FMCG companies to go easy on price hikes
2 min read . Updated: 08 Feb 2023, 12:01 AM IST
PremiumTo protect volumes, firms may reduce the intensity of price hikes or raise the quantity offered in packs
NEW DELHI : As raw material prices cool off after nearly two years of staying elevated, packaged consumer goods makers may reduce the intensity of price hikes in the coming quarters, and even reduce prices in some cases.
Steep input prices had prompted fast-moving consumer goods (FMCG) companies to raise prices across categories such as biscuits, shampoo and detergents, eroding consumer demand. Some resorted to “shrinkflation" as well, effectively reducing pack sizes and selling less quantity of products as an alternative to direct price hikes.
Mumbai-based Godrej Consumer Products Ltd, which sells soaps, insecticides and hair colour, said it may reduce prices of products in its portfolio further after recently slashing soap prices. “Inflation is easing and there should be some return to growth — it will be a question of timing," said Sameer Shah, chief financial officer, Godrej Consumer Products Ltd (GCPL).
GCPL, which raised prices by an average of 10-11% in the second quarter, reduced it to 6-7% in the third quarter. “We did take price cuts early in the December quarter in the soaps portfolio. It depends as to how the commodity scenario shapes up. As and when there is an opportunity for price cuts and driving market share, we will be very happy," Shah said in an interview.
To protect volumes, companies may reduce the intensity of price hikes or increase the quantity of products offered in a pack.
Peak raw material inflation is already behind companies, said Abneesh Roy, executive director, Nuvama Institutional Equities. “Price cuts will be few, like what one has seen in categories such as soaps; however, in other categories, consumers can expect to see some promotions."
In its earnings presentation last week, packaged foods maker Britannia Industries pointed to continuing food inflation in India, though at a slightly lower level.
With food inflation cooling quarter-on-quarter due to a drop in palm oil, analysts at Prabhudas Lilladher said it does not expect Britannia to take any further price hikes.
At its post-earnings call, Varun Berry, vice-chairman and managing director, Britannia Industries Ltd said: “I don’t think there’s going to be a substantial price increase. We will be only be opportunistic whenever necessary for certain stock-keeping units," he said.
Separately, in its earnings call, Sanjiv Mehta, CEO and managing director, Hindustan Unilever, said: “If commodity prices again flare-up, we might again have to go back to the books and see how do we protect the business model."
