HUL, ITC, Parle: FMCG Firms Hike Prices The Second Time This Quarter As Input Costs Rise
FMCG firms have either hiked prices or are planning to as they bid to offset inflation of their key inputs.
Two of India’s largest consumer goods makers have hiked prices across categories for the second time this quarter, while others have guided for similar action as they look to offset high inflation of key raw materials.
While Hindustan Unilever Ltd. raised prices in the range of 4-22% across its soaps and detergents segment, it stood at 7-10% for ITC Ltd.’s personal care brands. Parle Products Pvt. plans to increase prices by 8-10% across its biscuits, snacks and confectionery products in the ongoing quarter ending December.
Higher prices of crude oil and palm oil, coupled with revival of demand for consumer goods have emboldened the companies to effect calibrated price hikes. Palm fatty acid distillate, a chemical used in home and personal products, has surged 60% to $1,220 per metric tonne in the past 12 months, according to Bloomberg data.
The price hike by the maker of Dove shampoos and Lux soaps will be over and above the 11.5% rise it had implemented during April-September, its distributors told BloombergQuint on the condition of anonymity. The company didn’t respond to BloombergQuint’s emailed queries.
Yet, analysts expect HUL to further gain market share.
“That’s because regional players won't be able to manage the working capital and they have lower pricing power,” Abneesh Roy, executive vice president of institutional equities research at Edelweiss Securities.
Grammage Reduction
Distributors for ITC told BloombergQuint on the condition of anonymity that its personal care brands Fiama, Vivel and Engage have turned costlier with bigger packs, especially those above 500 gm, bearing the brunt.
Smaller packs, they said, have witnessed a grammage reduction. The distributors sought anonymity as they feared business repercussions.
A spokesperson for ITC told BloombergQuint that prices of select items have been revised as a “last resort because input costs have gone up significantly”.
Transportation and packaging costs have also shot up, pressuring margins further.
Roy said companies have implemented price hikes to offset 75% of the input cost inflation. Still, they’re wary that passing on the full impact of the increase in input prices to consumers, wary that it may throw off course nascent demand recovery, he said. As a workaround, companies are cutting costs elsewhere such as promotions and advertisements.
“Edible oil (price) has gone up by 60-65% compared to last year, while wheat flour and sugar have turned costlier by 8-10%, making it difficult to absorb the cost,” Mayank Shah, senior category head at Parle Products, told Bloomberg Quint.
Dabur may also look at another round of price increases in the fourth quarter of the ongoing fiscal, its Chief Executive Officer Mohit Malhotra said. “Inflation remains a big concern and we aren’t seeing signs of any softening yet.”