India's consumer goods firms hike prices on rising costs

India’s consumer goods companies are hiking prices across categories as they battle rising costs of commodities such as steel, copper and oil, which are inputs for their products, company officials said on Wednesday.

Videocon Industries, Mirc Electronics, which owns the Onida brand, Whirlpool of India and Samsung India are among home appliance makers who have either raised prices or plan to do it in coming weeks.

"We are taking the opportunity of price increases but there will be a limitation to what extent you can pass on to the consumer because of competitive pressures and consumer purchasing patterns," Tamal Kanti Saha, vice president, sales at Whirlpool.

India’s growing middle-class and rising incomes have attracted consumer goods companies, but rising inflation could hurt consumer spending and put pressure on profit margins.

Crude prices have increased about 35 percent so far this year and copper is up around 24 percent. Global steel prices rose 40 percent since the beginning of the year.

Import costs are also rising with India’s weakening rupee that hit a 13-month low of 42.92 last Friday. The inflation rate rose to 7.83 percent in the 12 months to May 3, the highest since November 2004.

But, price increases alone may not suffice, officials say.

"The current situation might force companies to innovate better and squeeze out inefficiencies," Ashish Nanda, Partner Business Advisory Services, Ernst & Young said.

"Because you’re in an inflationary environment you cannot necessarily pass on the price increase to the consumer. Beyond a point of time the consumer is going to stop accepting that."

Whirlpool plans to hike prices across categories between 2-5 percent in July and said in April it will hike prices 2-3 percent in April-June.

Mirc Electronics plans to hike prices 5-7 percent in the next few days while Videocon Industries will increase prices of its consumer durables by 5-10 percent in two weeks.

Samsung India, owned by Korea’s Samsung Electronics Co Ltd is holding prices, but hiked refrigerator prices 2-3 percent in March, said Ruchika Batra, General Manager-Corporate Communications of Samsung South-West Asia Headquarters.

"It’s the peak selling period in air-conditioners. We don’t want to disturb the consumer sentiment," she said.

India’s consumer electronics market is expected to grow 32.2 percent annually between 2007-2012, touching almost 2 trillion rupees, according to Euromonitor International’s estimates.

"In the longer term perspective, the overall growth story is still good for the key players who are investing in strong brands," Ernst & Young’s Nanda said.