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Now, get ready for a bigger HOLE in your pocket!
Household budget may make a larger hole in the pockets of Indian consumers in the coming months, as an estimated 41 per cent of food and beverages businesses are looking to hike their prices over the next one year, a survey has said.
According to global consultancy firm Grant Thornton's Food and Beverage (F&B) international business report, 41 per cent of F&B businesses in India expect to increase the prices.
In comparison, the annual survey, which is conducted between August and September, of 2010 had pegged the number of such businesses expecting a price hike at that time at just 12 per cent.
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The price hike by food and beverage businesses would put further pressure on household budget of Indian consumers, as commodity prices in India are already rising due to factors like insufficient logistics and storage infrastructure and a high dependence on imports.
The rate of price rise in food items, or food inflation, has remained high at above 9 per cent level since December.
As per the latest data, released last week, the food inflation stood at 9.01 in the week ended November 12, and the government is hopeful of further slide in coming weeks.
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The food inflation, measured by the Wholesale Price Index (WPI), was 10.63 per cent in the previous week, while it was over 11 per cent level in the year-ago week, the government data showed on November 24.
Commenting on the annual F&B business survey, Grant Thornton India client service director Piyush Patodia said the overall business environment in India remains strong.
"In any developing economy on the path to economic prosperity, F&B expenditure is one of the first to burgeon. The Indian consumer is not just consuming more, but also experimenting with hitherto exotic tastes, throwing open a huge opportunity to numerous foreign F&B companies and concepts," Patodia said.
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He, however, added that "the environment is still challenging due to sourcing and supply chain management issues: input and commodity prices are increasing and Indian F&B companies still have limited ability to pass these on to consumers through higher prices."
Patodia expects F&B profitability in India to either remain stable or possibly dip slightly over the next 12 months due to commodity and input price inflation pressures as well as increased regulatory environment.
Moreover, the food service industry is likely to get affected by the additional service tax, part of the Finance Act 2010 in India, which took effect this year and will impact a large number of restaurants.
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Grant Thornton further noted that privately held businesses (PHBs) in the F&B sector over the world are less confident than those in other sectors about their economic prospects. However, the optimism within the sector is increasing.
The Grant Thornton report shows that around 62 per cent of businesses globally in the F&B sector expect revenue to increase in 2011 -- a sharp increase from expectations in the 2010 survey, when it stood at 40 per cent.
The F&B sector is bullish about hiring, as 21 per cent of businesses in the sector expect to add workers in 2011 up from 17 per cent in 2010, but this is below the all-sector average of 29 per cent.
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The report also indicates that F&B firms are now looking for growth externally through M&A.
The report noted that globally on one side consumers are demanding food and drink priced to meet their dwindling budgets; on the other, more affluent shoppers are looking for higher quality produce; healthy and ideally locally sourced produce to cook at home.