Price hike in FMCG not a dampener any more

The price hikes in the fast moving consumer goods category have increased the basket size (average bill value), according to retailers. What may be considered a natural occurrence is, however, significant say analysts.

"This once again proves that downgrading, the nemesis of consumer goods companies is a thing of the past," said a Mumbai-based analyst.

In the past, when consumer goods companies hiked prices, consumers opted for cheaper products to offset the hikes in their monthly grocery bills.

This time, however, both organised large-format retailers and small retail outlets (grocers) told Business Standard that the average bills have gone up by an average of 5-10 per cent post the price hikes.

"Price hikes no longer seem to upset consumers, thanks to the booming economy and increasing per capita income, consumers are willing to spend a little more on daily supplies," said an analyst.

Recently, fast moving consumer goods (FMCG) companies had hiked prices by 5-10 per cent across categories from detergents and toilet soaps to edible oils in the face of rising input costs.

"Consequently, there has been a five per cent increase in the average food and grocery shopping bill," informed local grocers. Even large format outlets like the Future Group's Food Bazaar, claim to have registered an average of 5-10 per cent increase in the overall shopping bill per customer.

Food Bazaar executives told Business Standard that they also did not notice any dip in the number of products bought by customers post the price hike.

It's not just downgrading that customers have given up. If retailers are to be believed, consumers have not even cut down on impulse purchases, which is the other casualty when price hikes take place.

According to Food Bazaar executives, that impulse purchases have not gone down is significant. At least, 50 per cent of the footfalls in Food Bazaars are from consumers who are looking for impulse purchases like snacks, juices and so on.

According to Mumbai-based FMCG analysts, most of the brands that hiked prices recently, bet high on consumer loyalty and were therefore not apprehensive about price hikes affecting sales.

Analysts add that consumers at present do not mind spending a little more on their daily essentials.