New Delhi: Large FMCG companies took to moderate price hikes in laundry detergents, soaps, fairness creams, hair oils, toothpaste, edible oils, tea, ghee and curd in response to rising inflation across key raw materials.
Inflationary trends have been prevalent in crude oil, palm oil, vegetable oil, and tea. Crude derivatives are among raw materials used by many consumer firms. Overall, freight and packaging costs have shot up too for companies. Palm Fatty Acid Distillate—a chemical used in all home and personal products has witnessed 36% inflation in the past twelve months.
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Companies could be required to take further price hikes in the short term to sustain margins, according to a report released by Elara Capital. “Due to inflation in petrochemicals, vegetable oil derivatives and other agro-commodities we expect price hike of 2-16% by most companies. Packaged food brands using palm oil as key raw materials requiring 3-16% price hike while companies in home and personal care needing around 3-13% price rise to sustain margin at current levels,” Sagarika Mukherjee at Elara Capital said in the report.
The report added that companies such as Hindustan Unilever Ltd, Nestle India, Colgate Palmolive India, Emami, Tata Consumer Products and Marico took incremental price hikes in February 2021.
Dabur India Ltd said it may consider undertaking selective and judicious price hikes in its portfolio while undertaking cost efficiencies.
“While we had seen muted inflation through most part of the last one year, the recent months have seen inflation inching up for some key raw materials. Besides, the rise in fuel prices would certainly add to the inflationary pressures. We are working towards managing the impact through our synergies and cost efficiencies. However, we may consider undertaking only selective and judicious price hikes, which will also depend on the competitive scenario in the market, to protect our margins,” said Lalit Malik, the company’s chief financial officer. The company sells hair oils, juices, shampoos and over the counter products.
Wipro Consumer Care and Lighting that makes Santoor brand of soaps took an 8% hike in its soap portfolio over the last three to four months. “Palm oil prices have gone up dramatically, which is a key ingredient, as far as soaps are concerned and you’d have seen, everybody’s announced price hikes in soaps. Even in Chandrika which we make from coconut oil we’ve taken a price hike there. The price hikes have been to the tune of 8% in the last three to four months,” said Vineet Agrawal, CEO, Wipro Consumer Care & Lighting and Executive Director, Wipro Enterprises said in a media roundtable earlier this month.
Elara tracked price hikes taken by top FMCG firms in February. Hindustan Unilever Ltd increased prices in its mass market detergent brand—Wheel to the tune of 14-17% quarter-on-quarter and on select detergent bars; there is no price change in premium laundry brands. Marico Ltd, in the meanwhile, has taken 7% price hike in large stock-keeping unit of its Nihar Shanti Amla hair oil apart from withdrawing in select Parachute packs offered in the third quarter. In edible oil—Marico has taken price hike of 5-8% quarter-on-quarter across SKUs to offset sharp inflation in vegetable oil.
Mukherjee at Elara said that for soaps and hand washes further price hikes could be contained as companies have already taken strong pricing actions.
For snacking companies that operate at ₹5, ₹10 and ₹20 price points, even marginal price hikes are not feasible, though a sharp jump in prices of edible oils, crude oil and raw materials like gram flour has led to inflationary pressures. “Crude prices are up sharply as a result freight costs are high, packaging price has gone up too; what we are trying to do is whichever category has a very sensitive price point we are trying to lower grammage or trying to rationalize channel margins and then absorb as much as possible. We are also working on new productivity measures wherever possible,” said Subhashish Basu, chief operating officer at snacking company Prataap Snacks.
Demand for fast moving consumer products improved in the December quarter but was down 2% in 2020, market research Nielsen said in its quarterly estimates.
Analysts at Motilal Oswal Financial Services Ltd said most consumer goods companies are expected to either return to or exceed pre-covid sales levels in the fourth quarter of the current fiscal. “Price hikes taken by most companies earlier in the year as well as during the quarter, combined with continued stringent cost-control measures, should offer some relief from the sequential inflationary trends seen in most commodities,” the brokerage said in a report dated 9 March.