As wheat prices have skyrocketed over the last month, packaged food companies are either hiking prices or cutting down on grammes in packs of biscuits, noodles, and atta. The thing is, wholesale wheat prices rose 14% in March—the highest in 63 months.
Companies facing inflationary headwinds because of high palm oil and crude prices may be in for more trouble if domestic wheat prices continue to rise. Kolkata-based ITC Ltd said it made “calibrated price revisions” for Aashirvaad Atta, Sunfeast biscuits, and Yippee noodles, given the magnitude of the price increase.
ITC is the largest private-sector procurer of wheat in India, and this lends a source of competitive advantage to the food business. However, inflation and an increase in raw material prices remain a concern.
We have been closely monitoring costs and have brought in efficiencies across every node of the value chain, right from raw material sourcing to delivery to the consumer, “said Hemant Malik, divisional chief executive, foods division, ITC.
Biscuit makers said prices of wheat were up by 10–15% from a month ago, not to mention the uncertainties around planned oil imports that could exacerbate inflationary trends.
Surya Food and Agro Ltd, which sells biscuits under the Priyagold brand, said it was becoming difficult to manufacture biscuits at lower price points. This is on account of inflation across key raw materials, including edible oil, milk, and wheat, he said.
Because of high export demand, prices of wheat have been going up. They have already increased 10-15% in the last month. Sugar and milk prices have also increased. The biscuit industry is in very bad shape, “said Shekhar Agarwal, director of the packaged foods company.
The Ukraine-Russia conflict has impacted wheat production and global supplies. Conflict in the region, which accounts for over a quarter of global wheat imports, has shored up demand for Indian wheat. India has promised to increase exports to plug global wheat supply shortages.
Private traders are stocking up large quantities of wheat, hoping for strong export-linked demand to lead to higher prices in the domestic markets. Meanwhile, a harsher summer is impacting wheat yields across major wheat harvesting states.
To be sure, India is the second-largest producer of wheat. Compared with a year-ago period, prices of packaged atta in retail stores grew more than 6%, while bread grew 11.6%, according to data sourced from retail intelligence firm Bizom.
A further increase in the prices of value-added products is expected as there remains strong export demand for wheat, which will put pressure on prices locally. There would be further pressure on products as edible oils become costlier because of the palm oil ban in Indonesia.
Biscuit makers, which predominantly sell packets at ₹5 and ₹10 price points, have been reducing grammage instead of taking direct price hikes. 70% of Surya Food & Agro’s portfolio is priced at ₹5-10. Agarwal said it is becoming difficult for companies to sustain the ₹5 price pack.
Varun Chaudhary, managing director, CG Corp Global, which makes Wai Wai noodles, said with the ongoing Russia-Ukraine conflict wheat prices have been at their highest since the global food crisis in 2008. Increased wheat prices are impacting the company adversely, Chaudhary said.