Britannia, ITC to hike product prices on account of rising wheat price

Lower wheat production and increased government procurement have led to the price rise.

Sharp short-term rise in wheat prices is burdening manufacturers of products like atta and biscuits, who, in turn, pass on the increased cost to the customer. Britannia is considering price hike while ITC, another big procurer of wheat, is also mulling similar move in Aashirvaad Atta and its variants. Smaller manufacturers of wheat and other products like bread etc may also be forced to pass on the increased burden. 

The prices rose due to lower acreage and crop damage in some areas. Also, the government procurement has been higher than estimated. Last year, government agencies procured 29.5 million tons. This year's target was to procure 32 million tons but actual procurement has been 35 million tons. 

Wheat production estimate has been downgraded by 1.4 per cent from last year to 97.11 million tons in 17-18.

Varun Berry, managing director of Britannia Industries said a 3-4 per cent price increase across categories is on the cards.

"We will have to take a price increase. We have covered wheat quite well but at some stage this struggle is going to finish off. Yes there is going to be inflation as far as wheat is concerned, so we will have to plan price increases," said Berry. "It's probably going to be 3-4 per cent price increase starting Q4 across categories on an average.”

An ITC spokesperson said the atta market prices respond to the prevailing prices of wheat, which in turn is driven by the current wheat stock position in the country.

".. The prices of Aashirvaad Atta and its variants accordingly get corrected in a calibrated manner over time," the spokesperson said.

In just a month, wheat prices in India went up by 6.3 per cent while international prices (Cbot) went up 13.4 per cent. 

According to Hetal Gandhi, Director, Crisil Research, the burden starts pinching smaller players when the biggies think of passing on the prices.

"Many of the manufacturers, mostly SMEs, are resorting to buying excess wheat and flour to insulate themselves against the rising prices resulting in higher working capital needs. Unorganised players, consisting of small players like local bakeries and snack shops, are expected to be more affected with the sharp rise in wheat prices as they do not have a strong procurement chain and have limited ability to pass on the rise in input costs," Hetal said.