​​Sugar Industry in India: An Investor's bet on Addiction

3.65 crore metric tonnes. That is the colossal amount of sugar produced by the Indian sugar industry for the sugar year 2021-22. Yes, sugar production has a different 12-month cycle that runs from October to September every year.

The second largest producer of sugar after Brazil, India’s income from sugar exports for the aforementioned period stood at ₹20,000 crore. This record-breaking inflow was achieved by flooding the global markets with 1.09 crore metric tonnes of sweet crystal.

This crystal-clear crystal has not only the Indian masses, but the entire economy hooked on it (I swear I am talking about sugar, the clear kind)! The weirdest part, most people are unknowingly addicted to sugar.

“It is just sugar; how bad could it be?” If only you knew.

As mentioned before, it is not just an addiction limited to the space between our hands and mouths. Transportation, one of the most important parts of any economy, is also starting to develop a taste for the “good stuff”.

Not only this, but the non-edible industry shamelessly abuses this addiction to its advantage as well. After all…

Today Insider brings you the sticky business that is the Indian sugar industry. Diabetics fret not; this is one bitter article!

Are You Addicted to Sugar?

First of all, before everyone and their dog get riled up about me pushing the idea of “sugar craving” too far by calling it an addiction, let me clarify one thing.

Sugar addiction is as real as addiction to any other substance of abuse.

Various studies have shown that eating sugar releases opioids and dopamine. Since this is a financial platform, let us keep things simple. Opioids and dopamine are the chemicals released by our body that trigger the reward system of our brain.

The result, consuming sugar leads us to feel happy, and this leads us to seek out and consume more sugar in an endless cycle. Don’t believe me? Believe the rats that were made victims of addiction!

Neuroscience and food addiction experts Nicole M. Avena, Pedro Rada, and Bartley G. Hoebel experimented. The experiment went something like this…

Initially, rats would be starved daily for a 12-hour period. Following this period of “fasting”, the rats would be given access to a 12-hour supply of sugar water along with their normal food.

After a month, these rats started showing neurological responses similar to those exposed to drugs of abuse. The three traits displayed by the squeaky addicts were as follows:

1. Bingeing: The rats started consuming unusually large amounts of the sugar water.
2. Withdrawal: Similar to opiate consumers, lack of sugar led to anxiety and behavioural depression in the rats.
3. Craving: There was a lever that could be used to administer the sugar solution. During periods of fasting, the rats would press the level more often, showing signs of increased want for the sugar solution.

Thus, the more sugar we consume, the more sugar we want to consume and end up consuming.

“It is just sugar; how bad could it be?”

Between the period of October 22 to October 27, the festive season in India, the country saw a spike in sugar consumption by 32%. The average Indian experienced a weight gain of close to 1.5 kg in this period.

Take a look at the sales growth of the top 5 sugar producers in the country (based on market capitalisation).

Over the last 5 years, Banna Amman Sugar registered the largest sales growth of 34.9%.

These sales numbers represent multiple facets that the sticky crystal has permeated into. The decay isn’t limited to just sugar being consumed as an edible substance, as other arms of the industry have snaked their way into consumers’ lives.

Sugar Industry in High Spirits

Sugar does not just cause trouble on its own, it even has a by-product that leaves its users wanting another hit. I’m talking about ethanol, of course. Ethanol or grain alcohol is produced by fermenting cane juice and yeast. Molasses, a thick, syrupy by-product of sugar production, is also used to produce ethanol.

Ethanol or ethyl alcohol is used in producing beer, wine, and other liquor. The companies mentioned above also supply ethanol to industries which include but are not limited to distilleries, oil companies, etc.

EID Parry even produces two ranges of hand sanitizers named Handkleen and Sterisafe.

Now, if you thought that these companies were exploiting a widespread substance addiction, you would be correct. Honestly, which company does not exploit its user base? You either find a weakness in the masses to exploit… or you create one!

“It is just sugar; how bad could it be?”

Alcohol consumption in India has been on the uptick over the years. An analysis by Lancet showed that India’s drunkenness has increased through all age groups.

Out of the surveyed population, only 1% of women and 19% of men aged 15 years and over consumed alcohol. Out of this 19%, here is the consumption increment among various ages:

But our country’s raging alcoholism is not what will drive ethanol production. Sure, it helps that we prefer rotten cane juice over professional help, but there’s a bigger buyer that could drink the biggest party-goer under the table.

I am talking about the Indian transportation industry, of course. No, the stereotypical drunk truck driver is not the consumer; it is the truck itself. Ethanol is the new big thing in India’s “green fuel” drive.

Through the Ethanol Blending Programme, the government initially aimed at infusing 5% ethanol in motor fuel, then raised the infusion rate to 10%. Following the rapid achievement of the 10% infusion before the targeted timeline of November 2022, the new target to achieve is a 20% infusion. The timeline for achieving a 20% infusion has been preponed from 2030 to 2025-26.

Ethanol-blended petrol results in higher fuel efficiency and reduced emissions.

According to the Press Information Bureau, over the last 8 years, implementation of the EBP has resulted in a forex impact of more than ₹41,500 crores, as Indian dependence on imports for motor fuel decreases. The emission of greenhouse gases has also decreased by 27 lakh metric tons. The usage of ethanol also led to the release of more than ₹40,600 crores to farmers engaged in the production of raw materials for ethanol.

So, everything looks rosy, or rather, rosé for the ethanol industry, right? Well, like most programs, this one has a flaw too. Almost a fatal one at that.

As you can see, transportation is the major problem for the saviour of the transportation industry. Under the current scheme, the 27 lakh metric ton of reduced GHG emission is offset by the projected 7.6 crore metric tonnes that will be released by the trucks employed to transfer said ethanol.

Dessert for your thought

Sugar brings a number of health issues with itself, and sugar alternatives exist in the form of sweeteners like Xylitol, Erythritol, and other sugar alcohols (these alcohols do not pack the “punch” you are thinking about).

In a country where Muh meetha kar lijiye is the preferred method of celebration, alternate sweeteners will quickly become an annoying limiter. The daily recommended dose for artificial sweeteners, limited to 10-15 grams per day, poses an issue.

Sugar manufacturers after I say this, “Tumhare muh main dahi Xylitol Shakkar pade!”

Consumer taste is a strong driving point for any brand, and this taste is not just a study of trends, but their literal tongues. Not just sugar manufacturers, but even oral care brands have exploited this sense to capture the market.

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