Britannia, Amul, Dabur to raise prices or cut quantities in packaged products. Here’s why

Shopping for daily-consumption grocery products is set to get more expensive and this will happen all because of higher input costs.

Big players like Britannia, Amul, Dabur and Parle are either looking forward to raising prices or cutting quantities in packaged products after the cost of ingredients such as sugar, milk powder and palm oil increased by 20-80% over the past year on account of fluctuating global commodity prices and lower production cycles.

The move comes in after the hike in consumer goods prices as the industry still nurses the wounds of demonetisation, which crippled demand, and endured at least four quarters of subdued growth as consumers cut back on discretionary spending.

Biscuit maker Britannia said prices of its biscuits will go up by up to 7%, while Wipro Consumer Care, the manufacturer of the country’s third-largest soap brand Santoor, said prices will rise about 5%.

Amul, the nation’s top ice-cream maker, said prices are up 5-8% after a two-year gap due to higher sugar and milk powder prices.

Others such as Parle and Dabur are either reducing quantities or clamping down on promotions, which indirectly amount to price increases.

“We will cover up the inflation hit and hike prices 6-7%,” said Varun Berry, managing director of Good Day biscuit maker Britannia.

According to Wipro Consumer Care & Lighting chief executive officer Vineet Agrawal, prices of soap will go up for the first time in three years.

“Cost pressures are definitely more than what they were and it is starting to reflect on retail shelves now. Our focus is always topline growth,” Agrawal told ET.

Industry analysts feel that the demand for palm oil from core importers such as India and China has resulted in stiffening of prices. Palm oil is also a key ingredient for detergents and cosmetics.

Earlier, Religare Capital Markets wrote in a report that the gross margin pressures have been visible with players initiating selective pricing actions.

“Poor demand has weighed on the Indian consumer sector over the last two years. Additional headwinds from demonetisation and GST (goods and services tax) could have a lasting disruptive impact,” Religare wrote in the report.

Parle has also confirmed that it has reduced the weight of its confectionery and snacks category after almost four years.

“The price hike is all indirect in the form of weight reduction and translates to anywhere between 8-12% of price hikes,” BK Rao, marketing manager at Parle Products, told ET.