Rising input cost pushes FMCG companies to hike prices

NEW DELHI:  Fast-moving consumer goods (FMCG) companies have resorted to price hikes in the range of 5-12 per cent of daily use goods to offset inflationary pressure on their key raw material with demand seeing an upswing. Firms like Nestle India, Hindustan Unilever Limited (HUL), Colgate Palmolive India, Emami, Tata Consumer Products, Wipro Consumer Care, Marico, ITC have already increased prices, while others like Dabur and Parle are closely tracking the development.

“We witnessed a sharp price increase in milk and further increase in prices of most oil commodities. Price was also increased in soaps with the rise in palm oil prices,” analysts at Kotak Institutional Equities said in a note. HUL, for instance, raised the price of select SKUs of Lux and Lifebuoy soap by 9 per cent.

In shampoos, Patanjali has upped the price of Kesh Kanti shampoo by 7 per cent, while P&G has increased the price of Olay face cleanser by 11 per cent.

Similarly, Marico has raised the price of Saffola edible oil, ITC raised the price of 150gm pack of Sunfeast Bourbon biscuit by 7 per cent and Nestle India has raised the price of 400gm pouch pack of Nestea Iced tea by nine per cent. 

Besides, tea prices are down 40 per cent from its recent peak (August 2020) but is still up 57 per cent on a y-o-y basis. 

Industry executives say that they could also reduce pack sizes as rising costs of input items such as milk, wheat flour and edible oil is beginning to hurt their margins.

“The price of wheat flour has definitely gone up over the last year. In South India, it is selling at about Rs 24 per kg and it will be slightly lower in the North. There are additional and handling costs that also add costs for small and medium manufacturers,” said an industry executive, adding that for small packs, the price increase would be in the form of a gram reduction, while for bigger packs the price hike could be in absolute value terms.

Analysts, meanwhile, also warn that companies may have to raise prices further to maintain margin.