India’s consumer goods companies are contemplating price hikes due to a steady increase in commodity prices, first due to the Covid-19 pandemic, followed by the Russian invasion of Ukraine.
Consumers will be forced to pay more for essential items, even as the current cost price inflation has already crossed the Reserve Bank of India’s upper threshold limit of 6%. In the month of February, it reached 6.07% and in January it was 6.01%.
Consumer goods companies have been facing an unprecedented rise in commodity prices such as wheat, palm oil and packaging materials and the Ukraine crisis has added to their woes with rising crude oil prices.
The wholesale price index has soared 13.11% year-on-year in February and has remained in double digits for the 11th consecutive month.
Companies are expected to increase prices in a calibrated manner as they also don’t want to upset the nascent recovery. Some may pass on only a part of the hike to customers and absorb the rest.
With consumers already facing high inflation, manufacturers feel a drastic hike would force them to cut down on consumption.
Companies such as Dabur and Parle are watching the situation closely, while Hindustan Unilever Limited and Nestle reportedly increased the prices of food products last week to maintain margins.
These two companies have increased the prices of food items such as tea, coffee and noodles. Market analysts are expecting a 10-15% increase in prices, even though input costs have risen much more.
Earlier price rises affected the volume growth of most companies in the third quarter ended December 31. Hindustan Unilever reported volume growth of 2% in the quarter ended December, compared with 4% growth in the second quarter.
Godrej Consumer Products, Emami and Marico reported flat year-on-year volume growth in Q3. Only Britannia bucked the trend with volume growth of 5% year-on-year.