Climbing production costs start straining at the retail level
Increasing costs of production are beginning to bite into the operations of manufacturers of consumer goods. For many, retail prices are becoming their biggest concern.
Siam Cement Plc, the country's leading cement manufacturer, yesterday announced its first increase in cement prices for two years, saying its production costs have risen by 50 per cent since 2004. Siam Cement's president Kan Trakulhoon said the group had been affected by increasing energy costs, but it stayed its price increases to avoid burdening its retail customers. "With continuous increases in oil prices over the first quarter of this year, we have made a request to the Commerce Ministry to adjust our retail price on some product items, such as cement," Kan said. "The energy cost in our cement business has risen by 50 per cent over the past two years and accounts for between 10 per cent and 20 per cent of the total cost of sales. Forced by the declining domestic demand for cement and an oversupply of cement on the market, we decided we can raise our retail price a little," he said. Cement is one of 10 products for which prices have been strictly controlled by the Commerce Ministry. Retail prices for these products, including shampoo, tissue, tampons, and soap can only be increased with the ministry's approval. Although manufacturers of other products may be allowed to raise their prices, not all companies are willing to mark up their goods in an environment of high competition, lest they lose market share. Procter & Gamble Thailand's director of external relations, Amardeep Khosla, said that, at this point, P&G had not notified the ministry of any price hikes, despite increases in the cost of raw materials. Boonkiat Chokwatana, president of ICC International Plc, the producer of Mama instant noodles, said that despite higher transportation costs, his company would try to maintain the price of its noodles as long as possible. "We'll try our best to hold the increase. Indeed, we have not raised the price for a long time. Mama noodles are priced at Bt5 [a pack], compared to Bt2 thirty years ago," he said. Boonkiat urged other manufacturers to improve their efficiency to bring down production costs, instead of simply pushing through a price increase. Claudio Alessi, managing director of Bata Shoe of Thailand Plc, will announce a freeze on the retail price of its school shoes despite a rise of about 20 per cent in production costs. Business ReportersThe Nation
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