Buyers, companies on edge as prices rise

Large consumer-facing companies have been facing inflationary pressures for several months. There has been a significant increase in the prices of palm oil, packaging materials, plastics, steel and aluminium, leading to an increase in the prices of foodstuffs, edible oils, cookware and consumer durables products.

Ravi Saxena, Managing Director and Co-Founder, Wonderchef Home Appliances Pvt Ltd. Ltd. said they do not remember the last time the companies had made three price hikes in a year. “We, too, have hiked prices thrice in a year, which is a 25% increase in product prices,” he said. This was the result of an unprecedented 50% jump in the price of steel and a triple jump in ABS (Specialty). Plastics) Prices—the raw material used in Wonderchef’s cookware and kitchen appliances.

“Appliances and consumer durables firms have increased prices, and consumers do not have that kind of disposable income today after the pandemic. The situation is very difficult for the economy, consumers and companies.”

Diwali this year is the energy crunch of last year, Saxena said, not only because of inflation, but also because of the second Covid wave in April and May that shook consumer confidence. “There was a tremendous loss of lives, families affected, and even the jobs lost during Covid have not returned,” he said.

Rohit Mathur, president (electric fans, water heaters and pumps) at Usha International agreed that the continuous increase in raw material cost is affecting the sector. The problem is compounded by the lack of components. “Because of this, when we cannot afford the rising cost, unfortunately, we need to pass on the burden to the consumers in the form of hike in prices. Having said that, people wanting to buy the product are buying,” he said, adding consumers have gone from being price-conscious to value-conscious.

“The company has announced attractive combo offers as well as easy finance options to woo the consumers, who wish to buy and upgrade their homes,” he added.

Buyers are demanding discounts in the fast-moving consumer goods category as well. Researcher NielsenIQ said last year’s high inflation and pandemic pressures have changed in-store buyer behavior. Its study showed that 81% of Indian shoppers sought in-store discounts and promotions, up from 74% in 2020.

“To complement this change in consumer trend, manufacturers have increased promotions in non-food categories such as liquid toilet soap, toilet cleaner, shampoo and washing powder. Within food items, the categories which have been promoted through promotion are glucose powder and biscuits,” it said.

Researcher Kantar said households falling in middle and lower socio-economic classes (SECs) B, C and D paid more per kilogram on groceries than their more mobile counterparts.

“We know that the mid-SEC buyer is spending as much as the upper SEC buyer per kg of FMCG, post the pandemic. This is a reflection of a lot of parameters, including whether consumers are moving from bigger, better brands or non-branded products to branded products, their purchase basket includes costlier categories like sanitizers and hand wash, rising inflation and increasing cost of manufacturers. said Kantar, which tracks household consumption of packaged products including staples, beverages and personal care products.

Kantar cautioned that the rise in the price of daily household items could prompt middle- to low-income households to leave the categories or move to cheaper alternatives.

In a recent earnings call, Hindustan Unilever’s top management said prices of several commodities have remained at several-year highs. Palm oil prices remain at record highs, while crude oil and packaging feedstocks have also risen significantly.

Sanjiv Mehta, chairman and managing director of Hindustan Unilever, said FMCG firms have pushed up prices, “those at the bottom of the pyramid… the director told analysts on the October 19 earnings call.”

Ethnic wear retailer Biba said shoppers returned to stores to buy new clothes ahead of the festive season, but demanded better deals. The company’s managing director Siddharth Bindra said the company is seeing pressure on raw materials, especially with rising cotton prices.

“The kind of increase in raw material prices we are seeing is decadal. All this is happening in six months to nine months. Even the cost of processing has gone up. It is extremely challenging; This is something that most brands will have to pass on to consumers,” he said.

“As you start moving into higher price points, people want a little bit more value for money. They are not asking for very sizable tickets,” Bindra said, adding that this could have a short-term impact on volumes. Is.

Electronics retailer Vijay Sales said in general electronics prices are 15% higher than in the year-ago period. Director Nilesh Gupta said, “As a result, a price hike was expected, but volume-wise, we are yet to touch the pre-pandemic figures.”