Hindustan Unilever, Nestle hint at price increases amid rising costs
industan Unilever and Nestlé plan to selectively increase prices of their products to take into account higher crude oil and petrol costs, the rupee’s depreciation against the dollar and more expensive commodities such as wheat. Nestlé India’s logistics providers, too, are looking to renegotiate rates after record-high petrol and diesel prices. However, not all companies will pass on the entire burden to consumers because it could hamper growth. Petrol prices have crossed Rs 90 a litre in Mumbai on increasing global prices of crude oil, of which India is a net importer, further impacted by the falling rupee. Crude derivatives, which are key inputs for FMCG companies, and petroleum derivatives used in packaging material including bottles and tubes, have also become more expensive.
Illicit industry flourishing due to sharp increase in tax on cigarettes
TC said while it is witnessing some uptake in consumer demand, it is difficult to assess the exact pace of growth, given the base disruptions over the past two years. The company has been trying to accelerate growth in consumer packaged goods and hospitality but it has no plans to spin off these segments into separate listed entities. ITC’s cigarette business accounts for nearly 85% of the company are EBIT and have been funding the growth of other businesses. However, margins should head north as core FMCG brands gain in size. Whilst there is a need to regulate the industry, it is imperative that regulations should not lead to unintended consequences, as we have witnessed in the case of sharp increases in taxation on cigarettes. Over the last six years, cigarette taxation has trebled. Such punitive increase in taxation has led to substantial growth in the illicit cigarette industry. Overall tobacco consumption has increased over the years, however, the legal cigarette industry has declined and its share of tobacco consumption has reduced to 11% but accounts for 87% of the revenues and is taxed more than 50 times compared to other forms of tobacco products. So, there is a shift to illegal and smuggled cigarettes, which has led to an estimated loss of Rs 13,000 crore to the exchequer.
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