This New Year you may have to pay more for biscuits. That is not all, even chocolate and soaps are set to become dearer. The reason, experts say, is the rising price of raw materials.
Parle-G, one of the highest selling biscuit brands in the country, has hiked its price. The 82.5 gram Parle-G packet of Rs4 will be replaced by an 88-gram packet with a price tag of Rs5. This 25% hike is for an additional 4 grams.
“This could impact consumption because the biscuit market is quite price sensitive. But there is no option,” said Praveen Kulkarni, general manager, Parle Products. Prices of sugar and wheat flour, which constitute 50-60% of the cost of making biscuits, have seen an upward surge.
Parle’s rival Britannia Industries Ltd has already increased prices by 5-15% across various brands, while ITC, the third big biscuits player, will follow suit soon, said analysts.
The story is similar in personal-care products. “We will have to raise prices in a month by 7-10%,” said CK Ranganathan, chairman and managing director of Cavinkare Ltd, a Chennai-based manufacturer of haircare and skincare products.
Godrej Consumer Products Ltd said it is just about holding on for now. “So far, we have been able to maintain our sales growth; so, we are holding the priceline. But there could be an impact on consumers if inflation keeps rising,” said Hoshedar K Press, executive director of the company.
Companies have been resorting to a simple trick to ensure that their sales don’t fall even: reduce the quantity inside a pack, the so-called “grammage reductions”. Hindustan Unilever has used this strategy so far,as has Cadbury’s, the biggest chocolatier.
“Companies have reduced grammage by 15-20% over the past year,” said an analyst with a domestic brokerage.
Hozefa Topiwalla and Girish Achhipalia, analysts with investment bank Morgan Stanley, said in a note to clients that weak monsoon has impacted the kharif crop due to which there has been a slowdown in consumption.
In the past two months, the growth rate in biscuit sales is down from 17-18% to 10-11%, Parle’s Kulkarni said.
