Industry
Packaged food makers plan price hikes
Summary
Pricing pressures are rising even as consumer goods volume growth slowed to 3.8% from 7.5% a year earlier in the quarter ended June, primarily due to slower sales of packaged foods such as salt, flour and oil, NielsenIQ said last week.
Even as consumer goods makers expect a good monsoon to spur demand, costs of some of the commodities have started rising after months of decline. That’s likely to prompt price hikes across cookies and cakes to hair oil.
Britannia Industries Ltd expects a 4-5% inflation in the coming months as prices of flour, sugar and cocoa rise, Varun Berry, vice-chairman and managing director at the maker of Good Day biscuits, said in a post-earnings call on 5 August. The company may have to increase prices "a little bit", he said.
"We will have to figure out which are the brands, which are the categories where we go ahead and take some pricing (action), if required," he said.
Read more: Honasa to bring down inventory holding period for Mamaearth distributors
Consumer goods makers cut prices over the last few months as inflation eased, offering respite. That reversed some of the hikes announced over the preceding two years when commodity inflation stayed persistently high, hurting consumption. While costs are rising again, they are much below the peaks of FY22 and FY23.
Berry said flour and sugar prices are rising slowly, while cocoa has gone "through the roof". But palm, laminates and corrugated boxes are “balancing" these out, he said. Skimmed milk power, however, has gone up too, he said. The company is monitoring the situation and assessing its impact, he said.
He doesn’t expect a dent in demand. For about 20 months, inflation was 22% and that “gets us off track because those are the kind of numbers which impact consumer consumption. I don't see that happening," he said.
Read more: Fast Moving Consumer Goods: Time for a strategic pivot
Pricing pressures are rising even as consumer goods volume growth slowed to 3.8% from 7.5% a year earlier in the quarter ended June, primarily due to slower sales of packaged foods such as salt, flour and oil, NielsenIQ said last week. Companies expect a normal monsoon to spur demand, it said.
For Dabur India Ltd, too, food inflation is a concern. “We might have to take some price increases in food, but it depends upon how the situation is," Mohit Malhotra, chief executive officer at the maker of Real juice and Vatika shampoo, said in a post-earnings call on 1 August. The company had cut prices of its Badshah spices as commodity prices softened in the previous quarter.
Saffola cooking oil maker Marico Ltd increased the prices of its Parachute coconut oil by 6% in the previous quarter as input costs rose. Copra is up 19% year-on-year. And there’s more to come.
Saugata Gupta, managing director & CEO, said during the company’s post-earnings call on 5 August, "We expect marginal inflation in copra, we will take that price hike."
