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Sindhu J. Bhattacharya

New Delhi , Oct. 6

COULD it be the storm after a lull? A few months after downward price revisions, there is a likelihood of the Fast Moving Consumer Goods (FMCG) industry gearing up for price hikes across some products. While industry leader Hindustan Lever Ltd (HLL) has already initiated the upward price revision process by announcing hikes in Surf Excel Quickwash sachet, Clinic All Clear shampoo and all its packaged tea brands, analysts said other companies could soon follow suit.

Said Mr Rajesh Jain, CEO of Pranav Securities, "HLL continues to be the price leader in the categories it operates in. When the price leader is taking a hike, it means the cost curve has reached a point where it is impossible for competition not to increase prices. Rival companies would have to sell at a loss otherwise."

Mr Jain's sentiment is echoed by Mr Vijay R. Singh, Vice-Chairman of India Household and Healthcare Ltd, the sole licensee of LG Household and Healthcare Ltd. Mr Singh feels that both, steep input cost increases and HLL's price increase decision leave little room for maintaining current prices.

"It is apparent that there is a market out there for premium priced products. Some of our products are as much as 50 per cent higher than HLL but they sell and do good volumes," he said while adding that since the company has already priced its products at a premium, it was not contemplating any immediate price increases.

Another industry analyst said that though both, HLL and Procter & Gamble India sell premium priced products, many of their products have a large footprint in terms of SKUs and market penetration. Thus, any price revision by one player in such categories is bound to impact the fortunes of competitors.

Mr Jigar Shah, an analyst with KP Choksey, said if FMCG companies decide against price hikes in the short run, they may resort to cutting advertising and promotional spends.

"In some products there could be price increases. However, if large FMCG companies decide to absorb input cost hikes, their bottomlines could be impacted."

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