Prices of several consumer goods including packaged food and dairy products, liquor, refrigerators, air-conditioners, imported apparel and personal care products are set to increase up to 10% with companies passing on certain input price increases and the impact of rupee depreciation.
Top executives of companies, however, said the proposed price hikes of 3-10% over the next 1-2 months will still be one of the lowest in the last two years when inflation shot up to record levels and rupee fell against the US dollar at a higher pace than before, and hence they don’t expect this will have any significant impact on consumption when overall inflation is softening.
Companies have been largely absorbing higher input and import costs to aid improvement in demand, they said.
The industry has forecasted a recovery in overall demand, including in rural markets, from April-June quarter.
Dabur India chief executive officer Mohit Malhotra told analysts earlier this month that the mix of inflation is changing with crude and herbs prices softening while concentrates that are imported have become dearer due to currency devaluation. He said the company is in the process of taking price increases of its food products because earlier price hikes in these products were limited to 4-5% compared to 6.5% overall price increase effected by the company, leaving some headroom.
Britannia Industries managing director Varun Berry said in the earnings call this month that food inflation continues although “at a slightly lower level”. He said wheat is on the boil, overall consumer food price inflation was at 6% year-on-year in the December quarter, and the dollar is strengthening.
“I don’t think we are going to see the kind of inflation that we have seen in the last two years for some time to come,” he said. However, Britannia will go for 2.5-3.0% price increase for certain packs to adjust with the input cost inflation, Berry said.
Price of milk has gone up twice in October-November 2022 and earlier this month by a cumulative 8-9%, which industry executives said will push up prices of dairy products like butter, ghee, cheese and ice-cream.
Industry experts said milk prices would continue to rise.
Manish Bandlish, managing director of Mother Dairy, said the stress on raw milk prices is being felt across the industry, putting pressure on consumer prices that may continue till October. He said there is a significant increase in demand for milk and milk products, but the procurement prices of raw milk have been consistently firming up due to rising cost of feed and fodder.
Premium imported apparel and personal care products would also pinch more as companies plan to increase prices by 8-10%.
“Inflation has been a bit of impact because of the dollar value and the market has accepted that pricing,” said Abhishek Bajpai, CEO of Apparel Group India that sells brands such as Aldo, Charles & Keith and Bath & Body Works. “We are seeing the global cost price is getting a bit more settled as they were very volatile in the last 12 months.
We have tried to absorb as much as we could within ourselves and not pass it on to the customer. But in certain cases, there have been some price variations,” he said.
Appliances dependent on imported components such as air-conditioners, refrigerators and microwave ovens, too, will see a hike with rupee trading at around Rs 83 against the dollar. Companies said their existing pricing benchmark is Rs 77-78 for $1.
Neeraj Bahl, managing director of BSH Household Appliances India that makes Bosch and Siemens appliances, said the company will increase prices by 3-5% from April. “It’s a small price hike and we don’t expect any impact on demand due to the early onset of summer,” he said.
White good companies have also withheld the 2-3% increase in prices due to the one level tightening of energy labelling norms for AC and refrigerators this season, but now will pass that.
Tata-owned appliance maker Voltas said in the earnings call that the company has been holding on to price hikes for the last few months for demand to recover and may increase prices in the June quarter.
Liquor companies including Diageo, Pernod Ricard, Radico Khaitan, and United Breweries have also said they are aggressively seeking price increases from the government due to inflation in key raw materials such as extra neutral alcohol, glass, and packaging materials.
In India, retail and wholesale prices of alcohol are controlled by states that account for over 65% of the overall market, making it difficult for companies to raise prices quickly.
Source : The Economic Times Feb 22nd 2023