Biscuit manufacturer Britannia Industries Ltd has begun raising prices in response to a significant increase in the costs of essential ingredients, including palm oil and cocoa. Varun Berry, the vice chairman and managing director of Britannia, noted during the earnings call for the December quarter that the industry has been experiencing a cycle of inflation and deflation. “At the start of the year, we believed the environment would not be inflationary, and we had implemented substantial price increases last year. As we began to adjust those prices, we faced a wave of inflation, prompting us to initiate further price hikes,” Berry explained.
On Thursday, Britannia, known for its Good Day and Tiger biscuits, reported a 4.8% sequential increase in its consolidated net profit for the December quarter, reaching ₹582 crore, alongside a 6.5% rise in consolidated sales to ₹4,463 crore. The company raised prices by 2% during the quarter and anticipates a total price increase of 6-6.5% by the end of the June quarter of 2025-26, as the costs of key input materials like wheat, palm oil, and cocoa remain elevated. “Our total price increase for the third quarter of 2024-25 is approximately ₹100 crore. In percentage terms, this equates to about 2%, but we expect to reach a 4-4.5% increase by the end of the fiscal year,” he added. “In Q3, we’ve already implemented a 2% hike; in Q4, we plan an additional 2.5%. Then, in Q1 of the next fiscal year, we will introduce another 1.5%, leading to a cumulative increase of 6-6.5%.”
It is important to note that several key raw materials have become more expensive compared to a year ago. For example, palm oil prices have surged by 43%, flour prices have risen by 4%, and cocoa prices have skyrocketed by 103% year-on-year. In September, India raised import duties on crude and refined palm oil by 20 percentage points, resulting in effective duties of 27.5% for crude palm oil and 35.75% for refined oil. As the largest importer of palm oil, India’s decision has affected producers of packaged foods and soaps. “Initially, there was an assumption that the increase in palm oil import duties would be temporary; now it is clear that this is a long-term change,” Berry remarked.
This price adjustment follows warnings from other packaged consumer goods companies about impending price hikes across various products, including soaps, body wash, and tea, due to fluctuations in commodity prices, particularly crude palm oil. Hindustan Unilever Ltd raised prices in the December quarter and indicated that further increases are likely. Similarly, Nestlé India has signaled potential pricing adjustments within its coffee portfolio due to high commodity inflation.
Meanwhile, Britannia Industries is actively monitoring commodity prices. “Our strategy will continue to focus on increasing market share while maintaining profitability. We remain alert to competitive pricing actions,” the company stated in its earnings presentation submitted to the exchanges on Thursday.
