Rising prices eat into food, soap sales | business | Hindustan Times
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Rising prices eat into food, soap sales

Inflation is just not showing any signs of retreating. Prices of day-to-day consumption products like, biscuits, cheese and yogurt are going up sharply. Saurabh Turakhia reports.

business Updated: Apr 30, 2008 23:06 IST
Saurabh Turakhia

Inflation is just not showing any signs of retreating from your daily life. Prices of day-to-day consumption products like, biscuits, cheese and yogurt are going up sharply. There are indications that prices of soaps may see a fresh round of increase.

While Nestle has increased the prices of branded yogurt by Rs 2 on its 400 gm pack recently, Britannia has increased the prices of its Good Day brand by Rs 2. “Pricing is a dynamic variable and we review our mix, including pricing, on an ongoing basis,” said a Britannia spokesperson.

That the consumer is feeling the pinch is getting reflected through sluggish growth of certain segments like soaps. In January, Godrej Consumer Products, which makes Godrej No 1 and Cinthol soaps, had gone in for a price hike. A month from now, it is contemplating another hike.

“We will have to increase prices of our premium brand by Re 1 (from Rs 16 to Rs 17) and of popular brand by 50 paise (from Rs 12 to Rs 12.5),” said H K Press, executive director and president, Godrej Consumer Products.

Godrej Consumer Products announced its results recently, which indicated that growth in the soap business was only 5.5 per cent in the fourth quarter of 2007-08. Press admitted that partly the reason may have been the price hike that the company went in for early this year. He agreed that the volume growth was almost flat.

Analysts say the Rs 6,000 crore soap industry is flattening in volume terms. According to Anand Shah, FMCG analyst at Angel Broking, “In the soap segment, the volume degrowth has started. Hindustan Unilever has been able to sustain the price rise as it grew by 20 per cent in the soaps and detergents segment, but overall the industry is getting affected due to the price rise.”

Companies are also introducing lower quantity packs. For example, Godrej introduced a 100 gm pack a few months ago.

D Sundaram, vice-chairman of Hindustan Unliever, told Hindustan Times that the company would go in for judicious price increases during the next financial year. He said the company would opt for a dual strategy of hiking prices along with reducing pack sizes.

Since most of the items that have seen price rises are essential items, consumers cannot avoid buying them. However, some shifting from premium to popular brands may be a possibility. Some organsied retail chains are seeing this happen. Mohit Khattar, president (marketing), Subhiksha, said, “Soaps, detergents and biscuits are not items of discretionary purchase. However, people do tend to change brands in such times.”