Surging input costs and the Russian invasion of Ukraine have led to a rise in food prices around the world. As a result, packaged-goods companies in India selling small packs of biscuits, chips, salted snacks and noodles priced below Rs 10 apiece are finding it difficult to sustain low prices, said reports.
About 40-50 percent of sales for companies such as Parle and Britannia come from these small packs, which drive volumes in the rural markets and low-income households. However, higher costs of key input items such as edible oil, wheat and sugar are forcing these companies to either make size cuts or increase the prices of these packs.
Parle has indirectly increased the price of small packs in the past six months by reducing grammage.
For small packs, the company reduces the weight till it is feasible in a bid to manage inflation, Krishnarao Buddha, senior category head at Parle Products, told Mint. “Above the Rs 10 price pack, we tend to take a direct price increase," he said.
Last week, Britannia Industries announced it would take a 10 percent price hike this year, which will mostly come through weight cuts.
Similarly, Wai Wai noodles maker CG Corp Global also hinted at an increase in prices of its Rs 10 noodles this month.
Apart from reducing the spending power of individuals, inflation has led to an increase in wholesale prices of inputs at a faster rate than retail price.
“Prices of edible oils may firm up further due to export restrictions by key producing countries and the loss of sunflower oil output due to the war,” RBI governor Shaktikanta Das said in a statement on May 5.
The invasion of Ukraine by Russia has had a detrimental effect on wheat. Wheat prices touched a 14-year high in March, India Today reported quoting data by the International Panel of Experts on Sustainable Food Systems (IPES).
Meanwhile, the rise in input costs and the ongoing Ukrainian crisis have shrunk the margins of companies selling alcoholic beverages in India, forcing them to seek a price hike.
Liquor companies have seen margins fall to around 15 percent from 25 percent in 2018, The Times of India quoted Nita Kapoor, CEO at International Spirits and Wines Association of India, as saying. "The alco-bev industry needs to pass on the rising costs to sustain itself," Kapoor said.
Input costs of two most important ingredients for Indian made foreign liquor (IMFL) - extra neutral alcohol and glass – have gone up by 26-30 percent against prices in 2018, data from the International Spirits and Wines Association of India said.
(Edited by : Sudarsanan Mani)
