Consumers in India already paying more for many essential commodities now need to pay more for their favourite cup of coffee. FMCG companies Nestle India and Hindustan Unilever have raised prices of their coffee brands Nescafe and Bru respectively by 10-12% over the last couple of months, according to retailers and a research report by JP Morgan.
The price hikes by FMCG companies come in the wake of a sustained rise in cost of raw materials over last several quarters. Prices of raw coffee have surged globally amid supply hiccups.
For instance, price of the most consumed Arabica variety of coffee rose 50% in a year, according to a Bloomberg report. However, coffee prices may be at their peak right now and the rally could end due to record output in Central America, the report says.
Global production of Arabica will outpace demand in 2011-12, analysts say. Netherlands based bank ABN Amro last month forecast a global Arabica surplus of 6.90 lakh 60 kg bags in season beginning October.
FMCG companies in India have been facing pressures from a spike in raw materials across the board. Nestle India’s input costs, for instance, rose over 12% in April-June, while Hindustan Unilever’s raw material costs were up 26%.
Hindustan Unilever and others like Godrej Consumer Products , Bajaj Corp and Dabur have raised prices of some of their products, especially in personal care products and soaps & detergents by 3-10% over June-August. Colgate Palmolive India too has raised prices of some of its toothpastes by 3-6%.
Most FMCG stocks have outperformed the broader markets this year as investors have sought cover under defensive sectors amid an overall volatile market.
The CNX FMCG index is up 1.7% in the last three months, even as the broader Nifty has fallen 7.3%.
Nestle shares ended at Rs 4,454.10, up 1%, while HUL closed up 0.2% at Rs 320.50 on Wednesday.