Large Indian manufacturing and consumer goods companies are planning a further price hike in the coming months, having already made at least two or three increases earlier this year as high input and logistics costs as well as supply disruptions erode margins.

Fast-moving consumer goods companies (FMCGs) have said they could increase prices by 4-10% over the next three months, although that could dampen sales.

Consumer electronics companies have already raised prices 3-5% this month on refrigerators, washing machines and air conditioners and have finalized another round of 6-10% increases from the month next.

This will be the fourth price increase for white goods since December 2020, a record for the industry.

Agencies

Auto makers nationwide have also implemented price hikes and may increase them further, senior executives said. They are unlikely to get a break from steelmakers, even though the costs of coking coal and other inputs have come down a bit.

Dabur said he had raised prices by 4% and another price hike was planned. “If the pressure is on and inflation does not ease, we would be forced to make another price hike in the fourth quarter,” said Dabur CEO Mohit Malhotra.

Hindustan Unilever, Dabur, Britannia, Marico and others have raised prices 5-12% in the past two quarters, after crude, palm oil and packaging costs more than doubled over the past year.

“The price increase is inevitable”

“Margins have eroded despite the price increase, which is done mainly by reducing grammage,” said Krishnarao Buddha, senior category manager at Parle Products, India’s largest food company. “There is clearly no respite despite a slight drop in the cost of raw materials and we need to raise prices an additional 4-5% next quarter.”

According to Nielsen, the FMCG market grew 12% in the September quarter, but 90% of the growth was driven by price revisions while the rest was led by volume – the unit count. of products purchased or consumed.

Executives in the consumer durables industry said input costs rose 22-23 percent, as the prices of commodities like steel, copper, aluminum, plastics and components rose. reached an all time high.

“The price hike is inevitable given the rising cost of commodities, freight and the exchange rate,” said Deepak Bansal, vice president of home appliances and AC activities at LG Electronics, the most major manufacturer of household appliances in the country. “Despite all the cost innovations to absorb some of the rising input costs, we are forced to make two successive price increases just to recover costs and not to increase profits.”

More expensive cars

Major automakers such as Maruti Suzuki, Hyundai Motor India, Tata Motors, Mahindra & Mahindra, Skoda, Volkswagen, Toyota Kirloskar Motor (TKM) and Hero MotoCorp increased their prices several times during the year to reflect increases in prices. commodity prices. Hero MotoCorp has announced its intention to further increase the prices of its range to Rs 2,000, with effect from January 4th.

Earlier this month, Maruti Suzuki announced that it would raise vehicle prices again in the new year. This will be the company’s fourth price increase in the past year and the sixth in 18 months.

“We have increased prices overall 4.9% this year, but that’s far less than the overall increase in commodity costs,” said Shashank Srivastava, senior executive director, marketing and sales, Maruti Suzuki. “We have taken internal measures to improve efficiency and productivity. However, there has been an unprecedented increase in the costs of raw materials like steel, copper, plastic, aluminum. We had to pass part of the costs on to our customers. Raw materials represent 75 to 80% of the overall cost of the vehicle.

More expensive entrees

Steel prices rose to Rs 77 per kg in the third quarter of this fiscal year, from Rs 38 per kg in April-May 2020. Copper prices rose to $ 9,700 per tonne, from $ 5,200 per tonne in May 2020. Aluminum prices increased to $ 2,700-2,800 per tonne from $ 1,700-1,800 per tonne.

There has been some sagging in the prices of precious metals such as rhodium, which now costs $ 18,000 per tonne, from a record $ 26,000 per tonne, but Srivastava said the trend is temporary.

Senior executives at some steelmakers have said they absorbed the costs when coking coal hit record highs in October and likely won’t pass on the benefits now that input prices ease.

Coking coal prices touched Rs 432 per quintal in October against Rs 180 at the start of the year.

“When steel prices recovered, we did not negotiate auto contracts at this point. So some steelmakers had to absorb cost inflation and did not pass on the full price increases. spot on consumers, “said Ranjan Dhar, marketing director of AM / NS India, an integrated steel maker. “That might not be reflected in the margins now, but may be reflected in the first quarter of next calendar year. Apart from iron ore and coking coal, the prices of ferroalloys have increased significantly, the prices of refractories are on the rise, the cost of transport to the EU, which is around $ 35-36, is now hui about $ 110. ”

Jindal Steel and Power Managing Director VR Sharma said, “We have already passed on the benefit of lower input costs, especially iron ore. . ”


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