Hike leads to 5% increase in average monthly household spend, says report
Prices of daily essentials and groceries in India have risen by up to 40 per cent. Consequently, monthly average household spend on essentials and groceries has gone up by 5 per cent since the April-June quarter of 2020, reveals a report by Ratan Tata-backed retail digitisation start-up SnapBizz.
However, packaged goods have been able to avoid price hikes by revamping their packaging in terms of net weight and other comparable variables. The report analysed over 2 million randomly chosen shopper baskets for each month since the outbreak of the pandemic, from various cities.
“Under essentials, there has been an 8-10 per cent price increase in rice across all markets. Due to hike in wheat prices, local brands have increased atta price by 8-15 per cent, whereas in brands like Aashirvaad and Pillsbury, MRP remains the same but trade and promotion schemes are withdrawn and higher slabs to qualify schemes are announced. Revision of prices in oil is the highest, with 40-50 per cent increase in MRP pan-India,” said Prem Kumar, founder and CEO, SnapBizz.
There were no price changes in categories like salt, coffee, detergent bars. Biscuits prices remain the same but schemes/discounts given are withdrawn. While there is no change in MRP for noodles, brands like Maggi have reduced weight from 70 gm to 60 gm per pack.
Snacking items have seen an increase of 8-10 per cent since the price of oil has spiked sharply. Detergent powders and liquids have seen price increases of 5-7 per cent and teas have seen an increase of 15-20 per cent across cities. The only category where price is reduced by approximately 20-30 per cent is hand sanitizers, since the government has waived off taxes.
“Since Q2 of 2020, while consumers were forced to stay indoors, there has been a change in the consumer basket composition to include more of essentials. This, combined with a corresponding change in the prices of a few categories of essentials/groceries has led to a 5 per cent increase in the monthly average household spend. Stocking has been a big concern for Kirana stores as consumer demand for less expensive alternatives across categories has gone up,” said Kumar.
Kiranas gain share
Arvind Mediratta, MD and CEO, Metro Cash & Carry India Pvt Ltd, confirmed that stock levels are at an all-time low in kirana stores at present.
“While the average basket size of the 1.5 lakh kirana stores that buy from our 28 Metro Cash & Carry stores every month has not decreased but, the frequency of shopping has come down from 4 – 4.5 times/month, impacting our sales by 10-15 per cent in May and June,” he said. Pointing out that May 2021 was probably the worst month in terms of sales post Covid-19, he said, “June is showing recovery but its still lower than June 2020. This is because, this time business hours were seriously curtailed, both lives and livelihoods have been impacted. The overall sentiment is depressed, medical expenses have spiked from 5 per cent of monthly incomes pre-Covid to 11 per cent, and price inflation has hit consumers due to increase in crude oil, petrol and diesel prices.
“However, kiranas have gained share in the food and grocery sector during the pandemic – 88.5 per cent of FMCG sales comes from kirana stores, modern trade contributes only 8 per cent and e-commerce is just 2.7 per cent.”
The report indicates a significant increase in working capital deployed by retailers because of drying up of credit lines from suppliers, affecting smaller outlets.
Home deliveries have increased compared to last year with customers tapping digital routes to place orders.