Competitive intensity and softer raw material prices have resulted in a reduction in prices of soaps and edible oils in the second quarter, but fast moving consumer goods companies will avoid taking further price cuts as they are focused on protecting margins with some raw material prices inching up, BNP Paribas said in a note.

Some categories such as oral care and value-added hair oil have seen prices hikes in the quarter, it said.

Price Cuts

In the soaps category, intense competition, especially in the mass segment, has resulted in price cuts of around 4 per cent in Q2, with grammage reversals and anniversariation, as companies jostle for market share. The price cuts have been minimal in the premium category, which is less price sensitive. BNP Paribas said prices of premium soaps are at high levels, having risen 20-35 per cent on year, and more price cuts may be needed to drive volumes.

The brokerage said Godrej Consumer Products continues to take price cuts, while Hindustan Unilever has cut prices for its mass brands “to remain competitive.” Lux has seen an 18 per cent price reduction in the past three months, while other brands have reduced prices in the 0-4 per cent range. But more price cuts are unlikely, as rising palm oil prices can put margins at risk.

Edible oils

Another segment that has seen price declines is edible oils, where raw material prices have seen a steep correction. In this category, Sundrop has seen the steepest price cut of 18-32 per cent, followed by Fortune (17-31 per cent) and Saffola (9-16 per cent), data by BNP Paribas showed.

With a softening in raw material prices, edible oils have seen more price cuts over the last three months, said the note.

Price Hikes

The oral care segment has seen 3-13 per cent price hikes in the premium and gel categories across brands over the past six months. In Q2, price hikes for most oral care companies were in the low double digits. Colgate, HUL and Dabur have raised prices by 10-15 per cent in the last one year.

In the value-added hair oil category, the mass segment has seen price hikes, despite the competitive intensity, which has spiked with the softening of liquid paraffin prices.