This Diwali, gifts will mean a lot more spending

This Diwali, consumers may face higher costs for gift hampers as prices of dry fruits and chocolates have surged. An ET study reveals a 14% average increase in prices due to lower supply and rising cocoa costs. Industry executives fear this inflation could dampen consumer demand during the festive season. It’s the ‘festival of lights’ but inflation may cast a shadow on gift hampers of dry fruits, chocolates, cookies, juices and potato wafers.  An ET study of the 10 most-gifted products shows consumers will have to shell out about 14% more on average this festive season, from last year, as cashews, almonds and chocolates such as Cadbury Silk, Hershey’s Kisses and Ferrero Rocher are more expensive. This, industry executives fear, may crimp consumer demand. Lower supply of almonds, cashews and Californian pistachios has triggered a surge in retail prices. For instance, almond kernels, the most in-demand grade, cost 27% more at Rs 800 per kg this September, from Rs 630 a year ago, according to data from Nuts and Dry Fruits Council of India, an association of over 700 members. Raisins cost the same but cashews have seen the highest price increase, of 37%, with the prized W320 variant going up to Rs 960, from Rs 700 per kg in the previous year, as per the dry fruits body.

“One reason for this price hike in cashews is that this year, global and domestic crops are around 15% short,” said Rahul Kamath, president of All India Cashew Association and director of Bolas, a dry fruit brand and cashew processor.

Mismatch in Demand and Supply

Three to four years ago, there had not been any demand-supply mismatch, keeping prices stable at Rs 800-850 per kg, he said. “In subsequent years, the price kept on going down due to surplus supply globally. It is only now, four years later, that the price is Rs 900-950 per kg, which is not bad when we adjust for inflation,” said Kamath.The price of Californian pistachios has also risen by about 7% to Rs 1,100 per kg, from Rs 1,030. “This year, Californian pistachios have a 1.1-billion-pound crop, compared to a 1.5-billion crop last year,” said Gunjan Jain, Nuts and Dry Fruits Council (India) president. Companies fear prevailing higher prices may impact demand this festive season. However, Jain—also CEO of dry fruit brand Nutraj—said the dry fruits industry is hoping for a 10% growth in Diwali sales this year, though it would be half of the normal expectation of a 20% increase.

Pricey cocoa

Meanwhile, chocolates have been hit hard by rising cocoa prices since August 2022, pushing retail stickers about 25% higher this Diwali, according to retail intelligence firm Bizom. For instance, the price of Cadbury Silk 155 gm chocolate bar was Rs 175 last year. Mondelez, the manufacturer, reduced the weight of the pack to 150 gm this year and also increased the price to Rs.185. Hershey’s Kisses milk chocolates cost Rs 155 for a 108-gm pack, from Rs 140, while Ferrero Rocher hazelnut and milk chocolate premium gift boxes of 200 gm (16 pieces) are 5% more expensive at Rs 549, from Rs 524. Mondelez and Hershey’s didn’t respond to ET’s queries. Ferrero Rocher declined to comment.

Inflation woes

Consumption demand has been muted this year across most segments due to continued inflation, though the industry expects sentiments to improve in Diwali. Researcher NielsenIQ said the domestic fast-moving consumer goods (FMCG) market reported a sharp decline in overall volume growth in the June quarter to 3.8%, compared to 7.5% a year ago and 6.5% in the March quarter. The packaged foods category saw volume growth of 2.4% in the period, compared to 8.5% a year ago and 4.8% in the March. NielsenIQ on Tuesday said nearly 87% of Indian shoppers are feeling the impact of rising food prices. On Monday, ET reported that consumption is picking up, driven by a normal monsoon, lower inflation and strong festive stocking, which is expected to reverse the recent slowdown. In other food categories, prices of cookies have gone up 4-8% while that of milk-based products such as ghee and butter have increased 15-20%, driving up prices of milk-based sweets as well. Dabur’s Real mixed fruit juice has increased to Rs 130, from Rs 128, for 1-litre tetra pack over the past year. The only savior is the packaged traditional savories segment, staying unchanged or reducing by 4%. For instance, prices of products like Bikano Aloo Bhujia, Haldiram’s Soan Papdi and Pringles wafers are the same as a year ago. India’s retail inflation was at 3.65% in August, compared to 3.6% in July. Food inflation, which accounts for nearly half of retail inflation, was at 5.66% in August, compared to 5.42% in July.