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In a move that could further pinch the Indian consumer’s pockets, consumer goods maker Unilever has hinted at a possible hike in prices of its products in the emerging markets soon. Indian analysts expect the price hike to be in the range of 4 to 5 per cent.
Paul Polman, CEO of the world’s second largest consumer products company, after declaring the company’s annual earnings on Tuesday, said it would raise prices in the emerging markets to offload cost inflation. The company’s sales have been slower in the emerging markets due to weakening currencies and poor macroeconomic factors. But despite that, the underlying sales in these markets grew 8.4 per cent due to price increases.
Nitin Mathur of investment bank and brokerage firm Espirito Santo, said: “Two things that helped Unilever post a better-than-expected result was that the growth in the emerging markets was not bad as the market expected it to be and secondly, the gross margins held up well.”
He, however, said that though the company has not made any India-specific comments, it is likely that there will be a price hike of around 5 per cent in major products, including soaps and detergents (these two categories earn HUL about 50 per cent of its total sales).
The Anglo-Dutch company’s Indian unit, the Rs 26,000-crore Hindustan Unilever Ltd (HUL), which will announce its third quarter earnings on January 27, has taken a price increase of up to 14 per cent, according to analysts in the last two quarters.
The move by HUL might prompt other companies such as Godrej Consumers Products, Emami, Marico, GSK, ITC and Dabur to follow suit, thus forcing the consumers to downtrade, experts said.
Pricing action Brokerage firm Religare Institutional Research, in its latest report, mentioned that it expects pricing action in highly competitive categories, with an eye on aggressive promotions in some categories such as soaps, detergents, shampoos and oral care. It also warned against further signs of slowdown in consumer spending and commentary on demand with signs of downtrading.
The report also forecasts that the third quarter earning of Indian consumer-focused companies will be moderate on account of a grim festival season and muted consumer sentiment.
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