FMCG companies to raise prices further

FMCG makers don't foresee sales falling after their recent price hike, but retailers don't agree. Retailers suggest customers would opt for cheaper brands instead, reports CNBC-TV18.

Surf, Tide, Real and Lux have become more expensive in the past three months. And soon they'll cost even more. Rising input costs have spurred the hikes. But FMCG companies are sure consumers will buy their products in spite of the price hike.

"Volume growth last year across the board was 10 per cent," says Adi Godrej, chairman, Godrej Industries. This year I expect it to be 15 per cent and there will be price increases too. Both will continue in tandem. But we will see sales and profits in the FMCG sector."

But the retailers feel otherwise. They are certain rising prices will spell lower volumes and make customers switch brand loyalties. "People will move into a lesser brand. If you're buying a Dove today, you might shift to a Pears or a lower-priced item," feels Kishore Biyani, chairman, Future Group.

That means more choices for the consumer. But with retailers such as Food Bazaar, Food World and Reliance Fresh offering their own private labels FMCG makers are bound to feel the pinch. "If there is consolidation of modern retailing and there is control of one or two organisations over footfalls, it puts pressure on suppliers," feels Y C Deveshwar, chairman, ITC.

A recent AC Nielsen study found 56 per cent Indians agreed that supermarket brands were a good alternative to other brands, with 62 per cent saying private labels were good value for money. These numbers suggest that brand loyalties could be a thing of the past.