How a detergent may have aided the RBI in acting quickly on inflation


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If India’s central bank was serious about beating inflation, it should have paid more attention to Surf Excel NSE 4.50 percent. In January, the price of laundry detergent increased by 20%. While this isn’t surprising given that most ordinary items are growing more expensive everywhere, the retail price before the adjustment was interesting: 10 rupees (13 US cents) for a bar.

Such little detergent bars are aimed at less affluent consumers who are sometimes unwilling to spend an extra rupee without cutting back on something else. Unilever Plc’s India franchise relies on “magic pricing points” — such as 5 or 10 rupees — to keep these customers from downgrading to cheaper products.”On the December quarter earnings call, Ritesh Tiwari, the chief financial officer of Hindustan Unilever Ltd NSE 1.00 percent., said that packs that operate at magic price points account for nearly 30 percent of our business.” The firm’s primary method of exercising price power for these packs is to reduce weight. “As a result, even selling the same number of units leads to volume loss,” he explained.

As a result, price rises accounted for the majority of Unilever’s India sales growth of 11% in the final three months of 2021. Underlying quantities (commodities leaving factories) increased by only 2%. Competitors fared worse. According to NielsenIQ, volumes in India’s broader consumer business fell 4.8 percent in rural areas compared to a 0.8 percent reduction in cities.

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