Even as consumer goods makers hope a good monsoon season will boost demand, costs of some essential commodities have started to rise after months of declines. That is likely to lead to price hikes for biscuits, cakes and hair oils.
Britannia Industries Ltd expects inflation of 4-5% in the coming months due to rising prices of flour, sugar and cocoa, Varun Berry, vice president and managing director of the Good Day biscuit maker, said on a post-earnings conference call on Aug. 5. The company may have to raise prices “a little bit,” he said.
“We will have to determine which are the brands, which are the categories that we will move into and take some pricing action, if necessary,” he said.
Consumer goods makers have cut prices in recent months as inflation has moderated, offering some respite. That reversed some of the hikes announced in the previous two years, when commodity inflation remained stubbornly high, hurting consumption. While costs are rising again, they are well below the peaks of fiscal 2022 and 2023.
Berry said flour and sugar prices are slowly increasing, while cocoa has soared. But palm, laminates and corrugated boxes are “balancing out” these prices, he said. However, skimmed milk powder has also risen, he said. The company is monitoring the situation and assessing its impact, he said.
He does not expect a drop in demand. For about 20 months, inflation was 22% and that “throws us off course because those are the kind of numbers that impact consumer spending. I don’t see that happening,” he said.
Last week, NielsenIQ said price pressures are mounting even as consumer goods volume growth slowed to 3.8% from 7.5% a year earlier in the quarter ended June, mainly due to lower sales of packaged foods such as salt, flour and oil. Companies are hoping a normal monsoon will boost demand, it said.
For Dabur India Ltd, food inflation is also a concern. “We may have to accept some price increases in food, but it depends on how the situation is,” Mohit Malhotra, chief executive of the maker of Real juice and Vatika shampoo, said on a post-earnings conference call on Aug. 1. The company had cut prices of its Badshah spices as commodity prices softened in the previous quarter.
Saffola cooking oil maker Marico Ltd raised prices of its Parachute coconut oil by 6% in the previous quarter due to rising input costs. Copra is up 19% year-on-year. And there is more to come.
Saugata Gupta, managing director and CEO, said during the company’s post-earnings conference on August 5: “We expect marginal inflation in copra, we will accept that price increase.”
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