KOLKATA: Consumer goods companies are planning a round of price hikes much higher than regular seasonal increase, as they factor in the impact of the rupee's record lows on imported products and components.
Prices of LED televisions, laptops, printersand multi-functional IT devices, washing machines, refrigerators and air-conditioners are set to rise by 5-10% within a week, compared with earlier expectations of a 3-5% increase. Prices of imported food items, such as cheese, pastas, sauces and fruit are also likely to rise, retailers indicated.
Manufacturers say hikes actually need to be higher, but they will absorb a part of the cost increase since sales might be impacted at a time consumer demand is lukewarm. "Demand will definitely take a hit since products will become expensive. But a price hike has become imminent," said Panasonic India MD Manish Sharma.
Videocon Chief Operating Officer CM Singh said the electronic products that will see the steepest price rise are LED TVs (which contain 90% imported components), frost-free refrigerators (with 45% imported parts) and products imported as CBUs (completely built units) such as front-loading washing machines and inverter air-conditioners.
Prices of Local Products may Rise Too
"But prices of even entry-level, locally manufactured products such as single-door refrigerators and CRT TVs will go up by at least 5% since they too have some imported components," Videocon Chief Operating Officer CM Singh said.
An entry-level 32-inch LED television, which costs around Rs 28,000, would now cost around Rs 30,800 while a laptop powered by Intel's Core i5 processor, which costs around Rs 42,000, will become dearer by some Rs 3,500. Similarly, a 310-litre five-star frost-free refrigerator, which costs around Rs 30,000, will become costlier by Rs 1,500. Premium appliances such as side-by-side refrigerators, whose prices start at Rs 70,000, will become costlier by 8-10%.
Computer maker Lenovo India's MD Amar Babu said laptop prices may increase by more than the 5-8% planned earlier. "Prices would immediately go up by at least 5-8% and can be higher if the rupee continues its fall. The market is already tough and going to get tougher," he said.
Canon India Executive Vice-President Alok Bharadwaj said the company has decided to hike prices of computer peripherals such as printers, copiers, scanners and multi-function devices by 5%. Prices will be reviewed again next month. "Since demand is low and revenue growth is not as much as we had expected, we have decided to undertake price increases in two phases. Prices of digital cameras too would be reviewed next month ahead of the season which starts around August," said Bharadwaj.
LG India, which recently increased prices by 3-5%, would take a call on a further price correction after a month if the rupee does not improve. "We have based our prices on the rupee exchange rate of 59 against the dollar. But if rupee continues its fall, prices would be reviewed," said LG Electronics India Director (home appliances) YV Verma.
However, mobile phone makers such as Samsung and BlackBerry said they are holding onto prices. Himanshu Chakrawarti, CEO of India's largest cellphone retail chain The Mobile Store, said companies have decided to adopt a wait-and-watch strategy on prices since sales have shrunk. As per estimates, smartphone sales have declined by 20% in the past two months compared with the year-ago period. However, a Samsung spokesperson said the company is considering an increase in the prices of TV and appliances.
Sony India MD Kenichiro Hibi said the brand will hold on to prices despite the cost pressure.
Retail chains said prices of imported food and personal care products will rise. Gourmet grocery chain Godrej Nature's Basket MD Mohit Khattar said there will be a lag of a couple of months in the price hike of imported food products since importers have stocks for 1-2 months.
Spencer's Retail Chief Executive Mohit Kampani said prices of imported food would rise by 25-30% with the rupee devaluing further compared with its earlier expectation of 20-25% last week. "For every 1% devaluation in the rupee, the end price of imported food rises by 3-4%. Since we import every month, the price hike will hit the shelves as early as next month," he said.
Kampani fears that if the rupee continues at this level or falls further, there will be an indirect pressure on personal care products as well since a lot of raw materials for categories such as oral care are imported.
"Multinational FMCG companies such as P&G, HUL and L'Oreal have created Asian production hubs and import a lot of finished products, which would may lead to an increase in prices," said Kampani.