice based drinks

The GST Council approved the change on 3 September 2025. It raises the retail price of sweetened and carbonated drinks, while the institutional trend shows sugar use in processed food still rising, so any effect on total sugar demand is likely to be gradual.

Sources: Storyboard18; The Week (PTI)

For investors

Key learnings

  1. Bulk buyers take about 60 to 65% of Indian sugar, so packaged food and beverage growth now drives domestic sugar demand more than households do.
  2. Food makers' sugar cost in India depends on policy: a ₹31 per kg floor unchanged since 2019, against a cane price up 29% and an ISMA production cost estimate of about ₹40 per kg, points to upward risk.
  3. Higher GST on sugared drinks from 2025 favours beverage makers with low-sugar and juice-based ranges.

What to track

  • Minimum selling price of sugar: A rise passes straight into food and beverage input costs (As announced · Department of Food and Public Distribution)
  • Ex-mill sugar prices in Maharashtra and Uttar Pradesh: Shows the market price bulk buyers pay above the floor (Weekly · ISMA, trade press)
  • Sugar export quota and ethanol diversion: Larger exports or diversion tighten domestic supply for food makers (Seasonal · DFPD, ISMA)

For policymakers

Key learnings

  1. The gap between cane prices and the sugar floor price is a structural tension that ends either in a higher sugar price for food makers or in mill payment arrears to farmers.
  2. Export quotas let India keep domestic sugar prices stable for consumers and food makers, at the cost of predictability for exporters.
  3. Tax policy on sugared drinks now works against the sugar sector's interest in higher demand, so health and farm policy need to be read together.

What to track

  • Fair and remunerative price of cane against minimum selling price of sugar: A widening gap signals pressure to raise the sugar floor (Annual · CCEA, DFPD)
  • Institutional share of sugar consumption: A rising share shows demand moving to processed food and drinks (Periodic · ISMA studies)
  • Sales and sugar content of taxed beverages after the 40% slab: Shows whether the tax is changing formulations and consumption (Quarterly · listed beverage makers' results and disclosures)

India

India's sugar output, projected by ISMA at 343.5 lakh t for 2025 to 2026 before ethanol diversion, is sold at home under a government floor price of ₹31 per kg with exports set by quota each season, and institutional buyers, mainly food and drink makers, buy most of the sugar consumed at home.

Sources

  1. Food and beverage processing: materials, Material Insights (2026)
  2. India's institutional sugar consumption rises 10% over five years: ISMA study, Storyboard18 (2025)
  3. Govt to consider industry's demand to hike minimum selling price of sugar: Food Minister Joshi, Outlook Business (PTI) (2025)
  4. Carbonated soft drinks, non-alcoholic beverages to become costlier with GST rate hiked to 40 pc, The Week (PTI) (2025)