Online BusinessBiscuit makers say they may be forced to raise prices
Rising sugar prices are pushing biscuit manufacturers to plan a rise in their prices. The industry says commodity prices have reached a level beyond which it would be impossible to sustain the pressure and there is no other choice but to pass some of it on to consumers.
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Wholesale sugar prices have reached a record high, at Rs 4,250 per quintal, taking retail prices to almost Rs 50 a kg.
ITC says while it is making every effort to further improve supply chain efficiencies to mitigate the impact on consumers, a price rise is inevitable, given the significant increase in input costs.
Chittaranjan Dar, chief executive of ITC’s foods division, says: “We do not normally touch consumer prices on the basis of only periodic price fluctuations of commodities. However, this time around, certain inflated commodity prices are here to stay on a medium-term basis. With an unprecedented rise in sugar prices, along with increase in prices of many agri-commodities such as wheat/maida, oil, etc, the impact on costs is over 15-20 per cent, in an industry where profit margins are traditionally low.”
Britannia also says it would have to increase prices. Neeraj Chandra, COO and VP, reasons: "While we are taking strong steps to mitigate the effect of commodity price increases, there would be an imperative to increase prices...We are constantly monitoring these and will take price increases as appropriate.”
To some extent, future contracts (where a wholesale seller and buyer sign a supply contract for a certain period, agreeing on a price, which is insulated from fluctuations during the period) have helped companies sustain prices. But, as and when the contracts expire and come for renewal, it would be necessary for the companies to mull a price rise.
Parle Products Ltd Group Product Manager Mayank Shah says: “Till now, future contracts have shielded us. But, if the prices continue to rise at this rate, at the time of renewal we will have to pay higher price and, consequently, we will have to consider a price hike.”
Shah adds that Parle is closely monitoring the situation and hasn’t raised prices yet. But one in the near future is not ruled out.