FMCG companies are considering another round of price hikes to mitigate the impact of historic levels of inflation in commodity costs such as wheat, palm oil, and packaging materials, which may force consumers to pay more for their daily essentials.
Furthermore, the ongoing conflict between Russia and Ukraine has dealt another blow to FMCG producers, as they anticipate higher wheat, edible oil, and crude prices.
Companies such as Dabur and Parle are watching the situation and will undertake calibrated price increases to mitigate the inflationary pressures. According to some media reports, makers such as HUL and Nestle have increased the prices of food products last week.
“We are expecting a 10-15 per cent hike by the industry,” Parle Products Senior Category Head Mayank Shah told PTI.
Shah further noted that the prices are witnessing high fluctuation and hence it would be difficult to tell about the exact increase due to volatility of price.
The price of palm oil had increased to Rs 180 per litre and now has come down to Rs 150 per litre. Similarly, crude oil prices had risen to nearly $140 a barrel and has now slipped below $100 per barrel, he added.
“However, it is still higher than what it was earlier,” Shah said, adding that the companies are also hesitant in taking price increases significantly because demand was reviving after COVID and they do not want to tinker with that.
Last time, the makers did not take the price hike to completely mitigate the impact and had absorbed some part of that.
“Everybody is currently talking about a price hike of 10-15 per cent, although the input cost has gone much more than that,” he said.
When asked as to whether Parle would also go for a hike, Shah said right now it has enough stock of packaging materials and other stocks and would take a decision after a month or two on this.
Expressing similar thoughts, Dabur India Chief Financial Officer Ankush Jain said inflation remains unabated and is a cause of concern for the second year in a row.
“The inflationary pressures and resultant price increases have led to consumers tightening their purse-strings and relooking at discretionary purchases, while also downtrading to smaller packs. We are closely watching the situation and will undertake calibrated price increases to mitigate the inflationary pressures,” he said.
Commenting on the current situation, Edelweiss Financial Services Executive Vice President Abneesh Roy, said FMCG makers are passing high inflation to consumers.
“FMCG companies like HUL, Nestle have high pricing power. They are passing on inflation in Coffee and packaging materials. We expect all FMCG companies to take a further hike of 3 to 5 per cent in Q1FY23,” he added.
An HUL spokesperson had said, “We are witnessing consumer volume titration due to the impact of high inflation. In this environment, our priority is to provide value to consumers, invest behind our brands and protect our financial business model.”
“We mitigate cost inflation first by driving our savings agenda harder, looking at all cost lines with a laser-sharp focus and removing any non-value-adding cost.
“Considering the inherent strength of our brands and our execution prowess, we have been able to provide the right price-value equation to the consumer, thus helping protect our business model in a highly inflationary scenario,” he added.