Fast-moving consumer goods makers raised prices in April in a bid to offset the impact of renewed commodity cost inflation. These hikes are nominal yet expected to boost price-led growth in the current fiscal.
Owing to the rise in copra prices, Marico has taken a 6% price hike on select packs of its Parachute hair oil range, according to its Managing Director and Chief Executive Officer, Saugata Gupta. He expects domestic revenue growth to outpace volume growth in the first quarter of FY25 itself.
Godrej Consumer Products has taken a “mild” price hike in soaps as palm oil prices have hardened in the last few months, its Chief Financial Officer, Aasif Malbari, told NDTV Profit. “We expect sales growth to be ahead of volume growth in the second half of FY25 as price increases make a comeback.”
Hindustan Unilever Ltd. expects its near-term price growth to decline in low single digits, said Ritesh Tiwari, the company’s chief financial officer.
“If commodity prices remain where they are, we envisage price growth plateauing in the mid-term,” he said. However, the country’s largest consumer goods maker expects to take a “low single-digit” price hike in the second half. It is currently monitoring the raw material price situation.
Britannia managing director Varun Berry foresees inflation of about 3-4% this fiscal, particularly post-election. “The outlook for this year is not deflationary but of healthy inflation,” Berry said. Wheat and sugar, in particular, are expected to remain inflationary in the coming quarters, he said.
While the wheat output has been good, the government currently holds a low reserve, Berry said. An increase in government purchases could lead to a potential rise in wheat prices throughout the year. Furthermore, the lacklustre sugar production indicates a possible inflation in sugar prices.
The overall commodity inflation would be at “manageable levels,” he said. However, at present, Britannia is assessing the impact of input cost inflation.
Earlier, companies like Dabur and Emami also indicated modest price hikes to the tune of 1-3% in the current fiscal after factoring in the input price and consumption trends in different categories.
Pricing growth for the fast-moving consumer goods industry fell to 2.7% in 2023 as against 10% in 2022, according to market researcher NielsenIQ. This decline can be attributed to the decrease in prices for most products in the previous year. In 2022, there was unprecedented inflation in input costs, ranging from palm oil to crude oil to packaging materials, largely due to geopolitical factors. As a result, most companies have seen higher volume growth compared to growth in recent quarters, as prices have decreased despite overall demand remaining sluggish.
The companies are now flexing their pricing muscles as volumes finally show some signs of recovery. All eyes are on a likely good monsoon and anticipated rural spending post elections to further spur volumes. Roughly 70% of the growth in FMCG is driven by volume increases, with the remainder coming from price adjustments.
