CHENNAI : FMCG Companies Prepared for Price Hikes Business
FMCG companies, including Hindustan Unilever and Godrej Consumer Products, are preparing for price hikes due to ongoing inflation in crude palm oil, tea, coffee, and edible oils. Rising costs, including import duties, have already impacted margins. Companies are implementing price increases to counter higher input costs, with Marico and Tata Consumer also adjusting prices accordingly.
CHENNAI : With prices of several commodities remaining firm, FMCG companies intend to increase prices of products in the current quarter. While crude oil prices have been volatile in recent times, prices of edible oil, especially palm oil, tea, coffee have seen much inflation. FMCG companies had passed part of the higher input costs to the consumer in the previous quarter and they are prepared for further hikes if prices remain firm.
“Crude palm oil and tea experienced inflation of 10 per cent and 25 per cent year-on-year, respectively. Given our assessment, that this price increase is here to stay, we are now taking calibrated price increases.
While crude oil remained benign during the quarter, there has been recent volatility in prices owing to geopolitical tensions,” said Hindustan Unilever. “We remain vigilant and are watchful of any price fluctuations that seem to persist. In this dynamic environment, we continue to remain agile, taking actions to provide a competitive price-value equation to our consumers,” HUL added in its investor presentation.
According to Sudhir Sitapati, CEO of Godrej Consumer Products, the company’s EBITDA margin was at the lower end of the targeted band due to high inflation on palm oil. “The already high prices were further exacerbated by the import duty on oil. We think this is a short-term hit, and we will recover the margin through judicious price increases and stabilizing our costs over the next few quarters,” he said.
In the case of soaps, Godrej has taken sequential price hikes. “It is positive pricing this quarter also. Next quarter or this quarter onwards, we will see significant price growth and next quarter will be even higher,” he said. Higher palm oil prices have a bearing on soaps and FMCG companies alternatively reduce the grammage as well to counter the sudden surges. Marico is monitoring the food and retail inflation spike in September. “Copra prices are up 25 per cent compared to the same period last year and rice bran oil 7 per cent up. We will take calibrated pricing actions in response to the rising trend in input cost,” it said.
Tata Consumer products finds that tea prices were 28 per cent higher for the September quarter in North India and 25 per cent up in South India. Average coffee prices for Q2 were 82 per cent higher on a y-o-y basis. Staggered price increases have been actioned across Tata’s tea brands and price increase has been announced in Tata Salt. ITC finds that surge in domestic wood prices and ocean freight continue to weigh on margins of paper and paper products.
Source Link : https://www.deccanchronicle.com/business/fmcg-companies-prepared-for-price-hikes-1836236
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