The packaged consumer goods industry is facing strong headwinds over the past few months because of inflation in commodity prices and because of this the packaged foods companies are cutting down on the grammage of smaller-sized packs or resorting to price hikes in categories such as salty snacks, chips and cookies following inflation in commodity prices and higher transport costs.
Unfortunately food inflation, including that of edible oils, especially palm oil has been a cause of concern for several firms.
In fact from next month, PepsiCo India, which sells the popular Lay’s and Kurkure snacks, might reduce grammage in its ₹5 and ₹10 packs. Their basic focus is to try and protect consumer value by undertaking strict cost efficiencies across the business. However, given the significant increase in input costs, particularly palm oil and paper, PepsiCo India, like other consumer companies are also selectively revisiting the price-value equation across various snacks brands.
Parle Products Pvt. Ltd has reduced the grammage in biscuits at ₹5 and ₹10 price points. In chips, the company has reduced grammage in some packs priced at ₹50, while also reducing the pack size of those at ₹30. In namkeens, the company has raised prices on the 400gm and 1kg packs.
The grammage could come down from 50 grams to 45-40 grams, for instance, depending on brands and pack sizes. Lower-priced packs are crucial for driving volumes for the snacking and confectionery industry. As a result, companies rarely move away from the ₹5, ₹10, and ₹20 price points.
The oil prices are killing and salty snacks are highly dependent upon oil. It has become pertinent for packaged food companies to make these increases.
Bikano, which makes salty snacks, cookies, and namkeens, said the rising price of palm oil that doubled over the past year has affected the snacks industry in a big way. As a matter of fact, according to Bikano, these inflationary trends may continue for three to four months.
The prices of palm oil have more than doubled over the last year. For Bikano, palm oil is one of the major ingredients. As a result of the constant increase in the cost of palm oil, packaging, it has reduced grammage in the ₹100 stock-keeping unit only.
In the June quarter, prices of packaging materials, oil, and grams or pulses were higher than in the March quarter. However, since March, inflationary pressure has come down marginally.