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After several quarters, FMCGs begin price hikes

Monday, 1 July 2013 - 12:33pm IST | Place: Mumbai | Agency: dna

Consumer companies, which have been offering discounts and promotional offers to push sales for a while now, have now started hiking prices.

The increase has been seen across segments – hair oil, shampoo, soap bars and detergents, toothpaste, tea and biscuits included.

Among others, Tata Tea has hiked prices of Gold and Premium packs by 4.3% and 5.6%, respectively.

Nestle has increased prices of Maggi Atta Noodles and Maggi Tomato Ketchup by 5.3% and 4.3%, respectively.

GSK Consumer and Britannia have taken price hikes of 20% on their products Foodles and Britannia Vita Marie Gold, respectively.

On several other products, the companies have rolled back the discounts and promotions.

For instance, HUL has rolled back its promotional offer on Dove and Pears Oil Clear, resulting in a price increase of 13.5% and 11.1%, respectively.

In the shampoo segment, HUL has taken a grammage cut on Sunsilk and Clinic Plus.

Even P&G has reduced grammage on Head & Shoulders and Pantene Pro V shampoos, which has resulted in an increase in prices.

Does all this mean demand has revived? Maybe not.

Indeed, analysts attribute the hikes to the rupee depreciation and increase in inflation in  commodities like tea, milk and crude.

The companies are withdrawing promotions and discounts specifically in categories that have seen an inflationary trend in input costs, Abneesh Roy of Edelweiss Securities pointed out.

To be sure, the rupee has shed over 9% in the last three months, which is bound to make several commodities expensive. The impact of a depreciating rupee is generally felt with a 2-3 month lag as companies typically have some inventory in store. It could well be the case that instead of increasing prices dramatically then, companies are going in for smaller, calibrated hikes now, so as to avoid affecting demand drastically.

The price hikes are small so far and mostly restricted to niche brands where the companies have more room to increase prices, and not the mass brands, said an analyst at a foreign brokerage house.

“It is more like the companies are trying to increase prices on select brands to test the market and see if it impacts demand,” she said, requesting anonymity.

A fresh round of price hikes is expected around the festival time in September-October, by when consumer demand is expected to improve.

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