FMCG companies are contemplating a price increase to offset the unprecedented level of inflation in commodities such as wheat, palm oil, and packaging materials. As a result, consumers will have to pay more for their daily essential purchases.
A bolt from the blue has been the Russia-Ukraine war, which has caused the price of wheat, edible oil, and crude to increase.
Price Hike By Dabur, Parle, HUL, Nestle
Calibrated price increases should be undertaken by companies like Dabur & Parle to combat inflationary pressures.
HUL and Nestle increased the prices of food products last week, according to some media reports.
According to Mayank Shah, Parle Products Senior Category Head, the industry is predicting an increase of 10-15 percent.
Since the prices are undergoing high fluctuations, it is difficult to determine the exact increase as a result of volatility.
In addition, he said the price of palm oil had risen to Rs 180 per liter and now has fallen to Rs 150 per liter, and the price of crude oil had risen to USD 140 per barrel and now has slipped below USD 100 per barrel.
With the demand reviving post-Covid, the companies are also hesitant to increase prices significantly, for fear of tampering with the demand.
The makers absorbed some of the price hike previously rather than resorting to price hikes to fully mitigate its impact. “Everybody is talking about a 10-15 per cent increase in prices, although the input costs have risen much more than that”.
Shah said Parle has enough packaging materials and other stocks and would make a decision about the price hike after a month or two.
According to Ankush Jain, CFO, Dabur India, the inflation continues unabated and is a cause for concern for the second year in a row. He said that
“Inflation and price increases have led consumers to tighten their purse-strings and rethink discretionary purchases, as well as down trade to smaller packs. We are closely watching the situation and will undertake calibrated price increases to mitigate the inflationary pressures.”
What Corporates Have To Say About It?
Edelweiss Financial Services Executive Vice President Abneesh Roy said FMCG makers pass high inflation onto consumers. “FMCG companies like HUL and Nestle have high pricing power,” he said. They are passing on inflation in Coffee and packaging materials. In Q1FY23, all FMCG companies are expected to increase their prices by 3 to 5 percent.
Companies like HUL and Nestle have raised the prices of food items such as tea, coffee, and noodles to maintain margins by passing along some of the burden to the consumers. A report indicates that the company has hiked the prices of Bru coffee, Brooke Bond tea, etc.
According to reports, the company has also raised the prices of its popular Maggi noodles by 9 to 16 per cent, along with milk and coffee powder. “We are experiencing consumer volume titration due to high inflation,” said a HUL spokesperson. Our priority is to provide value to consumers, invest in our brands, and protect our financial model in this environment.”
He continued, “We mitigate cost inflation by driving our savings agenda harder, looking at all cost lines with a laser-sharp focus, and removing any non-value-adding costs. Because of the inherent strength of our brands and our execution capabilities, we have been able to provide the right price-value equation to the consumer, thus maintaining our business model during a highly inflationary period.”
