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Indonesian food and beverage industry mulls price hikes as sugar costs soar

Jakarta Post - August 15, 2023

Ruth Dea Juwita, Jakarta – The domestic food and beverage industry is considering raising the prices of a number of products this year to make up for the high price of refined sugar, an industry association has said.

The Indonesian Food and Beverage Producers Association (Gapmmi) said on Monday that the hike would affect products such as syrups, sodas and cookies.

The price of refined sugar on the world market hovered at about 0.53 US cents per kilogram on Monday, up more than 26 percent from the same period last year, according to Markets Insider data.

"The sugar price has jumped up some 30 percent [year-on-year]. [...] Now imported sugar is costlier than local sugar," Gapmmi chairman Adhi S. Lukman said on Monday, as quoted by Kompas.com.

"My prediction is that at the end of this year or at the start of next year, many firms will review their pricing," he said separately.

Adhi said Indonesian processed food manufacturers relied completely on imported sugar, as local white crystal sugar, which is commonly sold for household consumption, could not be used in industrial production.

El Nino-related droughts in sugar exporting countries such as Thailand and India have contributed to the high world price of the commodity.

Adhi said the immediate supply of sugar would not be significantly affected as major companies typically purchased sugar at set prices under annual contracts that expired at the end of the year, safeguarding them from the high prices for a time.

He noted that the food and beverage industry would consider carefully whether and to what extent to adjust the prices of sugary products, as it was a lengthy process that involved discussions with distributors and retailers.

Adhi said the average consumer price hike would likely be between 3 and 4 percent, which he said was far from offsetting the costs faced by industry players.

Raising consumer prices to make up for the full increase in industrial sugar costs would be impractical, he said, given Indonesian consumers' sensitivity to pricing.

Taking the syrup industry as an example, Adhi said, where refined sugar made up roughly 60 percent of the raw materials used, producers could feasibly hike retail prices by about 18 percent.

"If [the price is] too high, the consumers will run away," he said.

The government increased the raw sugar import quota for refineries to 3.6 million tonnes in the 2023-2024 period, up 7 percent from the 3.36 million tonnes authorized in 2022-2023.

Despite a forecast increase in domestic plantation white sugar production, the government also authorized sugar mills to import a total of 991,000 tonnes of raw sugar to fill unused capacity.

Indonesia's 2023-2024 sugar consumption is expected to be 7.9 million tonnes of raw sugar equivalent, up slightly from the 7.8 million tonnes consumed in the 2022-2023 period, according to United States Department of Agriculture projections.

Source: https://asianews.network/indonesian-food-and-beverage-industry-mulls-price-hikes-as-sugar-costs-soar