Consumer goods companies embark on another round of price hikes in the January-March quarter

“The price hike has been due for some time now. The industry postponed price increases due to the holiday season. However, we expect prices to rise about 5% this quarter due to higher commodity inflation,” said Eric Braganza, president of the Consumer Electronics and Appliances Manufacturers Association. He said the amount of the price hike could vary as some companies have already raised prices while others are in the process of doing so.

Orient Electric Ltd, a maker of cooling appliances such as fans, coolers and kitchen appliances, said commodity prices had been erratic over the past 18 months.

There has been a spike in the prices of raw materials such as plastics, steel and copper, said Salil Kappoor, business manager, home appliances, Orient Electric. He said the company could raise prices by 4-7% this quarter across the product portfolio. “Transportation costs have increased. There is no other way than to pass it on to consumers. We also increased costs earlier; it will happen again this quarter,” Kappoor said.

Companies had previously raised prices for appliance brands between 5% and 15%, which Kappoor said led to a contraction in demand.

Meanwhile, biscuit maker Britannia Industries Ltd is planning a 10% price increase this quarter, managing director Varun Berry told analysts late last month. Wheat, sugar and palm oil prices continue their upward trend, according to the company.

The maker of Good Day cookies and Britannia cakes raised product prices by 1% in the first quarter of the fiscal year, 4% in the second quarter and another 8% in the third quarter.

Inflationary pressures have intensified since the start of 2021 as demand for goods and commodities surged following a reopening of economies around the world following covid-induced shutdowns.

In India, the Wholesale Price Index (WPI) rose sharply in the nine months to December, according to government data. This is due to the recovery in economic activity, a sharp increase in world prices for crude oil and other imported inputs, and high transport costs.

For companies selling smaller everyday-use packaged products with little room to raise prices, this has meant implementing strict cost controls and price increases accompanied by grammage reductions.

In an earnings call last week, Mohit Malhotra, CEO of Dabur India, said the company had raised prices on a range of products to offset inflation.

On its healthcare portfolio, it raised product prices by 10% Prices of products such as Honitus, Pudin Hara and Chyawanprash were increased.

“We took the second round of price increases in the third quarter – there will be a pass-through effect, which will happen in the fourth quarter,” Malhotra said on Feb. 3.

Dabur is working on a combination of its Samriddhi cost reduction program, taking some price hikes as well as expanding distribution to counter rising raw material costs. “So the company may have to accept further price increases. We are aware of the elasticity of demand that plays here with the increase in prices,” he said.

The local branch of the world’s largest beauty products company, L’Oreal, said prices for commodities, especially those related to petrochemicals, used to make plastic bottles remain stubbornly high.

“Anything related to petrochemicals is getting tougher. So we haven’t seen a single major ingredient go limp. The inflationary trend continues, and this is a source of concern. Because there’s a limit to what you can pass on to the consumer, companies also have to tighten their belts and budgets. The first round of awards took place at the end of last year and the second will take place in the middle of this year,” said Amit Jain, Managing Director of L’Oréal India.

He said price increases in the beauty and personal category were taken in the “mid single digits”.

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