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Business News/ Companies / News/  FMCG firms offer deals to consumers as input prices cool
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FMCG firms offer deals to consumers as input prices cool

After multiple price hikes over months began to hurt sales, companies selling daily household goods such as toothpaste, soaps and biscuits are beginning to offer higher weight for the same price, or discounts on retail shelves

FMCG firms offer deals to consumers as input prices coolPremium
FMCG firms offer deals to consumers as input prices cool

After multiple price hikes over months began to hurt sales, companies selling daily household goods such as toothpaste, soaps and biscuits are beginning to offer higher weight for the same price, or discounts on retail shelves.

Many packaged goods companies were forced to raise prices over the last several months as commodities including palm oil, crude as well as packaging turned expensive. However, incessant price hikes have also impacted FMCG volumes.

Several companies Mint spoke to said that in order to maintain volumes and ward off competition, they are offering price cuts on modern trade shelves, or giving benefits such as extra cookies in a pack or more grammage.

It also helps that prices of some commodities such as palm and crude oil have cooled from their peaks.

“Now that the prices (of commodities) have sort of settled, companies are trying to lure consumers back because their profitability is sort of taken care of, they have taken necessary price corrections. They are left with a breather; so they are able to give a price-off, a volume promotion, or a freebie. However, in our biscuit industry, we are still impacted by prices of wheat and sugar—those are still high even through oil has cooled," said Krishnarao Buddha, senior category head at Parle Products.

Companies selling edible oils and soaps were the first to start reducing prices as palm oil prices stabilized. However, those selling other packaged goods have resorted to other methods instead of direct price cuts. These include discounts at retail stores or extra grammage and freebies.

While commodity prices stay high, Amitabbh Singh, senior vice-president at Patanjali Ayurved Ltd, said the need to preserve market share amid growing competition and tepid consumer demand is prompting the company to run aggressive promotions. Patanjali that sells a whole range of fast moving consumer goods is running promotions on packaged wheat, hair care products, toothpaste, honey and chyawanprash, and recently cut soap prices. Singh said prices are unlikely to go down across the entire sector, with manufacturers instead choosing to do on-trade promotions. “We have to do it to gain volumes back and gain market shares. Companies will be unable to pass on direct price cuts to consumers but we will see some offers instead," he said.

After rising for eight quarters continuously, crude oil prices cooled off in the past two quarters. However, prices remain at elevated levels, analysts at Motilal Oswal Financial Services said in a 30 November note. Palm oil prices too have corrected from their peak levels.

“If input costs correct further, companies may pass on the benefit to consumers immediately to boost demand, especially in rural India. A few companies have started to pass on the benefit to consumers," they said.

Modern trade retailers said competition intensity in terms of product launches is significantly high; as a result, companies are feeling compelled to dole out offers. “The interest by more established brands towards in-store promotions is definitely on the higher side this year, compared to previous years," said Amit Dutta, CEO at modern retail chain Le Marche Retail.

Dutta added that as footfalls to modern trade outlets have returned, competitive intensity is high.Meanwhile, Aditya Goel, co-founder, Love in Store, a store loyalty management company that works with over 50 FMCG companies said that with input costs stabilizing, two things are visible—price correction on products like soaps and oils, and in-store promotions. “There is heavy investment shift to top stores in the form of promos, assets, visibility, price-offs; focus on large, stand-alone grocery and daily needs stores are a key priority," he said.

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ABOUT THE AUTHOR
Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Published: 11 Dec 2022, 09:21 PM IST
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