Jyothy Labs Ltd. plans to increase the prices of its product portfolio in the coming quarters to increase its operating margin to pre-Covid levels amid rising commodity prices.
“If we increase the price by 3%, that’s good enough for us, which we’ll probably take in the coming quarters, depending on where raw material prices go,” said Ullas Kamath, joint director of Mumbai-based consumer goods manufacturers. said BloombergQuint in an interview.
Bleach manufacturer for Ujala fabrics and Henko detergents said it has managed to increase prices by up to 5% per category and reduce operating costs by 2% to counter the overall rise in raw material prices over the past year.
Kamath said raw input costs have softened in the last seven to 10 days, after rising for about a year. And the company is in a position to protect itself from rising prices only in the next three to five months. “If this continues (falling costs) we will probably resort to an increase in total sales price of only 2%.” But if the amount falls 5%, then a price increase will not be necessary, he said.
The company’s operating margin fell to 12% in the quarter ended June compared to 14.3% in the previous quarter. Revenues rose 6% consecutively to HRK 525.4 million – at a time when the revenues of its larger counterparts Hindustan Unilever Ltd. contracted 1.8% in that period. Jyothy Labs’ profit rose 36% month-on-month to 39.5 million runes due to an exceptional item of 23.5 million kuna.
If a price hike becomes inevitable, then it would start with more expensive stock stocks, according to Kamath. A 7-10% increase in larger SKUs will offset the escalation of costs in SKUs at lower prices, he said.
Growing rural penetration
The company’s revenue from the dishwashing segment grew 12.8% in a row, while the fabric washing segment remained flat.
Sales of the company’s smaller storage units increased as more people began sampling its products. That segment contributes 35% to total sales, he said, as rural markets opened up after pandemic-related restrictions.
“On packages of 5 to 10 rupees they (rural consumers) sample our products, and if they like it, then they go for higher prices,” Kamath said. “So to that extent, we are extremely happy that the acceptance of all our brands in rural areas has been much higher than ever before.”
Demand in rural markets grew by more than a third than in urban areas, Kamath said, and the hinterland accounts for 40% of business. A tenth of its revenue comes from the modern store, which consists of hypermarkets and supermarkets, and 5% from online sales. Jyothy Labs is witnessing a migration from modern commerce to e-commerce, but expects both channels to coexist.