As inflation bites, consumers cut spending on almost everything
NEW DELHI: Hammered by rising prices, households have cut spending on everyday items, from toothpastes to soaps, as slackening demand slows sales of some of India’s biggest consumer-goods companies, market data show.Companies have raised prices of nearly everything, from food items to detergents, mainly because of cost-push inflation, which refers to higher prices of raw materials. Sales have fallen more in rural areas, market data show.Households are shifting towards smaller packages or cheaper alternatives to regular brands to save money, as pricier oil and broken supply chains exacerbated by the Ukraine conflict have sent inflation soaring in rich and developing economies alike.US inflation has hit a record 18%, while the UK saw consumer prices climb to 7%. Retail inflation in India quickened to 6.95% in March, a 17-month high, driven by a sharp jump in food prices, official data released on Tuesday showed.When prices rise, they erode the value of money. A rise in food prices impacts poorer households more because they tend to spend a higher proportion of their budgets on food than the well-to-do.“(Prices of) everything has gone up. Even online grocery stores which would give me a better discount no longer do so,” said Tripti Sinha, a middle-class woman from east Delhi.Consumers are downgrading to cheaper alternatives to everyday items, such as soaps and shampoos. Retail-intelligence firm Bizom, in a recent note, said rural sales of lower-priced smaller packages had gone up by 2% in beverages, 4% in personal-care products, and 10.5% in commodities between January and the first week of March.India’s biggest FMCG firms, including Hindustan Unilever Ltd, Marico Ltd, Dabur India Ltd, Emami Ltd, and Britannia Industries Ltd, have seen margins squeezed, prompting them to raise their, prices by up to 30% in recent months, Bizom said.Dabur Ltd’s analysis showed sale volumes of most products – shampoo, toothpaste and hair oil — were either plateauing or declining. The sale of soaps had fallen 5% in March from a month ago. Bizom tracks sales of over 6 million retail and kirana stores.In its March quarter update, consumer goods firm Marico Ltd, which sells Parachute, a popular hair-oil brand, said: “Companies effected price hikes across packaged consumer goods categories to cope with the cost-push.” Persistent inflation “continued to hurt consumer wallets across rural and urban”, it said, citing data from market researcher Nielsen.
ABOUT THE AUTHOR
Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.
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