Retail inflation predicted a heat of discontent

Rising prices will be a disappointment for buyers whose household budgets have already been hit due to business losses or job losses related to the pandemic. Experts in the sector said there could be a replacement market and a slight increase in demand for these products, and that number looks good against the low base of the pandemic years.

Despite various surveys pointing to an increase in consumer confidence, retail experts said they do not see any signs of improvement in consumption as people’s income has not increased.

In fact, Indian consumers have turned to buying smaller or lower priced packs for both food and personal care products, said Arvind Singhal, chairman of consulting firm Technopak Advisors. The trend has been captured by the retail intelligence platform Bizom which tracks over 7 million retail stores. It said the contribution of low-priced packs to total sales of beverages, personal care and items in rural India grew by 2%, 4% and 10.5%, respectively, between January and the first week of March. In urban India, the contribution of cheap packs in confectionery, commodities, home care and packaged foods increased by 2.8%, 2.9%, 5.9% and 13.7%, respectively. Price inflation was at the root of this change, Bijom said.

To analyze consumption trends, brokerage firm ICICI Securities recently interviewed heads of large packaged consumer goods firms. Saugata Gupta, Managing Director (MD) and Chief Executive Officer (CEO) of Marico Ltd, told its analysts that food inflation, general inflation (petrol and diesel), and input cost inflation have made the situation unique and the food and packaged consumers Goods inflation leads to bottom trade. Dabur India CEO Mohit Malhotra also conceded that inflation is a big issue and growth is coming from pricing, while volumes are flat. On volume growth, overall, the industry is deteriorating and the situation is likely to remain the same for some time due to inflation. Malhotra told ICICI Securities that consumer wallets are shrinking, and at the same time, openings are also increasing spending in the out-of-home category.

Technopak’s Singhal agreed that people who have disposable income are spending more on services such as travel, leisure and dining out. In his view, of the total working population of about 550 million people, the number of people who actually hold stable jobs could be 30-40 million. All others are agricultural sector or self-employed, or daily labourers.

“So, those few millions don’t drive the needle and drive overall consumption. You need to create more people in the so-called middle class who can buy electronics and appliances for the first time.”

Of course, some companies are smart, have performed well and have gained market share at the expense of others. Kitchen and home appliance company Wonderchef could be one such firm. Its MD and co-founder Ravi Saxena said that the company, which makes around 600 appliances from mixers and toasters to coffee machines, grew 30% last year and is expected to grow 30-40% this year. “We are still young and in development mode and offer premium devices. We grew in the pandemic because people were cooking at home and then we successfully pivoted to the D2C brand with about 45 to 50% of sales coming from the internet. ,

However, he said that almost every crisis around the world makes the poor poor and the rich rich. “The two years of covid has certainly eroded India’s overall consumer power. As the COVID subsides, the Russia-Ukraine crisis reared its head, leading to further inflation,” he said.

Such uncertainty shakes the confidence of making discretionary purchases and damages consumer sentiment. Of course, consumers are venturing out and visiting malls, perhaps just to feel normal. “But the stores may be empty. I wouldn’t say that the consumer is doing amazing right now.”

Shuchi Bansal is the Media, Marketing and Advertising Editor of Mint. The simple post will look at pre-assing issues related to all three. Or just fun stuff.