As the Russia-Ukraine war wreaks havoc on food supply chains and inflation soars, India¡¯s biggest cookie manufacturer Britannia Industries Ltd. plans to hike prices by as much as 7% this year.?
This is also a sign that inflationary pressures are set to further hurt the poorer consumers the most, especially after FMCG giants like Nestle, HUL, Parle and Dabur, too, are making similar announcements on price hikes and inflationary pressure.
As per ET, Managing Director of Britannia, Varun Berry, said ¡°I¡¯ve never seen two years which are as bad. Our first assumption was a 3% inflation this year, which obviously went wrong by a very big margin because of Mr Putin. Unfortunately, it¡¯s (inflation) turning out to be more like 8-9%.¡±
MD Berry also said "It's a price shock for the consumer, while you dilute it to whatever extent by removing grammages from the pack. But consumers are smart, they figure out that this packet is lighter than used to be. So it will have some impact, we're already seeing an impact with the price increases we got last year."
130-year-old Britannia, which makes brands like Good Day and Marie Gold cookies in India, had reportedly posted a 19% drop in quarterly net income through December 2021, which was worse than average analyst estimates, as per?ET.
But despite the headwinds, Britannia is on the lookout for potential acquisitions as it diversifies its portfolio. In the next five to seven years, its MD Berry wants cookies to account for about 60% of sales, down from the current 70%, as the company launches new product ranges from milkshakes to croissants and continues expansion across rural India.
Last week, RBI Governor Shaktikanta Das had acknowledged that the central bank will have to revisit its inflation forecast in its April 2022 meeting after consumer prices breached its 6% upper tolerance limit for two months in a row.
In India, increasing prices pose the risk of denting demand in a country where private consumption accounts for some 60% of gross domestic product (GDP). Britannia, which makes a range of bread, cookies, cakes and dairy products, is among a handful of particularly exposed local firms, according to Investment banking company?Jefferies research.
Jefferies analysts also stated that the timing of input price inflation could not have been worse, adding that aggressive price hikes won't be able to prevent declining margins for companies.
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