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Parle Products, one of the largest food companies of the country, is eyeing a second round of price hikes of around 2-5 per cent due to high commodity costs and increased logistics charges. Price hikes, coming into effect in the July-September period, will be mostly across rusk and confectionary items.
The hikes are unlikely to impact the double digit volume and value growth that the company is eyeing in FY22, driven by recoveries in the rural and upcountry markets.
Previous price rise was initiated across categories like biscuits, both mass and premium ranges, salty snacks and bakery items. Biscuits account for 75 per cent of the company’s topline.
The second round of hikes will cover popular brands like ‘Poppins’, ‘Mango Bite’, ‘Melody’, among others.
Managing Demand
According to Krishnarao Buddha, Senior Category Head (Marketing), Parle Products, the company has taken a two-pronged approach towards price adjustments so as not to hit demand recovery.
In the mass category or fast-moving LUPs, where prices continue to be in the ₹5-10 range, weight reduction in packs has happened. For instance, a 50 gram pack priced at ₹10 will continue to be priced at ₹10 but the weight will go down to, say, 35-40 grams.
On the other hand, in the larger packs, there has been a price hike that will be initiated, while pack weights will remain intact.
“The idea is to create consumer demand. So if we hike prices in the LUP range, their movement or demand slows down. So, obviously we do not want to tinker with prices. In the larger packs, consumers don’t mind paying extra but get disturbed if pack weights change,” he told BusinessLine .
Krishnarao says that amongst commodities, palm oil price “has been on fire” and nearly “doubled” over the last one year; not to mention diesel and petrol prices that increased the logistics costs.
Parle will also be upping advertising spends by 10-12 per cent over the last year. These costs were muted in Q1 of FY21 due to localised lockdowns.
Outlook
According to him, sales have “improved significantly” with 70 per cent of the markets opening up from June onwards. Unlike previous year’s lockdown, when pantry-loading was witnessed, this year there was no such trend.
The second wave of infections has impacted rural consumption “to some extent” and there is buying hesitancy. However, good monsoons, higher MSPs and people returning back to work are likely to offset existing negative sentiments.
In Q1FY22 (March – June), urban markets drove demand for FMCG companies mostly, he said, adding that, “Rural growth is slower vis-à-vis urban. But, if the rural populace has extra cash in hands, then it would be fair for us to assume a robust July-September quarter and good festive season sales.”
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