Britannia hikes bread prices

Britannia hikes bread prices

Grammage reduction, that old ruse in the fast moving consumer goods (FMCG) book, has finally come to the humble bread. Struggling to fend off competition in key product segments such as biscuits and maintain margins at the same time, Britannia has decided to play around with the weight of bread it delivers in various pack sizes while keeping the old price points more or less unchanged. Earlier, it sold an 800 gram pack at `30 across the country. Now, a 700 gram pack will cost `28 in Delhi and `30 in other states. Similarly, in place of the 400 gram pack that it sold for `15 in Delhi and `16 in other states and hills, the company will now retail a 350 gram pack at `14 in Delhi, `15 in other states and `16 in hills. Under the new packaging norm that comes into effect from November 1, companies are not allowed to sell products in non-standard grammage, such as 66 gram, 130 gram etc. However, this rule doesn’t apply to bread. Abneesh Roy of Edelweiss Securities believes this gives Britannia the leeway to reduce grammage and thereby take an indirect price hike. This is a win-win situation for a company – the consumer does not feel the heat, but its margins improve. Indeed, unknown to most customers, this is the third time Britannia has revised prices in less than two months, going by reports. Harvest Gold, Britannia’s key competitor in the National Capital Region, had taken a price hike in August. Still, three price hikes in such a short time wasn’t quite anticipated. Experts believe the latest hike was prompted by increasing agri input costs. According to V Srinivasan, analyst at Angel Broking, low stocks and high international prices have pushed the cost of agricultural inputs up in the domestic market. The prices of wheat, the key ingredient, has risen 12% in the last four month. The prices of eight essential commodities --- condiments & spices, pulses, wheat, sugar, edible oil, tea, coffee and milk --- have risen 18% on an average between September 2011 and September 2012 while the per capital income of the average Indian consumer has risen only 10%, said an Assocham report, released Tuesday. To be sure, bread is a highly fragmented market. The brand loyalty Britannia enjoys in the premium segment sure gives it some room to take price hikes. It also helps that major FMCG players such as ITC, GSK are not present in the segment.