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April 10, 2012

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Stores' waiting game on prices

SUPERMARKETS in Shanghai are absorbing some recent wholesale price increases rather than passing them on to customers in an attempt to gain advantage over rivals. But higher prices will inevitably reach the shelves, according to industry officials.

Lotus, Carrefour, Tesco, Lianhua and other major retailers said Procter & Gamble raised prices for some of its shampoo and shower gel brands by 5 to 20 percent from April 1. The supermarkets are waiting to see who moves first in raising shelf prices, supermarket representatives said yesterday.

"We are watching market reaction closely, and there could be shelf-price increases in the future," said Xiang Jun, a media official for Lotus in Shanghai.

Price increases of between 10 and 20 percent for Head & Shoulders and Vidal Sassoon brands of shampoo have already appeared in several large supermarkets in Shanghai.

"All the news is about price hikes now," a shopper surnamed Yuan complained. "First, there was gasoline, and now it's personal care products. Companies couldn't be that short of money, and the problem is that consumers don't have a say in this."

A Haitong Securities report attributed the most recent round of product price rises to the rising cost of fuel, labor and raw materials. The increases are likely to snowball through product categories.

P&G was not available for comment yesterday. Unilever, another personal care giant, said the company had no plans to raise its wholesale prices.

Last year, Unilever was fined 2 million yuan (US$317,058) by China's top price regulator, the National Development and Reform Commission, for "fueling expectations for price hikes and disturbing market order."

The company's talk about possible higher prices was blamed for spurring panic buying of items such as laundry detergent.

Prices for cooking oil, milk powder and other commonly used household foodstuffs also increased recently.

In March, major cooking oil producers Arawana and Fulinmen said that they were raising wholesale prices for rapeseed oil and peanut oil by as much as 10 percent.

Carrefour said it hadn't passed on those increases yet.

Milk powder producers, including Nestle and Mead Johnson, also announced price rises of up to 10 percent early this month.


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