Company officials said recent government measures to reduce food prices will have limited impact on manufacturers of packaged consumer goods, and consumers are unlikely to benefit from any reduction in prices of daily items. To curb food inflation, the government had earlier this week limited sugar exports and allowed duty-free imports of soybean and sunflower oil. However, the companies said that they are facing higher cost of living in various sectors such as packaging material and edible oil imports.
“The way things are progressing, I would say it (relief measure) is going to relieve any further inflation in at least some input materials. This will ensure that there is some stability. Basically, such restrictions are going to help in controlling prices,” said Krishnarao Buddha, senior category head, Parle Products.
Buddha said the prices of many commodities like palmolein oil, which contributes 30-40% of the input cost for salty snacks, are still very high. “There, the government has very little control. So, they keep rising and that prompts us to continue increasing our prices, but the rate of increase in prices may not be as high due to government intervention,” he said.
Companies have been facing high inflation for several quarters, putting pressure on the company’s margins and increasing prices rapidly.
Others said allowing duty-free imports of two million tonnes every year of crude soybean oil and crude sunflower oil for two consecutive financial years will provide relief to fast-moving consumer goods (FMCG) players.
Manish Agarwal, director of packaged foods firm Bikanerwala Foods Pvt Ltd. Ltd. said inflation has impacted the pricing of almost all packaged consumer goods. He said the higher primary cost of manufacturing has resulted in large price hikes and more recently a decline in grammar in packaged consumer goods. “We believe that the government is taking necessary steps to ease inflationary pressures and will continue to announce further measures,” he added.
Aggarwal said the reduction in excise duty on auto fuels has brought down prices and will provide some relief. Last week, the government announced reduction in excise duty on petrol 8 per liter and on diesel 6 per litre, which can help packaged consumer goods firms reduce transportation and freight costs.
“The move by the government to reduce excise duty on petrol and diesel is timely and will go a long way in reducing overall inflation in the economy and its impact on consumers. Over the past year, we have been experiencing unprecedented input cost inflation for commodities including crude oil derivatives, palm oil, packaging and freight. In such a challenging environment, our priority is to deliver value to consumers, invest in our brands and protect our financial business model,” said a Hindustan Unilever spokesperson.
The maker of Dove Soap and Knorr Soup said it is reducing cost inflation by toughening its savings agenda, looking at all cost lines with a laser-sharp focus and removing any non-value-added costs. . “We are taking calibrated pricing action while protecting and growing our consumer franchise through our principles of net revenue management,” the spokesperson said.
Ankush Jain, Chief Financial Officer, Dabur India Ltd, said it is too early to see a significant impact on input costs. “However, reduction in fuel prices will go a long way in reducing logistics and freight costs for the companies,” Jain said.