HUL To Marico Set To Hike Prices Even More In 2022 As Input Inflation Persists

Consumers will have to shell out more for biscuits and staples to shampoos as the New Year is unlikely to bring relief from elevated input costs and disrupted supply chains.

Makers of fast-moving consumer goods are expected to increase prices by 4-20% depending on the pack size and category in 2022, according to the industry executives BloombergQuint spoke with.

The next round of hikes will be in addition to the increases over the past few quarters as companies grapple to absorb rising commodity and logistics costs. According to Bloomberg data, key inputs like crude, Malaysian palm oil and sugar have surged 60.6%, 65% and 20%, respectively, so far this year.

“We’re looking to raise prices by 5% of all products, including packaged wheat flour, basmati rice and pulses, barring edible oil, next month,” Angshu Mallick, chief executive officer of Adani Wilmar Ltd., told BloombergQuint.

While edible oil prices were cut 10-15% on the back of steady international rates and the government slashing import duty, other costs have only risen, he said. Packaging has gone up by 16-20%, he said.

Wheat—used to make bread, biscuits and other confectionaries—has turned 10.1% costlier over the preceding year in November, data from the Ministry of Commerce and Industry showed.

Wide-Ranging Hikes

Biscuit maker Parle Products Pvt. plans a 4-5% hike. While prices of certain raw materials fell in the last few months, basic inputs—wheat flour and milk—are showing no signs of abating, according to Krishnarao Buddha, senior category head-marketing at the company.

Dabur India Ltd. plans an increase in early 2022 but didn't disclose the quantum. “Inflation in recent quarters has been truly unprecedented at over 9%,” Chief Executive Officer Mohit Malhotra said.

The maker of Vatika hair oil and shampoo has already upped prices across most of its product portfolio by 4-5% between October and December, its distributors told BloombergQuint on the condition of anonymity as they feared business repercussions.

Britannia Industries Ltd. plans to bump up prices by 10%—its steepest jump—in quarter ending March. Two-thirds of the hike will be through grammage reduction and a third would be a direct increase in retail price, the owner of Good Day, Tiger and Marie Gold brands said in an investor presentation. The company had increased prices in each of the preceding three quarters: 7.5% in Q3, 4% in Q2 and 1% in Q1.

A Clearer Picture By January

Hindustan Unilever Ltd., Nestle India Ltd., Marico Ltd. and Tata Consumer Products Ltd. didn’t respond to queries from BloombergQuint.

Distributors of the four companies from five states, who spoke on the condition of anonymity, said a price rise is inevitable for all brands though the quantum will be known during the next billing cycle in January.

In December, HUL raised prices of its soaps and detergents by 7-10%, the distributors said. Its hair oil, skin care and home care products turned costlier by as much. That, according to analysts, will cover inflation at the cost of volumes.

“With 30% of the portfolio at convenient price point (Rs 5-20), we expect cuts in grammage to impact volumes,” analysts at Nomura wrote in a note. The cumulative price hike is estimated to be higher at 9% in third quarter as against 7% in the second quarter, it said.

“While we’re cautious in the near term, given slowing rural demand and high input cost inflation, the long-term story remains intact,” Nomura said.

Analysts also expect HUL’s margin pressure to ease from the new financial year. “Input cost scenario remains volatile with uncertainty around the Omicron Covid variant even as we expect HUL’s margins to bottom out in Q3,” Amnish Aggarwal, head of research at Prabhudas Lilladher Pvt., said.

Nestle India’s Chairman and Managing Director Suresh Narayanan had indicated consumers should expect price increases in 2022. “The new year is promising to be a difficult year... there’s going to be a spectre of food inflation staring at us.”

Not all companies are planning hikes though.

Bikanervala Foods Pvt. isn't increasing prices as of now to sustain volumes, its director, Manish Aggarwal, told BloombergQuint. The family-run seller of packaged snacks under the Bikano brand plans to increase the frequency of supplies to distributors to ensure availability of stock.

Yet, the company won't hold on for long. "If the commodities continue to show an upward trend from now, we'll be bound to increase market prices."

Preparing For Omicron Disruption

The rapid spread of Omicron and its impact on battered supply chains is adding to uncertainties for packaged goods companies. Many are beefing up their online presence and stocking up adequately to tide over any potential demand-supply mismatch, having learnt from the past two waves.

“We have been taking stock of operations continuously,” an ITC spokesperson said. “Our supply chain, having adequate inventory across various nodes in multiple geographies, is now in a much better position to address any challenges arising because of any restrictions.”