Be Ready to Pay More for Groceries
Prices of biscuits, soaps, ice-creams set to rise by 5%-10% on higher input costs
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