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New Delhi: Manufacturers of large packaged consumer goods are deferring promotional offers to retailers and consumers while raising product prices, as they tackle an increase in commodity costs.

Companies typically offer incentives to retailers and consumers to boost sales. For instance, extra units of a product or discounts are offered to retailers to encourage them to sell more.

Consumers also tend to receive offers such as extra grammage and freebies. However, with cost pressures inching up, companies are looking at ways to trim costs.

“We have also reduced some of the trade offers and promotions (that is, offers made to retailers for stocking products which include extra packs, etc.,) and below-the-line initiatives with retailers and distributors," said Ullas Kamath, joint managing director, Jyothy Labs, which makes Pril dishwashing liquid and Margo soap.

“We have taken a selective price hike in our portfolios, and it has given some benefits while reversing some of the trade promotions and schemes," he said.

Jyothy Labs saw a 6% rise in input costs in the March quarter. Kamath said the costs of commodities such as palm oil, raw materials for producing detergents and packaging materials have increased.

Most companies have taken price increases and reduced promotions to pass on the cost inflation, an analyst tracking the sector said, requesting anonymity.

Prices of tea, cooking oil and soaps have risen over the last two quarters. Mumbai-based consumer goods company Godrej Consumer Products Ltd (GCPL) said it has delayed consumer offers planned for the first and second quarters.

Meanwhile, fast-moving consumer goods (FMCG) companies are also deferring their promotional schemes as fewer consumers are visiting stores during the pandemic.

“Companies will take a trade promotion dip right now, they will also delay consumer promotions and new launches because for new launches they want consumers in the store," said Aditya Goel, co-founder, Love in Store, a trade activation and execution company that works with large FMCG firms.

In a filing on its website, Marico Ltd listed the prices of more than 90 stock keeping units and variants of brands such as Saffola cooking oil, oats, Parachute, Nihar. Only four of these products had consumer offers running in April.

In its March quarter earnings, Marico said it recorded growth in sales volume of its Parachute hair oil brand, despite withdrawing offers and making price increases.

“Parachute Rigids grew by 29% in volumes in Q4FY21 on a lockdown-affected base. The brand firmly held its ground, despite a pullback of consumer offers and MRP (maximum retail price) increases during the quarter, in response to the sharp inflation in copra prices," the company said.

Dabur India Ltd did not say whether the company has withdrawn or trimmed its trade offers and promotions. However, it said it will continue to pursue price increases and undertake cost-cutting measures amid rising commodity costs.

Dabur is witnessing unprecedented commodity inflation of about 5-6% across agri-commodities such as edible oils, herbs, spices and honey among others, besides hydrocarbons.

“We have undertaken some calibrated price increases of around 3% to mitigate this impact. However, it is not enough to offset the impact completely and we will look at another round of price hikes, going forward," said Mohit Malhotra, chief executive officer.

Companies are also facing other challenges such as supplying to stores that work under restricted timings and dealing with cases of covid-19 in its frontline workforce.

“So, extra incentives are going towards enabling the workforce. Brands have started focusing more on core products rather than on a wide assortment to ensure strong availability. Hence, the number of stock-keeping units in circulation have also reduced as it simplifies manufacturing and also helps ensure uninterrupted distribution," said Akshay D’Souza, chief marketing officer at Bizom, a retail intelligence platform.

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