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Godrej Consumer to hike soap prices on high costs
Published on 21 Jan. 2011 11:02 PM IST
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After Hindustan Unilever (HUL), it is now Godrej Consumer Products (GCPL) which is planning to raise soap prices on account of rising input costs. GCPL, the second-largest soap maker after HUL, is expected to take a 5% increase in soap prices in due course, stated Times news.
“Vegetable oil prices have risen quite a lot over the last few months. We have raised prices in hair colour and we are looking at raising prices of soaps, too, because raw material costs have risen,” said Adi Godrej, chairman, GCPL. The company markets brands like Godrej No.1, Cinthol and Godrej Renew.
HUL, which had hiked the price of Lux soap (90 gm) by Re 1 to Rs.17 last week, has also raised the price of Liril soap (75 gm) by a rupee to Rs.22. At the same time, the price of Lux International (75 gm) has been increased by Rs.2 to Rs.22.
Palm oil prices have been shooting up on global supply constraints. This has put pressure on the margins earned by soap makers, who are left with little choice but to pass on the cost escalation to consumers.
An HUL spokesperson said the company was looking at all possible options, including cost effectiveness programmes and judicious price increases. “It should be noted that the increase in cost of some commodities is exceptionally high,” said the spokesperson. FMCG companies feel that while inflationary pressures can be tackled, it is important to maintain the purchasing power of consumers. In particular, income growth is a new-found phenomenon for rural consumers who have upgraded to branded products, adding to the growth of the FMCG sector. “The government should attempt to maintain the purchasing power of consumers by keeping a hold on interest rates, taxes and duties,” said M P Ramachandran, CMD, Jyothy Laboratories.
Ramachandran said consumer products are the first to get hit when purchasing power declines and consumers downgrade to lower-priced products. This impacts the industry as a whole.
Many factors like high inflation and interest rates edging higher have jolted the macro-economic environment of the country. But economists say this would not derail the growth story.
“We expect that an increase in wage incomes both at the rural and the urban level could partially offset the rate/inflation impact and help support consumption. Trends in rural consumption could get a boost following the proposal to link wages under the employment guarantee act to inflation,” said Rohini Malkani, economist, Citi India.

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