Noodles, biscuits, flour makers feelthepinch of wheatpricehike
Wholesale wheat inflation jumped to 14% in March, the highest in 63 months
NEW DELHI: Packaged foods companies are hiking prices or reducing grammage in packs of biscuits, noodles, and atta as wheat prices have increased over the last month.
Wholesale wheat inflation jumped to 14% in March, the highest in 63 months. Biscuit makers said prices of wheat are already up 10-15% compared to a month ago.
Companies facing inflationary headwinds because of high palm oil and crude prices, may be in for trouble if domestic wheat prices continue to rise. Kolkatabased ITC Ltd made “calibrated price revisions” for Aashirvaad atta, Sunfeast biscuits, and Yippee noodles given the magnitude of inflation.
“ITC is the largest private sector procurer of wheat in India and this lends a source of competitive advantage to the foods business. However, an increase in raw material prices remain a concern. We have been closely monitoring costs and have brought in efficiencies across every node of the value chain right from raw material sourcing till delivery to the consumer,” said Hemant Malik, divisional chief executive, foods division, ITC. Another factor that could exacerbate inflationary trends is the uncertainty around plan oil imports. Surya Food & Agro Ltd, which sells biscuits under the Priyagold brand, said it is becoming difficult for biscuit companies to manufacture products at low price points because of inflation across key raw material, including edible oil, milk and wheat. “Because of high export demand prices of wheat have been going up. It has already increased by 10% to 15% in the last month. Sugar and milk prices have also increased. The biscuit industry is in a very bad shape,” said Shekhar Agarwal, director at the packaged foods company.
The ongoing Ukraine-Russia conflict has impacted wheat production and global supplies. Conflict in the region, which accounts for more than a quarter of global wheat exports, has shored up demand for Indian wheat. India has promised to increase exports to plug global wheat supply shortages. A report in Hindustan Times on Thursday said that private traders are stocking up large quantities of wheat hoping for a strong export-linked demand leading to higher prices in the domestic markets.
Meanwhile, a harsh summer is impacting yield across major wheat harvesting states.
These factors have led to an increase of 6% in the price of packaged atta in retail stores and 11.6% in the price of bread, compared to a year ago, according to data sourced from retail intelligence firm Bizom.
“We do see that there could be further increase in prices of value added products as there remains strong export demand for wheat, which will put pressure on prices locally,” said Akshay D’Souza, chief of growth and insights, Bizom. D’Souza said factoring the Indonesia palm oil ban, there will be further pressure on products as edible oils become costly. “It just seems like a matter of time before we have another round of price hikes,” said D’Souza.
Biscuit makers who predominantly sell packets at Rs5 and Rs10 price points have been reducing grammages instead of hiking prices directly. About 70% of Surya Food & Agro’s portfolio is priced at ₹5-₹10 and Agarwal said it is becoming difficult for companies to continue the ₹5 price pack.
Announcing its March quarter earnings this month, Nestle India said cost outlook for key commodities such as edible oils, coffee, wheat, fuel remains firm to bullish in the short-to-medium term.