"We're seeing a tough demand scenario in the urban areas coupled with high inflation," said Britannia Industries' Managing Director and Vice Chairman Varun Berry during the post-earnings conference call with investors. As a result, Britannia Industries is likely to take a price hike across its entire portfolio.
Berry added that the value growth of the FMCG pack is falling while input cost inflation is on the rise, making it a tough operating environment. The firm has already resorted to a price hike of around 4-5 percent across its offerings, but is likely to take further pricing actions to maintain its margins.
The hike in prices will be gradual and taken across December-January, said Berry. "The price hikes will make the margins better, but as I said on the commodity side, the inflation is also a lot bigger than what we'd expected," he said.
Speaking on competition, Berry added: "There is inflation in the market. So, in times like this, there will always be a few players who want to drive demand and don't want to take price increases. Then they realise that their entire profit has gone to hell. And hence, they will then take some knee-jerk reactions and go out of the market."
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According to Britannia Industries, there could be two reasons leading to the slowdown in urban consumption, which weighed on its earnings show for the quarter ended September.
The first reason is rising housing costs, which make up 22 percent of the CPI basket in the urban areas. "That's creating stress for most consumers in large cities and metro," said Berry. The second is a slowdown in wage growth of the non-salaried workforce in urban areas, which has risen 3.4 percent, slower than inflation.
"So, there's stress in almost 51 percent of the workforce sitting in urban areas. So, that is the double whammy, which is creating a demand shortfall as far as urban and especially metro is
concerned," said Berry.
The FMCG player reported a consolidated net profit of Rs 531.5 crore in the September quarter, down 9.4 percent from Rs 586.5 crore in the year-ago period. The revenue from operations came in at Rs 4,667.6 crore in the reported quarter, up 5 percent as compared to Rs 4,432.88 crore in the same period of the previous financial year.
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