FMCG companies feeling inflation heat; rule out immediate price hike

Beverage majors like Coca-Cola and PepsiCo said high raw material prices are affecting their businesses, forcing them to adopt cost effective measures to offset high input cost

New Delhi: Leading FMCG firms PepsiCo, Reckitt Benckiser and Coca Cola on Wednesday said they are feeling the heat of high inflation which is putting pressure on overall cost, but ruled out price hikes in the immediate future, reports PTI.

“Inflation is biting and is a concern area for us and for others. We are not able to pass on the entire cost to the consumer, nor do we think we should,” Reckitt Benckiser (India) chairman and managing director and regional director (South Asia) Chander Mohan Sethi said.

“However, that automatically leads to pressure on our overall operating model,” he added.

Food inflation has been hovering at over 9% in the last few weeks. Though in the week ended 10th September it dipped to 8.84% from 9.47% in the previous week, prices of key commodities continued to rule high.

Beverage majors like Coca-Cola and PepsiCo have also said high raw material prices are affecting their businesses, forcing them to adopt cost effective measures to offset high input cost.

Commenting on the situation PepsiCo India chairman Manu Anand said, “Clearly, like everyone else, we are facing pressure. Our attempts are to ensure maximise productivity and minimise the impact of passing to consumers.”

Coca Cola India chief executive Atul Singh has also said that inflation is impacting its business but is not looking at raising prices.

“Inflation is there and it has also affected us, but we are not looking at raising prices,” he said.

Apart from price increases in the past to counter high input costs, the company is also formulating cost-efficient ways to reduce the impact of surging raw material prices, particularly on packaging.

“We are focusing much more on productivity and trying to see what all we can take out on non-value cost to the consumers on every area of the supply chain so that we are able to minimise the price increase.”

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IT companies jittery on sluggish US growth, EU debt crisis: Assocham

“Downgrade of US debt rating and debt crisis in Euro zone will impact recruitments in the Indian IT sector and hiring is expected to go down by about 30% during the course of next few months,” Assocham secretary general DS Rawat said

New Delhi: Major IT and BPO companies in the country are jittery amid fears of another economic slump in the US and a debt crisis in Europe, reports PTI quoting industry body Assocham.

About 55% respondents said that while the sector is unfazed from S&P’s downgrade of the US credit rating and that the slowdown is temporary, it would surely hamper the hiring activity across the sector.

“Downgrade of US debt rating and debt crisis in Euro zone will impact recruitments in the Indian IT sector and hiring is expected to go down by about 30% during the course of next few months,” Assocham secretary general DS Rawat said.

The downgrade by credit ratings agency Standard & Poor’s in August had triggered concerns that the $60 billion software services industry—which gets more than 60% revenues from the US market—would be hit.

IT industry body Nasscom, along with top players, had however, exuded confidence that the sector will ‘sail through’ the crisis.

Assocham interacted with about 140 representatives, directors, CEOs, CFOs, chairmen and MDs of companies offering IT/ITes and BPO, BTO, KPO services in various domains like pharmaceuticals, Banking, Financial Services and Insurance, auto, FMCG and manufacturing.

The study was carried out across Ahmedabad, Bangalore, Chandigarh, Chennai, National Capital Region (Gurgaon and Noida), Hyderabad and Pune.

“The US and Europe account for over 80% of India’s $60 billion IT industry and macro-economic uncertainty in these parts of the world are bound to make the market gloomy,” Mr Rawat said.

About 25% of respondents said the current round of global economic crisis won't have much of an impact on India, considering the strong domestic demand of goods and services together with their exposure to other avenues like Asia-Pacific and other parts of the world.

Nearly 20% of the respondents said Indian firms may report sluggish business during the course of next few months due to the slowdown.

Besides, the industry is already reeling under high interest costs, high inflation and the stock market is also in a sombre mood, the study added.

Apart from slowdown in foreign direct investment (FDI), growth in exports and domestic private consumption might also slump, Rawat said.

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High oil prices reduce scope for easing interest rate: RBI

“Oil prices have remained very steady despite global economic concerns while in 2008 they declined sharply in a small period. It reduces space that monetary policy has in dealing with the situation,” RBI deputy governor Subir Gokarn told reporters

New Delhi: With international oil prices continuing to remain high, the Reserve Bank of India (RBI) may not have much scope to reduce interest rates in its forthcoming mid-year monetary policy review next month, reports PTI.

“Oil prices have remained very steady despite global economic concerns while in 2008 (when recession hit the global economy) they declined sharply in a small period. It reduces space that monetary policy has in dealing with the situation,” RBI deputy governor Subir Gokarn told reporters here.

The RBI, which has raised key interest rates 12 times since March 2010 to contain inflation, is scheduled to announce mid-year monetary policy review on 25th October.

International oil prices have remained persistently high.

Brent crude oil was trading at over $107 a barrel despite fears of double-dip recession hitting global economy.

Mr Gokarn’s statement comes within days of RBI governor D Subbarao defending the tight monetary stance of the central bank to check inflation, which has remained near the double-digit mark despite series of interest hikes.

While the short-term borrowing (repo) rate has gone up by 3.5% since March 2010, inflation has remained stubbornly high at near 10%, much above the RBI’s comfort level of 4%-5%.

In addition to other factors, rising crude oil prices and rupee depreciation have been fuelling inflation at home. The oil marketing companies has revised upwards price of petrol twice in the last six months.

Mr Subbarao, while speaking at a function in New York, has said, “At this high level, inflation is unambiguously inimical to growth; it saps investor confidence and erodes medium term growth prospects.”

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