NEW DELHI: IF the hike in fuel prices has weighed on your wallet, you should brace yourselves up as your next grocery bill may further pinch your pockets, January onwards.
To offset inflationary pressures, including a steep rise in the cost of raw materials, fast-moving consumer goods companies may hike prices across product categories despite the consumption slowdown.
Firms like Nestle, ITC and Britannia said the environment is inflationary, and it is becoming difficult to hold onto prices, going forward. To begin with, companies would either hike prices or reduce pack sizes as rising cost of raw materials such as milk, edible oil, wheat and sugar is beginning to hurt their margins.
“...Normally, we try and mitigate it (price hike), as our strategy is driven by penetration-led volume growth, but in extreme cases we are forced to,” said Nestle India chairman and managing director Suresh Narayana.
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If there are measures that give some money in the hands of consumers in terms of increased consumption expenditure, then that should help, but nevertheless food inflation is here to stay, he added. Escalation of commodity prices such as edible oil, wheat flour and sugar may lead to price increases in the biscuits space with manufacturers likely to take 3-6 per cent price hike.
“The price of wheat flour has definitely gone up year-onyear. In South, it is selling at about Rs 24 per kg and it will be slightly lower in North India. There are additional and handling costs that also add costs for small and medium manufacturers,” said an industry executive, adding that for small packs, the price increase would be in the form of a gram reduction, while for bigger packs the price hike could be in absolute value terms.
The increase in the prices of cattle feed by more than 35 per cent has also been a key trigger for the price hike in the dairy segment and players such as Amul and Mother Dairy have already passed on the price increase to consumers.
Amul has increased milk prices by Rs 2 per litre across states, while Mother Dairy raised rates by up to Rs 3 per litre in Delhi-NCR. On the other hand, palm oil prices have been up more than 30 per cent in the last two months.
While some edible oil companies did marginally hike prices in November and December, they may be forced to consider another round of hike if prices remain at this level. Bread makers also think alike.
According to All India Bread Manufacturers Association, the industry is considering 7-12 per cent price hike over the next two weeks if inflationary pressures don’t ease off.