food inflation – TheNewsHub https://thenewshub.in Sun, 03 Nov 2024 08:39:52 +0000 en-US hourly 1 https://wordpress.org/?v=6.7 FMCG firms worry over high inflation, squeezing urban market; hint price hike https://thenewshub.in/2024/11/03/fmcg-firms-worry-over-high-inflation-squeezing-urban-market-hint-price-hike/ https://thenewshub.in/2024/11/03/fmcg-firms-worry-over-high-inflation-squeezing-urban-market-hint-price-hike/?noamp=mobile#respond Sun, 03 Nov 2024 08:39:52 +0000 https://thenewshub.in/2024/11/03/fmcg-firms-worry-over-high-inflation-squeezing-urban-market-hint-price-hike/

NEW DELHI: Leading FMCG companies reported a decline in margins in the September quarter on account of higher input costs and food inflation, which ultimately slowed down the pace of urban consumption. Rising prices of commodity inputs such as palm oil, coffee and cocoa were also accentuated and some FMCG firms have hinted at a price hike.
HUL, Godrej Consumer Products Ltd (GCPL), Marico, ITC, and Tata Consumer Products Ltd (TCPL) have expressed concerns over squeezing urban consumption, which according to industry experts forms 65-68 per cent of FMCG total sales.
“We think this is a short-term hit and we will recover the margins through judicious price increase and stabilising of costs,” said GCPL Managing Director and CEO Sudhir Sitapati in a Q2 earning statement.
GCPL, makers of Cinthol, Godrej No 1, HIT had a steady quarter given the headwinds of oil costs and tough consumer demand in India and its standalone EBITDA margin was lower, caused entirely by high inflation in palm oil.
The rural markets, which were earlier lagging behind, continued their growth journey ahead of urban. Besides, FMCG players reported growth from premium products and from sales through quick-commerce channels.
Another FMCG maker Dabur India also said the demand environment was challenging in the September quarter marked by “high food inflation and a resultant squeeze in urban demand.”
The maker of Dabur Chyawanprash, PudinHara and Real juice reported a decline of 17.65 per cent in its consolidated net profit to Rs 417.52 crore and revenue from operations slipped 5.46 per cent to Rs 3,028.59 crore.
Recently, Nestle India Chairman & Managing Director Suresh Narayanan also raised concerns over decline and said “middle segment” is under pressure as high food inflation continues to cripple household budgets.
“It is extremely clear that the market is facing muted demand. The growth in F&B sector, which used to be in double digits a couple of quarters ago, is now down to 1.5-2 per cent,” he said.
Over the rise of food inflation, Narayanan said there is a “sharp uptick” in prices of fruits and vegetables and oil prices.
“This could lead to an increase in prices if raw material costs become unmanageable for companies. We are ourselves facing a difficult situation as far as coffee and cocoa prices are concerned,” he said.
Nestle India, which owns brands such as Maggi, Kit Kat, and Nescafe also reported a marginal decline of 0.94 per cent and its domestic sales growth was at 1.2 per cent.
Narayanan also pointed out that tier-1 and below towns and rural also seem to be reasonably stable. However, “pressure points” are coming from mega cities and metros.
TCPL MD & CEO Sunil D’Souza also said urban has softened and has an impact on consumer spending in urban areas.
“My hypothesis is probably food inflation is higher than what we think it is and the impact is far higher,” said D’Souza in the earnings call for the September quarter.
HUL CEO & MD Rohit Jawa said the market volume growth trajectory remained muted in this quarter. At an MAT (moving annual total) level, total FMCG volume growth has slowed down slightly in recent months.
“The pattern is quite clear that urban growth has trended down in the recent quarters or quarter and rural has continued to grow gradually and has now for the past few quarters been ahead of urban, and also continues to be ahead of urban this time,” Jawa said in an earnings call.
HUL, which owns power brands such as Surf, Rin, Lux, Pond’s, Lifebuoy, Lakme, Brooke Bond, Lipton and Horlicks, reported a 2.33 per cent decline in consolidated net profit.
Similarly, Marico also reported “rural growing at 2x the pace of urban” on a year-on-year basis. It also reported “higher input costs in the core portfolios”. Though it already had price hikes in the coconut oil portfolio and a favourable reversal in the pricing cycle in Saffola oils.
“In view of the higher-than-anticipated degree of inflation in copra prices and sharp import duty hike in vegetable oils, the company will focus on its stated revenue growth aspiration while remaining watchful on the margin front during the second half of the year,” it said.
ITC, which operates in the FMCG segment with brands such as Aashirvaad, Sunfeast, Bingo!, YiPPee reported marginal drop of 35 basis points in margins amidst inflationary headwinds in input costs.
It faced “subdued demand conditions” due to unusually heavy rains in parts of the country, high food inflation and sharp escalation in certain input costs during the quarter.



