Truant monsoon inflates prices, deflates consumer sentiment

SPECULATIVE ACTIVITIES BY HOARDERS ALSO DON'T HELP

RETAIL prices of essential commodities have begun rising even as truant monsoons this year have raised concerns about the impact on consumer sentiment. Top retailers say prices of commodities such as rice, dal and vegetables have surged in the past week by over Rs 10-15 per kg, which could hurt the current robust consumer sentiment.
    Wholesalers say the delay in the rains has also led to speculative moves by hoarders trying to raise a quick buck. While prices of edible oil and sugar are steady, there are fears these could balloon soon, if the monsoon is further delayed. Sugar and groundnut oil, among the major edible oils consumed in the country, are sown during June-July.
    "There is lot of nervousness in the market that prices will rise further unless the monsoon sets in quickly," said Ketandamji Sangoi, a leading Mumbai-based retailer and wholesaler. "Prices of dals like tur dal and moong dal have shot up from an average of Rs 50 to Rs 60 per kg. Consumer sentiment is upbeat now, but a sustained price rise will be a dampener," he added.
    Retailers said prices of essential goods in Mumbai have risen faster than other markets like Delhi and Bangalore. The move has led to worries that consumers might tighten purse-strings and postpone purchases. Currently, the sentiment in both urban and rural markets are buoyant with the fast moving consumer goods sector recording growth rates of over 20%. Growth being volumedriven, companies are offering discounts and freebies to woo consumers.
    Already, in the past 6-8 months, consumers have shifted to economy and mid-priced products, forcing top FMCG companies to intensify focus on mass brands to protect volumes. Competition has intensified from regional players and smaller brands offering higher value proposition to consumers, said industry officials.
    Consumer spends in 2008 on vegetables and fruit, petrol, diesel, vegetable oils and foodgrain and rents had risen sharply owing to rising input costs and inflation. Since early 2009, prices had stabilised following a drop in commodity prices.
    FMCG companies say upgradation from unbranded to branded goods (packaged grocery, household cleaning products), demand of nascent categories (breakfast cereals, hair colours) and health and hygiene products (chyavanprash) would be affected in smaller markets.
    A prominent Delhi-based retailer told ET: "There has been a marginal increase of 3-4% in commodity prices, but there has been no change in the prices of processed foods, as in any case, processed foods manufacturers do not buy based on spot rates to hedge risks."
    (with inputs from Ram Narsinghdev Sahgal)

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