Soaring palm oil prices trigger inflation worries
NEW DELHI: Packaged goods companies are considering raising prices of products because of a surge in the price of palm oil, a key input for goods ranging from snacks to soaps.
Palm oil prices have more than doubled in the past year. India, the world’s biggest consumer of the edible oil, imports most of its requirements from Indonesia and Malaysia.
Subhashis Basu, chief operating officer of Indore-based Prataap Snacks, the company that makes Yellow Diamond chips, said the price surge is “bleeding” the company.
Dependence on the commodity is particularly high for the packaged snacks industry, said Basu. With prices rising steadily over the past year, the company has had to reduce the grammage of its chips and namkeen packs. “We also did some price corrections across brands, but the price rise is too much to be offset fully,” Basu said.
The company does not directly import palm oil, but buys it from large importers.
Rival snacks company Bikano is worried, too. “Palm oil is one of the major ingredients in our deliverables, including sweets and namkeens. The prices of other edible oils will also soar with the rise in palm oil prices,” said Manish Aggarwal, director, Bikano, Bikanervala Foods.
The company faced a similar problem last year, too. “This rise in palm oil pricing is only adding to the already existing food inflation that our economy is going through,” Aggarwal said. “If the prices continue to rise, we will definitely have to look at increasing the prices of our food-items.” The company may look at substitutes such as rice bran oil and cottonseed oil, he added.
Sunil Kataria, chief executive officer for India and Saarc at Godrej Consumer Products Ltd, said the maker of Godrej No.1 and Cinthol soaps has taken a price increase of 5-7% since January on its soaps.
The company plans to double down on cost-saving measures to tide over inflationary pressures. “We want to do a very calibrated and smart balance between volume growth and price corrections,” he said, adding that the company will watch how the situation evolves before taking further hikes.
The price increases have been taken across different stockkeeping units to ensure volumes remain intact. Rivals Hindustan Unilever Ltd and Wipro Consumer Care and Lighting, too, initiated price hikes in soaps in the last few months.