As commodity costs declined in the first month of the calendar year, leading CPG companies cut prices on some of their flagship products
Mumbai: Given the budget’s rural thrust, consumer packaged goods (CPG) companies are hopeful of a volume-led growth recovery in the latter half of the calendar year.
As commodity costs declined in the first month of the calendar year, and volumes remained muted, leading CPG companies cut prices on some of their flagship products.
The raw material cost index for consumer companies dipped 0.7% over the preceding month and was 3.8% lower than a year ago, giving companies room to continue with aggressive product pricing, said brokerage Religare Securities Ltd in a 1 March report.
CPG sales hit a five-year low in the December quarter following rural slowdown after two consecutive years of deficit monsoons and declining incomes. Even urban recovery has been slower than expected.
Benign commodity prices will help in pushing sales as companies will continue with their aggressive pricing strategy and high advertising and promotion spends.
Demand will pick up over the next six months to a year, as the allocation of ₹ 38,500 crore for the Mahatama Gandhi National Rural Employment Guarantee Scheme (MGNREGA), one of the largest in recent years, is expected to help lift demand following the budget, said Varun Berry, managing director, Britannia Industries Ltd.
Prices of copra were lower by 10.1% month-on-month, vanaspati oil was cheaper by 5.2% and light liquid paraffin oil was down 3.2% over December. Hair oil and detergent manufacturers like Marico Ltd, Dabur India Ltd and Procter and Gamble Home Products Ltd (P&G), which used these raw materials, passed on the benefits of lower prices by taking price cuts.
In the hair oil segment, softer copra prices enabled Marico to cut prices of its flagship brand Parachute Coconut Hair Oil (100ml) by nearly 6% over the month-ago in February to ₹ 31 from ₹ 33. Rival Dabur also reduced prices by over 8% of its 100 ml Dabur Amla hair oil pack to ₹ 41.7 from ₹ 45.5 in January.
In the highly penetrated and competitive detergent segment, P&G, the unlisted subsidiary of the Cincinnati-headquartered firm, is offering ₹ 25 off on Ariel Complete washing powder, at ₹ 160 for a kg as compared to ₹ 185 in January. P&G’s other detergent brands Tide Plus and Tide Naturals are also cheaper now than a year ago, whereas rival Hindustan Unilever Ltd’s brands Surf Excel Quickwash, Rin and Active Wheel are more expensive now than a year ago.
While prices of most categories like shampoos and soaps remained unchanged, the one category that saw price hikes across the board was the toothpaste category. The toothpaste segment saw most of the larger companies like Colgate-Palmolive India Ltd, Hindustan Unilever and GlaxoSmithKline Consumer Healthcare Ltd initiating price hikes in January. Colgate and Hindustan Unilever increased the prices of Cibaca and Pepsodent 2-in-1 by about 2.3% and 2.2% in February over the month ago, respectively. GSK hiked the prices of Sensodyne by 7.1% over the month ago by reducing the quantity to 70g from 75g earlier, said the Religare report.
A price hike was also resorted to by Britannia Industries for Nutrichoice Oats biscuits by ₹ 5 to ₹ 60 for the 150g pack. But “pricing and promotions were largely unchanged in most of the food and beverage categories like health drinks, noodles, milk, coffee, tea and butter," said Premal Kamdar, analyst, Religare Securities, in the report.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!