Daily essentials may become dearer soon

KOLKATA | MUMBAI: Consumers may soon have to pay more for daily essentials and packaged food due to a steep rise in input cost, even as companies fear increased price tags could impact demand. Prices of televisions and refrigerators are also set to go up in January.

FMCG firms including Nestle, Parle and ITC said cost of commodities such as wheat, edible oil and sugar have gone up by 12-20%, which could force them to either hike prices or reduce pack sizes. This is in addition to milk prices that were raised earlier this week. In consumer electronics, higher flat-panel prices and increased cost due to new, stringent energy-rating rules are set to drive up the prices of TVs and refrigerators.

“There is input cost escalation across the board,” ITC executive director (FMCG) B Sumant said. “Price hikes are dictated by market leaders and we expect such announcements will come soon.”

Cost pressure for packaged food segments, including biscuits, instant noodles, snacks, frozen food, cakes and readyto-eat meals, comes at a time when consumers are reeling under food inflation, which accelerated to a near-six-year high of 11% in November, led by a surge in vegetable prices.

“There are serious input cost pressures. What we normally try and see is if we can mitigate it through better efficiencies and economies. But in extreme cases, we look at increasing prices because we are cognisant of the fact that as we sharply increase prices, the levels of penetration will also get affected,” said Suresh Narayanan, chairman at Nestle India. “You can do a combination of reducing promotion, increasing prices and better sourcing, but food inflation is here to stay.”

In dairy, price hikes have started. Amul increased milk prices by ?2 per litre across states, while Mother Dairy raised rates by up to ?3 per litre in Delhi-NCR.

Parle Products category head Mayank Shah said the recent cut in corporate tax rates had provided some cushion against margin pressure, but if commodity inflation continued to accelerate, the company could increase product prices. “In normal situation, we would have hiked prices or reduced pack sizes by now,” he said.

Last quarter, HUL reduced prices, which in turn boosted demand for brands including Lux and Lifebuoy. With palm oil, a key input for making soaps, trading at a three-year high, analysts fear the gross margin for personal care firms could erode even though they enjoy good pricing power.

Consumer electronics industry executives said prices of television panels globally had gone up by 15-17%, forcing them to hike prices from January once the new production gets into the market.

Avneet Singh Marwah, CEO of Super Plastronics that sells Kodak and Thomson televisions, said prices will go up by 5-10% from mid-January.