Middle class feels inflation pinch, cuts in purchases

Nowhere is the trend more evident than in cooking oils, with standard 1-liter bottles being phased out of supermarket shelves by smaller, more affordable 750ml or 500ml packs.

New Delhi-based freelance writer Ejaz Naqvi says her monthly expenditure on groceries and household items has increased. “Every vegetable has become expensive and so have cooking oils,” said Naqvi, who had switched from canola oil to cheaper cooking oil the family of four used earlier.

The cost of manufacturing and transporting goods has risen sharply amid disruptions in global supply chains and a jump in fuel prices, even as demand for goods and services rises as the pandemic rages on Is. As a result, many companies are selling smaller packs or cheaper versions of products to reduce the impact on customers and avoid disassembling them to avoid passing on rising production costs.

Prices of some raw materials are at 40-year highs, brokerage Edelweiss said in a December 8 note on consumer goods markets. For example, paint companies rose 18% year-on-year, while Hindustan Unilever Ltd increased prices by 7% and biscuit companies by nearly 10%, the report said.

Krishnarao Buddha, Senior Category Head, Parle Products, said people have postponed purchases of discretionary goods and consumers down-trade during such inflationary periods.

“That’s what we’re seeing as well,” he said, adding that the change was particularly evident in middle- and low-income households. Since April, Parle Products, which sells the popular Parle G biscuits, said it is increasing prices across the brand. keep.

Saurabh Baisakhia, President, Appliances, Usha International, said the demand for home appliances is strong, but the firm is under increasing pressure from “rational” consumers.

“Rational” buyers who are closer to around 40-45% of the market – who typically operate on ticket-sized purchases – have seen little down-trading if it doesn’t fit their budget. So, while the price-conscious is looking at premium range, rational consumers are down-trading,” he said.

The company said it is “optimizing” its portfolio to ensure it can meet the needs of consumers at all price points.

Citing domestic data released by the central bank, Mint reported on Monday that consumers remained pessimistic about the current economic situation in November. Even as the level of expenditure on essential items increased, people were hesitant to spend on non-essential items.

Kamal Nandi, Business Head and Executive Vice President, Godrej Appliances said that during the second wave households are spending more towards medical exigencies as well as there are fewer consumers with discretionary income to spend.

This was particularly affecting a large segment of the consumer electronics and home appliances market, he said.

“Inflation is cutting into discretionary spending. As a result, you’ll see big ticket purchases getting postponed,” he said. Volumes were strong at the premium end, he said, a trend that has held steady over the past six months.

In an interview on 19 November, Saugata Gupta, Chief Executive of Marico Ltd, said that when there is persistent inflation, the tendency of people to upgrade from branded or small brands to big brands slows down. However, Gupta expects the phase to be transient.

With shoppers cutting discretionary spending, manufacturers are also feeling the pressure. Data from market researcher Nielsen IQ said that 14% of small consumer goods brands exited the market in the September quarter. It said this was due to consumers shifting to cheaper products or switching to non-branded goods.

Ullas Kamath, joint managing director of Jyoti Labs, which makes Prill dish washing liquid and Ujala whitener, said high inflation is hurting especially rural households. “In rural areas, 60% of household expenditure is on food. In general, the food basket has become expensive,” he said. This pressure is more visible in the middle and lower-middle class, he said.

Nielsen IQ said demand for packaged consumer goods in villages declined in the September quarter – a 2.9% drop in volumes compared to a year ago.

Orient Electric Ltd Managing Director and CEO Rakesh Khanna said the inflationary trend is likely to continue in the near term as there is no sign of any moderation in the outlook for commodities, Khanna said, adding that the company has taken measures to address cost pressures. raised prices for

Usha’s Baisakhia said that if the cost of raw material does not come down, then the prices may be revised soon. “The cost has gone up by 20-25% in the last one year, and the company’s prices have gone up by 15-18%. We are trying to absorb the impact. We don’t want to outsmart ourselves for the consumers,” he said.