The Hindu Business Line : … even as FMCG firms plan one more round of hikes

Chennai, July 9 It was inevitable. Consumer goods firms, which had a round of price hikes for their brands just a couple of months ago, are set to hike prices all around, if they haven’t already.

Driven to the wall with the surge in oil prices and the resultant hike in petro-products which go into products such as shampoos and detergents and also into packaging, fast moving consumer goods firms say that they have no option but to pass on the costs to consumers.

As Mr V.S. Sitaram, COO, Consumer Care, Dabur India, points out, in its hair oil brand, Dabur Amla, which forms a substantial part of its portfolio, the company had taken a price increase of 5 per cent in April and expects to take it up by another six per cent soon. Vatika, its shampoo brand, has seen a 10 per cent increase. Considering that for the full year in 2007 Dabur Amla saw only a two per cent increase, this year’s increase is substantial. “With a 50 to 75 per cent increase in key raw materials, there is only so much you can do and we have to pass on the costs to consumers,” he says.

Cost-push inflation is a leitmotif right across FMCG firms. As Henkel India’s Vice-President, Marketing, Mr Ranju Mohan, says, the increasing cost of key raw materials, especially LAB (linear alkyl benzene), a petro product which goes into its detergents, is being monitored all the time. Its Henko brand of detergent, which saw a price increase of Rs 2 just three months ago to Rs 95 for a 1 kg pack, may now go up to Rs 102. “We review the formulation of our brands and see if we can tweak it to reduce costs,” he says.

CavinKare Pvt Ltd, which makes a range of shampoos, deodorants, fairness creams and foods, increased prices by 5 to 10 per cent in April and expects another round of price increase by 5 per cent next month. The increase in oil prices, says Mr Ramesh Viswanathan, Executive Director, is a double whammy since it hits both the raw material costs as well as packaging costs. And, in the foods business, vegetable prices too have been going up. CavinKare makes a range of pickles, which will take the brunt. “I am expecting a slowdown in demand. The price increases will have an impact and I see tough times for industry in the next six to eight months,” he says.

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