New Delhi: Consumer products are likely to be costlier as India’s benchmark inflation rate climbed to a 13-year high of 11.05% for the week to 7 June.
Some companies have already indicated they will pass on the increase to consumers. Most firms selling fast moving consumer goods and consumer durables hiked prices several times in the past one year, mainly to check the impact of rising costs on their profits.
“Dabur hiked prices by 2-5% in key categories such as hair and oral care. With inflation rising again, we will look at price hikes as a tool to neutralize its impact,” said Dabur India Ltd’s executive director Rajan Varma.
Out of reach? Analysts said that after a series of price hikes across product categories last year, companies would be better advised to hold back any increases at this point in time. (Photo: Madhu Kapparath/Mint)
“We increased prices by 3% in March and June. If inflation continues to soar, we might have to increase prices of our products in July or August again,” said Kamal Nandi, vice-president of sales at Godrej and Boyce Manufacturing. Co. Ltd’s appliances division.
“To check the rising pressure, companies will have to resort to price hikes,” said V. Ramachandran, director of sales and marketing at LG Electronics India Ltd. “One impact of inflation could be on the demand. If the inflationary pressure sustains, there would be some loss of demand on entry-level products but growth in the high-end segment will continue,” he added.
“Inflation will not have much impact on the sector in a longer run. It might, however, affect balance sheets in the current quarter,” Nandi said.
Some companies might not take immediate action. “In the face of rising input costs and growing inflationary pressures, we have been holding our price points so as to not upset consumer sentiment,” said R. Zutshi, deputy managing director at Samsung India Electronics Ltd.
Venugopal Dhoot, chairman and managing director of Videocon Industries Ltd, while maintaining the company will not pass on the burden on to the consumer, said rising inflation will impact growth of the industry.
“If inflationary pressure was not so intense, the consumer durables sector, which is growing at 16%, would have grown at 20%,” he said.
Analysts, however, said that after a price hikes across product categories last year, companies would be better advised to hold back any increases at this point in time.
“FMCG companies including Hindustan Unilever Ltd and Godrej increased prices between 5% and 20% in the past one year. Now it will not be advisable for them to do so as it may impact consumer demand,” said Sameer Deshmukh, an analyst with Mumbai-based brokerage IL&FS Investsmart Ltd.
“They should instead look at other measures such as using alternative raw material, bulk buying and sourcing. Some companies are, in fact, already doing that,” he said.