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Saha Says Prices Must Go Up: Detergents Likely to Be First Items Raised

Posted on: Saturday, 2 July 2005, 00:00 CDT

Jul. 2--The Saha Group, the country's largest consumer goods conglomerate, said it can no longer absorb rising costs and will start passing along the burden of expensive fuel and raw materials to consumers by raising market prices of its products -- but gradually.

If the Internal Trade Department approves the Saha Group's price adjustment proposals, it will end an attempt by the company to hold the line on prices for months, as fuel costs continuously pressured the company's profit line.

Among the products likely to have higher prices in the short term are detergent, including cleansing products and dishwasher and laundry liquid detergent, Boonsithi Chokwatana, the group's chairman told thousands of bargain-seekers at the ninth Saha Group Export and Trade exhibition yesterday.

People were flocking to the three-day fair to buy consumer goods for home use, apparently because they feared prices were about to rise.

"Detergent is the product in our group hit hardest by soaring oil prices, and its main raw materials are also related to oil as well," Mr Boonsithi said. "The production cost of detergent has risen by 20 percent since the start of this year, and 40 percent since last year."

He said the likely price increase for detergent would be in the region of 4-5 percent, and the next adjustment will be made within four to five months.

The Saha Group has about 300 companies under its umbrella, making more than 1,000 consumer product categories. Group sales were 80 billion baht last year.

Saha remains confident it can achieve its sales target of 100 billion baht by the end of this year.

At the same time, the Saha Group will join the Thai Chamber of Commerce to propose the government reconsider allowing product manufacturers to increase prices based on their actual costs, in the face of expensive oil and raw materials.

Boonchai Chokwatana, chairman of the Wholesale and Retail Committee of the TCC, said that 16 committee members would meet around the middle of the month to discuss proper measures for manufacturers and distributors to increase prices of consumer goods.

Conclusions from the meeting would be submitted to the government. Authorities should allow producers to increase prices when they can really no longer absorb extra costs. However, price increases should be controlled and limited to prevent consumer shocks, said Mr Boonchai, who is also managing director of Saha Pathanapibul Plc.

Both executives of the Saha Group conceded that consumer purchasing power was declining, and confidence had plunged, reflecting concerns over the economic slowdown.

"We're not sure about the impact in the second half," said Mr Boonsithi. "We have to monitor the situation as oil prices will continue to rise, and the economic outlook is cloudy with negative factors."

Boonyarit Mahamontri, managing director of Lion Corporation of Thailand, a Saha affiliate that makes Pao detergent, said the government should have an energy policy in place to support local producers to compete with other players in the region.

For example, if the government wants diesel prices to float freely, it should look at the policy of neighbouring countries like Malaysia, which is continuing its subsidy for the local oil industry. Malaysians will gain a price advantage on the world market because Thai fuel costs are higher.

Lion has felt the pinch of dearer oil prices. Sales in the first half grew by 20 percent as expected, but net profit fell by 60 percent compared with the same period last year.

"We set a sales target for 2005 at 5.8 billion baht, a 15 percent growth from last year. We hope we can make it despite the surging oil prices," Mr Boonyarit said.

By Sukanya Jitpleecheep & Krissana Parnsoonthorn

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Source: Bangkok Post

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