FMCG makers prepare for a new round of price hikes
PremiumPrices of daily-use products set to rise as companies try to counter inflationary headwinds
NEW DELHI : Prices of fast-moving consumer goods (FMCG), such as biscuits, milk-based edibles and personal care items, could continue to rise this quarter as companies try to counter inflationary headwinds.
Biscuit maker Parle Products said it will effect another price hike in the quarter. “On some products, we have already taken it up in December. And the balance of them will happen in January—this will be about 5-7% increase. The price hike will continue till February," said Mayank Shah, senior category head at the company. This year, the company would have hiked prices by 10-12% on its entire portfolio.
High prices of edible oils, wheat, sugar and packaging materials are driving the price hikes for the maker of Parle-G biscuits. “I think the biggest challenge is in edible oil, (where) the price has gone up about 50-60% compared to the (same) period last year. Wheat and sugar are up about 10-12%. The other important commodities are packaging material, because of crude—plastics have gone up by 20-25%; there is an increase of 20-25% in paper, which is basically cartons and paper packaging. All those costs have increased," said Shah.
Chennai-based CavinKare said the company continues to see “pressures" on commodity prices. “We are possibly getting into a cycle where we may go in for a round of MRP (maximum retail price) corrections again," said Venkatesh Vijayaraghavan, CEO and director, FMCG, CavinKare.
The company, which sells shampoos, dairy beverages, personal care products as well as packaged foods, took a price hike in Q1 and Q2 of this fiscal year. “Combined for the year, our price hikes would be to the tune of 4% to 5%. This was largely on non-sachets portfolio," he said.
Inflation was visible on certain specialized inputs for shampoos and personal care products. “We have seen those prices go up; we have seen a little bit of pressure on the availability of milk as well," he told Mint.
Companies typically announce staggered price increases across their portfolios. Despite high inflation, not all products see an increase in their maximum retail price at once. Companies also scrap discounts to save costs.
In a 23 December report, brokerage Motilal Oswal said that agricultural as well as non-agri commodity prices increased moderately in the third quarter, before stabilizing towards the end of the quarter. It said the entire commodity cost basket, on an average, witnessed some degree of inflation—to the extent of 33.5% year-on-year in Q3.
MINT PREMIUM See All
“With commodity inflation refusing to ebb even in 3QFY22, we expect most of the companies under our coverage to see a year-on-year contraction in their gross margins. To combat the higher input costs, companies continued to take price hikes during the quarter; however, the effects will materialize with a lag," the brokerage said.
In a December interview with Mint Sunil Kataria, CEO, India & SAARC at Godrej Consumer Products, said, “We have already taken around 9% to 10% price hikes which will play out in the coming quarter (January-March). Right now, it’s very difficult to predict this commodity (cycle). We have seen some correction in crude recently, though it has been marginal. I don’t expect too much of a fundamental correction happening for maybe another four to six months."
Price hikes have been “broad-based" across the portfolio of the company that sells Cinthol soaps and GoodKnight mosquito repellents. “We have been very judicious. We have to balance it out between strategic stock keeping units and categories and ensure the right balance between margins and growth," he said.
Others, however, are reaping the benefits of some lower input costs. Edible oil prices, for one, have risen sharply. However, last month the central government reduced import duties on edible oils, making them cheaper.
As a result, edible oil companies, including Adani Wilmar and Ruchi Soya, reduced the maximum retail price of their products by 10-15%.
Mumbai-based Marico Ltd said that among key inputs, copra prices were range-bound for most of the December quarter, before witnessing a correction towards the end of the quarter.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!