Economy

FMCG companies, food majors hike prices; soaps to biscuits set to become costlier

Abishek Law | | | Updated on: Nov 26, 2021
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FMCG companies say that raw material costs have shot up and price hikes were the last resort

India’s largest FMCG firms and food companies — which include the likes of HUL, ITC, Parle and Britannia — have hiked prices of regular use offerings covering detergents, soaps, deodorants and food items such as bread, biscuits, confectioneries and salty snacks; citing high raw material prices.

Price hikes vary between 3 and upwards of 20 per cent depending on the pack size, offerings, and other factors. This is the second hike in FY22.

Other players such as Jyothy Labs, P&G, Britannia, Parle, among others are either following suit or have already initiated “calibrated increases” for the December quarter across their larger stock keeping units (SKUs).

Parle, according to distributors, has already put in place a select 8-10 per cent hike; while Jyothy Labs said there will be a 4-5 per cent hike on larger SKUs of detergents and soaps during the ongoing quarter (Q3FY22). Procter and Gamble has already initiated a 4-10 per cent hike, distributors and analysts said.

Also read: FMCG players rejig sachet strategy as margin pressure mounts

Confirming the price hikes, B Krishna Rao, Category Head. Parle Products, said, the March quarter (Q4FY22) is also expected to witness price hikes as commodity cost pressures continue. Overall in the first 10 months, hikes have averaged out between 6 and 8 per cent; but some category and brand-wise increases were higher to the tune of 15 per cent.

“Rusks, snacks (wafers and salted snacks) have seen multiple rounds of increase, confectionery items have seen one round of hike now, cakes saw a hike and so on. In fact, we estimate another round of hike in the March 2022 quarter. As of now, the price increases have come in all categories, across all pack sizes. Or there is grammage reduction. We really can’t help this time with raw material costs and packaging costs going up,” he told BusinessLine .

Calibrated hikes

Price hikes have been restricted to select large SKUs and brands at the moment, as companies generally do not want to lose out on market share gains.

According to Ullas Kamath, JMD, Jyothy Labs, there will be calibrated hikes across select large SKUs — including one kg, 500 gms, etc – to the tune of 4-5 per cent. This will be effective in the December quarter.

“Larger FMCG players, who are market leaders in some of the categories have increased price. So there is scope for us to do the same now. April onwards price increases were happening in select SKUs; but now the hikes are more obvious, visible, and spread out across brands and categories. For Jyothy Labs, this is the second round of price hike this fiscal,” Ullas Kamath, JMD, Jyothy Labs, told BusinessLine .

The current round of hikes saw HUL’s popular detergent brand Wheel become 4-7 per cent costlier with a 500 gram pack selling at ₹30, up by ₹2. Rin (fabric wash bar) and Lux soaps have seen price revision too.

ITC’s Vivel soap (100 grams) price is up by 9 per cent; Engage deodorant (150 ml) — amongst the market leaders — has seen a 7 per cent increase in MRP, retailers and distributors said.

P&G’s offerings have seen a price rise of 4-5 per cent in case of Ariel and Tide ; while Pantene and Head & Shoulder shampoos are costlier by 10 per cent, channel checks suggest.

Britannia, for instance, has hiked the price of multigrain bread, but has upped the total grammage. A multigrain bread that was previously ₹38 for a 400 gram pack is now ₹45 for a 450 gram — a per gram increase in end-user price.

Parle G and Krackjack (from Parle) have seen upward price revision, sources said.

Input cost rise

FMCG companies say that raw material costs have shot through the roof and price hikes were the last resort.

Crude — which is witnessing some stability now — is up over 65 per cent YoY; edible oil and palm oil prices are up 60-65 per cent YoY; flour and sugar prices are up anywhere between 8 and 10 per cent.

Packaging and laminate costs have also been up between 20 and 35 per cent. In fact, it is seeing a slight shortage of material on the packaging front. Freight costs also climbed on account of fuel prices rising by about 25 to 30 percent.

On a sequential basis costs are up 10 per cent; and this has been the trend so far this fiscal.

According to Abneesh Roy, ED, Edelweiss Securities, the FMCG companies have high pricing power and have been passing on 75 per cent of the inflation while trying to cut costs elsewhere. The fear continues to be around the demand recovery being hit. Most FMCG companies reported double digit volume growth indicating recoveries.

“We expect HUL to gain market share in these hyper-inflationary times given regional players won’t be able to manage the working capital and have lower pricing power. Moreover, slowdown in rural areas is not structural but transitory in our view, more of a base issue,” he said.

“There will also be some consumer offers tucked in here and there as the FMCG companies generally do,” Roy added.

Published on November 26, 2021

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