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27 Feb 2017

Icecreams, groceries pricier this summer, companies blame input costs

Groceries to get expensive, manufacturers blame input costs

Get ready to spend more as FMCG companies are soon going to hike prices of groceries and other everyday consumption products, citing an increase in input costs.

Icecream majors such as Amul and Vadilal have already hiked their product rates- between 5% and 8%.

The cost of raw materials and overhead items, such as labour, used in the production are known as input costs.

In context

Groceries to get expensive, manufacturers blame input costs

Cost of inputs in manufacturing icecreams

Input costs, such as skimmed milk powder prices, have moved from Rs. 140 a kg last year around the same time to over Rs. 240 a kg now. Sugar costs 30-40% more and milk fat prices have grown by around 35%, ice-cream manufacturers say.

How are companies planning to cope up to increased costs?


How are companies planning to cope up to increased costs?

Companies including Britannia, Amul, Dabur and Parle are either raising prices or cutting quantities in packaged products over the past year due to fluctuating global commodity prices and lower production cycles.

The rates are being revised even as the consumer goods industry tries to recover from the effects of demonetization, which had crippled demand and inflicted at least four quarters of subdued growth.

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Soap and Biscuits costlier, no sale promotions this summer

While Britannia will hike biscuit costs by 7%, Parle and Dabur are reducing quantities or holding back on promotions. After four years, Parle Products have reduced their weight by about 8-12%.

Demand for palm oil, a key material in detergents and cosmetics, from core importers such as India and China has resulted in stiffening of prices. Wipro will hike soap prices by about 5%.

What are industry analysts saying?

Religare Capital Markets wrote in a report earlier this month that "poor demand has weighed on the Indian consumer sector over the last two years. Additional headwinds from demonetization and the expected goods and services tax (GST) could have a lasting disruptive impact."

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