The Hindu Business Line : Why consumer goods prices have been under check for three years

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Chennai Feb. 22 Amid rising inflation, with the price spiral of agri-commodities and manufactured goods, prices of a whole swathe of items of daily consumption or FMCGs have either remained fairly static over the past three years, or, as in the case of detergents, risen in a price band of Rs 5-7.

A cursory glance at maximum retail prices (MRPs) over 2005-07 of a sampling of brands spread across various categories ranging from biscuits and confectionery to tea and toilet soaps buttresses the point. A combination of factors such as fierce competition among existing players, entry of new players in select categories and depressed demand has ensured that prices have pretty much stayed put over a three-year time frame.

Take prices of popular brands of biscuits such as Milk Bikis, which have remained at Rs 10 for 150 g over three years, or Parle Hide & Seek, stuck at Rs 15. The tale, by and large, is repeated across categories such as confectionery, shampoos, toilet soaps, tea, toothpastes, all categories with many players present, fighting tooth and nail for market share.

Only in detergents have brands increased prices by Rs 5-7 over the last year, but are still below the prices that prevailed for the same in 2004. The bruising price wars that P&G and HLL had in this category in that year with brands such as Tide cutting prices by over 50 per cent has meant that brands have been able to exercise their pricing power ever so slowly.

Mr D. Sundaram, Director, Finance, HLL, explains that selling prices of FMCG products have risen only by 2-4 per cent annually over the past three years, while the overall inflation rate has been nudging the 5-per-cent mark.

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