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Govt plans crackdown to ensure fair pricing in besan market https://thenewshub.in/2024/10/06/govt-plans-crackdown-to-ensure-fair-pricing-in-besan-market/ https://thenewshub.in/2024/10/06/govt-plans-crackdown-to-ensure-fair-pricing-in-besan-market/?noamp=mobile#respond Sun, 06 Oct 2024 12:48:57 +0000 https://thenewshub.in/2024/10/06/govt-plans-crackdown-to-ensure-fair-pricing-in-besan-market/

The Union government made yellow pea imports duty free in December 2023 to stabilize the prices of pulses, but its utilization pattern has shown unintended consequences.

Given India’s demand for besan to make batter, sweets, bread and snacks, duty-free yellow pea imports have surged to 2.2 million tonnes in the December 2023-September 2024 period. Yellow pea imports were negligible prior to December 2023.

“The Centre is now working on a plan that will require manufacturers to clearly disclose the ingredients on besan packaging, ensuring that consumers benefit from lower prices, as besan made from yellow peas is much cheaper than that made from whole chana,” the people cited above said.

Also read | Can India become ‘atmanirbhar’ in pulses by 2027 or is it a pipedream?

“The ministry will also be writing to the food regulator, the Food Safety and Standards Authority of India (FSSAI), to ensure that the labelling requirements for besan made from yellow pea and chana are strictly enforced across the industry,” the first of the two persons mentioned above said.

“Although yellow peas are safe for consumption, consumers deserve to know whether they are paying for a premium product or a cheaper alternative.”

“The concern is that traders should not make excessive profits from it. Ideally, mixed besan should be available in retail at below 50 per kg—not at the current 110 per kg,” this person said.

The high margins raked in by gram flour manufacturers can be gauged from the fact that while yellow pea costs 35 per kg, the chana dal price averages 74 per kg. In comparison, besan is being sold in the retail market at 110 per kg.

“It has come to our notice that an adequate quantity of yellow peas is being used to make besan, so consumers should benefit from lower prices. Why should traders make such huge profit margins?” the second person said.

“Testing of besan samples to check for yellow pea mixing is currently underway. All major players will be instructed to lower their prices accordingly,” this person said.

“The government’s decision to allow duty-free import of yellow peas until the end of this year may have discouraged farmers from growing this variety of pulses,” said Bimal Kothari, chairman, India Pulses and Grains Association.

“Since the duty-free import is for a limited time, big companies may have hesitated to introduce yellow pea besan separately, as they could face a shortage of raw material once the duty-free import facility is lifted. It’s a substitute for pulses like chana and tur, and everyone is taking advantage of it,” he said.

Also read | Yellow peas, ready-to-cook rice remain key ingredients in India’s food price battle

“Last year, the total production of yellow peas and green peas was around 1 million tonnes, and this will decrease further due to cheaper imports. It is estimated that by the end of the year, total imports will reach around 3.3 million tonnes,” Kothari said.

“The duty-free import was allowed to stabilize the prices of pulses, which are a key ingredient in food inflation. It’s because of yellow peas that the prices of pulses have remained under control,” the second person said.

In terms of chana production, the figures have shown a downward trend, from 13.5 million tonnes in FY22, to 12.2 millon tonnes in FY23, and 11 million tonnes in FY24.

In May, the government extended the duty-free import of yellow peas by four more months, allowing it until October. Imports are permitted without the minimum import price (MIP) and port restriction conditions. However, this duty-free period was further extended until the end of December in September.

The import duty on yellow peas was implemented in November 2017 at 50%. India primarily imports yellow peas from Canada and Russia. As a significant consumer and producer of pulses, India fulfills part of its consumption requirements through these imports.

According to the findings of a Crisil report, the prices of pulses, which account for 9% of the vegetarian thali cost, rose by 14% due to a drop in production in 2023. This led to a lower opening stock this year, further contributing to the uptick in thali prices, the Crisil report said.

India’s retail inflation rose to 3.65% in August from a five-year low of 3.54%. Food inflation, making up half of the Consumer Price Index basket, increased to 5.66%.

Queries emailed to consumer affairs ministry remained unanswered till press time.

Read more | Grow in India: Pulse self-reliance dream fades amid rising imports and low yields

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