Be Ready to Pay More for Gro­ceries

Prices of bis­cuits, soaps, ice-creams set to rise by 5%-10% on higher in­put costs

The Economic Times - - Brands & Companies -

The hikes come at a time when the con­sumer goods in­dus­try is still nurs­ing wounds of de­mon­eti­sa­tion and at least four quar­ters of sub­dued growth MD, Bri­tan­nia CEO, Dabur While some com­pa­nies plan to hike prices, oth­ers are tak­ing the in­di­rect route — re­duc­ing weight or clamp­ing down pro­mo­tions Ratna Bhushan & Richa Maheshwari

New Delhi | Ben­galuru: Get ready to pay more for bis­cuits, ice-creams and soaps this sum­mer. Shop­ping for daily-con­sump­tion gro­cery prod­ucts is set to get more ex­pen­sive thanks to higher in­put costs. Com­pa­nies in­clud­ing Bri­tan­nia, Amul, Dabur and Parle are ei­ther rais­ing prices or cutting quan­ti­ties in pack­aged prod­ucts af­ter the cost of in­gre­di­ents such as sugar, milk pow­der and palm oil in­creased by 20-80% over the past year on ac­count of fluc­tu­at­ing global com­mod­ity prices and lower pro­duc­tion cy­cles. The price hikes come as the con­sumer goods in­dus­try still nurses the wounds of de­mon­eti­sa­tion, which crip­pled de­mand, and en­dured at least four quar­ters of sub­dued growth as con­sumers cut back on dis­cre­tionary spend­ing. Bis­cuit maker Bri­tan­nia said prices of its bis­cuits will go up by up to 7%, while Wipro Con­sumer Care, the man­u­fac­turer of the coun­try’s third-largest soap brand San­toor, said prices will rise about 5%. Amul, the na­tion’s top ice-cream maker, said prices are up 5-8% af­ter a two-year gap due to higher sugar and milk pow­der prices. Oth­ers such as Parle and Dabur are ei­ther re­duc­ing quan­ti­ties or clamp­ing down on pro­mo­tions, which indi­rectly amount to price in­creases.

“We will cover up the in­fla­tion hit and hike prices 6-7%,” said Varun Berry, man­ag­ing direc­tor of Good Day bis­cuit maker Bri­tan­nia. Wipro Con­sumer Care & Light­ing chief ex­ec­u­tive of­fi­cer Vi­neet Agrawal said prices of soap will go up for the first time in three years. The maker of San­toor soap said the hike is on ac­count of in­creas­ing palm oil prices, a key in­gre­di­ent. “Cost pres­sures are def­i­nitely more than what they were and it is start­ing to re­flect on re­tail shelves now. Our fo­cus is al­ways topline growth,” Agrawal said.

In­dus­try an­a­lysts said de­mand for palm oil from core im­porters such as In­dia and China has re­sulted in stiff­en­ing of prices. Palm oil is also a key in­gre­di­ent for de­ter­gents and cos­met­ics.

Reli­gare Cap­i­tal Mar­kets wrote in a re­port ear­lier this month that gross mar­gin pres­sures have been vis­i­ble with play­ers ini­ti­at­ing se­lec­tive pric­ing ac­tions. “Poor de­mand has weighed on the In­dian con­sumer sec­tor over the last two years. Ad­di­tional head­winds from de­mon­eti­sa­tion and GST (goods and ser­vices tax) could have a last­ing dis­rup­tive im­pact,” Reli­gare wrote in the re­port.

Parle Prod­ucts, which makes con­fec­tionery and salty snacks be­sides bis­cuits, said it has re­duced the weight of its con­fec­tionery and snacks cat­e­gory af­ter al­most four years. “The price hike is all in­di­rect in the form of weight re­duc­tion and trans­lates to any­where between 812% of price hikes,” said BK Rao, mar­ket­ing man­ager at Parle Prod­ucts. Con­fec­tionery and snacks ac­count for 15% of the com­pany’s sales, he said.

Be­sides sell­ing less quan­tity at the same price, some com­pa­nies have scaled back free­bies. “We are cur­tail­ing con­sumer pro­mo­tions – which is a proxy for price hikes – to off­set in­fla­tion across var­i­ous in­put costs,” said Su­nil Dug­gal, CEO of Vatika sham­poo and Real juices maker Dabur. “We will wait for vol­umes to sta­bilise this quar­ter be­fore tak­ing up pric­ing.”

Ice-cream mak­ers in­clud­ing cat­e­gory leader Amul have topped up prices 5%-8% ahead of the peak sea­son, a move that has come af­ter two years. Amul man­ag­ing direc­tor RS Sodhi at­trib­uted the price hike to milk, sugar and skimmed milk, which have be­come 30-90% costlier.

Mother Dairy Fruit & Veg­etable busi­ness head (dairy) Sub­hashis Basu said the com­pany plans to re­vise prices. “Con­sid­er­ing the in­crease in in­put costs, we are con­tem­plat­ing in­crease in prices for the sea­son,” Basu said.

Reli­gare Cap­i­tal Mar­kets in a re­port ear­lier this month said gross mar­gin pres­sures have been vis­i­ble for FMCG com­pa­nies

We will cover up the in­fla­tion hit and hike prices 6-7% VARUN BERRY We are cur­tailed con­sumer pro­mo­tions... to off­set in­fla­tion across var­i­ous in­put costs. We will wait for vol­umes to sta­bilise this quar­ter be­fore tak­ing up pric­ing SU­NIL DUG­GAL

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