Unprecedented inflationary headwinds pose significant challenges in the near term and remain a key monitorable for the FMCG industry, said in its report on Wednesday.
The report notes that the FMCG industry as a whole witnessed some moderation in growth owing to subdued demand conditions in rural markets, high inflation eating into household budgets and high base effect in categories like staples & convenience foods.
“The year saw an unprecedented increase in prices of key inputs such as edible oils, packaging materials, soap noodles, fuel, logistics, etc. which exerted considerable pressure on margins,” it says.
FMCG companies have been under pressure owing to the spike in commodity prices. “Every category has had inflationary headwinds,” said Sanjay Singal, chief operating officer for the dairy and beverage segment had told Bloomberg.
Many FMCG companies opted for ‘shrinkflation’ to cope with rising input prices while managing customer demand, wherein they pared the weight of the product in their cheapest packages as prices of grains, oils and fuels spiked. Some companies did hike prices to pass on the cost to the customers.
But some commodity pressures have now eased. Palm oil has dropped below $1,300 per metric tonne from highs of $1,800-1,900 while crude oil has retreated to less than $107 per barrel, down from a peak of about $130. These together account for more than half of companies' input costs.
As per a ET report, packaged consumer goods makers said they will not slash prices despite the correction in two crucial commodities - crude and palm oil - but will instead slow the pace of price increases.
Financials
ITC’s FMCG businesses saw a segment revenue of Rs 15,994.5 crore for the year, up 8.6% YoY while the segment EBITDA grew 10% to Rs 1,449 crore. Margins remained sustained at 9.1%.
Analysts had suggested that a favourable product mix negated some of the raw material inflation.
Analysts are also constructive on the stock owing to a better-than-expected demand recovery and a healthy margin outlook in the cigarettes business, healthy sales momentum in the FMCG business, lower drag from its hotels business, and better capital allocation in recent years.
The report notes that the FMCG industry as a whole witnessed some moderation in growth owing to subdued demand conditions in rural markets, high inflation eating into household budgets and high base effect in categories like staples & convenience foods.
“The year saw an unprecedented increase in prices of key inputs such as edible oils, packaging materials, soap noodles, fuel, logistics, etc. which exerted considerable pressure on margins,” it says.
FMCG companies have been under pressure owing to the spike in commodity prices. “Every category has had inflationary headwinds,” said Sanjay Singal, chief operating officer for the dairy and beverage segment had told Bloomberg.
Many FMCG companies opted for ‘shrinkflation’ to cope with rising input prices while managing customer demand, wherein they pared the weight of the product in their cheapest packages as prices of grains, oils and fuels spiked. Some companies did hike prices to pass on the cost to the customers.
But some commodity pressures have now eased. Palm oil has dropped below $1,300 per metric tonne from highs of $1,800-1,900 while crude oil has retreated to less than $107 per barrel, down from a peak of about $130. These together account for more than half of companies' input costs.
As per a ET report, packaged consumer goods makers said they will not slash prices despite the correction in two crucial commodities - crude and palm oil - but will instead slow the pace of price increases.
Financials
ITC’s FMCG businesses saw a segment revenue of Rs 15,994.5 crore for the year, up 8.6% YoY while the segment EBITDA grew 10% to Rs 1,449 crore. Margins remained sustained at 9.1%.
Analysts had suggested that a favourable product mix negated some of the raw material inflation.
Analysts are also constructive on the stock owing to a better-than-expected demand recovery and a healthy margin outlook in the cigarettes business, healthy sales momentum in the FMCG business, lower drag from its hotels business, and better capital allocation in recent years.
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