New Delhi: Sugar demand in India is starting to stagnate as economic growth in the top user slows and food manufacturers opt for alternatives, according to Meir Commodities India Pvt and Golden Agri-Resources Ltd.
The nation will consume 25 million tonnes to 25.2 million tonnes in 2019-20, little changed from the previous season, said Rahil Shaikh, managing director of Meir, a Mumbai-based trader. Demand is being hit as the food sector changes formulas away from sugar amid health concerns, according to Callum Walker, a trader at Golden Agri-Resources.
India’s economic growth is expected to slow to a six-year low in 2020, potentially threatening domestic sugar demand and leaving more supplies for exports. Consumers around the world are also becoming more concerned about health risks, prompting food producers to seek alternatives, and governments have levied taxes on sugary drinks.
“Consumption has plateaued out in India due to the way the economy is,” Shaikh said at a Marex Spectron sugar symposium in London on Monday.
India’s economy is forecast to expand 6 per cent this year, according to estimates compiled by Bloomberg. When growth was at 8 per cent, the country’s sugar demand increased 2 per cent a year, said Shaikh, a former managing director at ED&F Man Commodities India.
Global sugar consumption is expected to climb 1.3 per cent in the 2019-20 season, slightly below the five-year average, the International Sugar Organization said in a report on Tuesday. There’s a “clear global trend” toward slower or negative growth in a number of key markets, it said, citing health concerns.
The sugar industry isn’t paying enough attention to manufacturers changing their formulas away from sugar, Golden Agri-Resources’s Walker said.
“We have multinational brands which are based in India who have a huge growth potential and they are also reformulating their products at the same pace as the rest of the world,” he said. “The rate at which they are reformulating is very rapid and the demand for sugar that they are taking out from their products is very high.”
The industry should make more effort to promote sugar as a better and natural alternative to high-fructose corn syrup and artificial sweeteners, said John Stansfield, an analyst at Group Sopex. There are places in the market that still offer growth, he said, pointing to Africa as an example.
“Cheap sugar does promote consumption,” he said. “It’s not all doom and gloom. We have a great industry and if we promote it a bit harder we’ll grow.”