SUGAR PRICE HIKE HAS NO SIGNIFICANT IMPACT ON F&B PLAYERS

KUALA LUMPUR, Jan 5 (Bernama) -- A hike in sugar price will not have any signifcant impact on large food and beverage (F&B) players in the country.

However, smaller producers and retailers may feel the impact of higher raw
material costs.

"We do not think the sugar price hike will substantially erode the margins
of larger food manufacturers such as Nestle, QL Resources and Kawan Food as they
usually purchase in bulk," OSK Research said in a statement Tuesday.

Sugar now costs 20 sen more per kg and is being retailed for RM1.65 per kilo
in Peninsular Malaysia and RM1.75 in Sabah and Sarawak. (US$1=RM3.42)

OSK said with effective cost management and ingredient ratios the companies
would manage costs well as sugar was only one of the raw materials used in food
production.

It also said the increase in sugar price would not curb food consumption as
the segment was largely inelastic.

As for beverage manufacturers such as F&N, the research house said the
impact would be negligible as the minimal increase in sugar price would only
translate into an extra one sen.

Meanwhile, OSK said bread prices would increase gradually.

"We think the current price will not sustain for long as the Bakery
Manufacturers Association, which meets regularly to set bread prices, is
expected to raise prices gradually in accordance with wheat prices," it added.
-- BERNAMA