Household budgets are increasing as consumer goods companies plan price hikes to offset costs

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Express press service

NEW DELHI: Household budgets have been disrupted by rising prices of essentials. This is a source of concern for the middle class, which is the hardest hit, as consumer goods companies that have not yet taken price hikes are planning an increase now, and companies that have already taken rises are considering another rise.

Global geopolitical factors such as the Russian-Ukrainian war and the continued rise in commodity prices – wheat, palm oil and packaging materials – added to inflationary pressures in the quarter ending March 2022, leading to many FMCG companies to raise prices to maintain their margins. and profitability intact.

Household goods prices have risen with FMCG giants like Hindustan Unilever, Britannia, Tata Consumer Products, Dabur raising the prices of their products – ranging from biscuits, sugar, salt and tea/coffee to soaps, shampoos and perfumes, among others. But the worst is not yet over! Varun Berry, managing director and CEO of Britannia Industries, on a call with analysts after the results earlier this week, said:

“We haven’t been able to keep pace with this inflation because we’ve never estimated the type of inflation we’ve seen, but we continue to take sensible price increases.” Britannia, which has already taken a 10% rise in 2022, could opt for another 10% rise beyond the revision made if spot prices hold over the next 12 months.

Regarding low wheat production and palm oil issues, Berry said, “This is a year where we really have to be on our toes and taking calls on a monthly basis.”

“There is no way any other activity can help with the pain that inflation is going to give us, it will have to be a price correction. do not have a significant impact on the consumer, we will have to make difficult decisions,” he added.

Britannia manufactures household names in India like Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold. Its product portfolio includes biscuits, bread, cakes, rusks and dairy products – cheeses, beverages, milk and yoghurt.

Another market leader Parle Products, which sells cookies, snacks and cakes, among other products, and has already taken a price hike of nearly 8-10% in the past 12 months to March 2022, expects to increase prices further by 7-8% for the current quarter, said Krishnarao Buddha, senior category manager for the company The new Indian Express.

“We seek to deal with inflation by making efficiencies in every possible area by reducing costs, be it product, packaging or the manufacturing process, and we strive not to increase prices as much as possible. Price increases are only planned if necessary,” said Buddha.

Amnish Aggarwal – Director – Research at Prabhudas Lilladher notes that calibrated and gradual price increases by FMCG companies are expected in the future.

“This could take the form of a reduction in grammage in the `2/5/10 packs and an absolute increase in the others. We also anticipate an increased focus on cost reduction and internal efficiencies to protect the However, we expect margin pressure to continue in the near term,” Aggarwal said.

Hindustan Unilever (HUL) raised prices by almost 10% in the fourth quarter and the FMCG giant’s CEO, Sanjeev Gupta, said on a post-earnings call: “As things stand , there will be more price increases.”

This would impact the price of Clinic plus, Close up, Bru, Dove, Glow & Lovely, Horlicks, Kissan, Lakme, Lipton, Lifebuoy, Pears, Lux, Surf excel, Rin, pepsodent, Vaseline, which are among more than 50-plus HUL brands making their way into Indian homes.

Amarnath Halember, executive director and CEO of NextG Apex, which specializes in breakfast and cereals and owns sub-brands Naturefest and Mamafeast, says that while FMCG companies are doing all they can to absorb most of the differences of price, a sharp increase is the only logical possibility in these circumstances. . “Long-term cost trends need to be shared with consumers, especially if raw material costs are to remain at new levels,” he said.

Similarly, nutritional supplement brand Supplement Sack is seeing its margin costs increase by 2-4% for much of its portfolio.

“Mayonnaise is our main product which suffered from the long war between Ukraine and Russia. This is because sunflower oil is the main raw material for the product and Ukraine and Russia supply a significant amount of sunflower oil to India,” says Manish Yadav, CEO of Supplement Sack.

FMCG major Dabur, which took price hikes in the range of 5-6% in Q4FY22 to offset the impact of inflation, expects inflation to climb unabated for at least least the second half of the year, according to its CEO Mohit Malhotra.

The FMCG industry has been hit by inflation and margins are squeezed.

Until the situation persists, companies will continue to pass on some of the damage to customers through the price correction. Consumer budgets will have to be constantly revised for now.

Year-on-year wholesale inflation rate (March 2022)

Britannia, which has already taken a 10% price increase in 2022, could opt for another 10% increase beyond the revision already made if spot prices continue for the next 12 months.

Base metals 25.97%

Oilseeds 22.49%

Vegetables 19.88%

Wheat 14.4%

Cereals 8.12%

Crude oil and natural gas 69.20%

Chemistry & chemicals 12.66%

Paper and paper products 12.24%

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