The escalating conflict between Russia and Ukraine has pressured fast-moving consumer goods (FMCG) companies in India to consider another round of price hikes to counter an unprecedented rise in commodity prices such as wheat, palm oil and packaging materials. compensate.
The price of crude oil and a wide range of commodities has risen since Russia attacked Ukraine over supply concerns.
Inflationary pressures in India were already mounting even before Russia invaded Ukraine on February 24. Indeed, February retail inflation rose above the Reserve Bank of India target of 2-6 percent for the second straight month.
That was even before the impact of the Ukraine conflict had begun and did not take into account a sharp rise in international oil costs.
The price of crude oil has risen sharply above $100 a barrel, and FMCG companies are forecasting further increases in the cost of wheat, edible oil and crude oil.
Companies such as Dabur and Parle are monitoring the situation and will introduce calibrated price increases to offset those inflationary pressures.
According to some media reports, makers like Hindustan Unilever (HUL) and Nestle increased the prices of food products last week.
“We expect a 10-15 percent increase from the industry,” Maynk Shah, head of category at Parle Products, told PTI.
Mr. Shah further noted that prices fluctuate widely and therefore it would be difficult to speak of the same increase due to the volatility of the price.
The price of palm oil has risen to Rs 180 per liter and has fallen to Rs 150 per liter. Likewise, he added that the price of crude oil had risen to nearly $140 a barrel and has now fallen to $100 a barrel.
“However, it is still higher than it was before,” said Mr Shah, adding that the companies are also hesitant to implement significant price increases as demand rebounded after COVID. They don’t want to mess with that.
Last time, the makers didn’t take the price hike to completely soften the impact and absorb some of it.
“Everyone is talking about a 10 to 15 percent price increase right now, even though the input costs are much higher than that,” he said.
Asked if Parle would also go hiking, Shah said it currently has sufficient stock of packaging materials and other supplies and would make a decision after a month or two.
While expressing similar thoughts, Dabur India’s Chief Financial Officer Ankush Jain said inflation remains unabated and is a cause for concern for the second year.
“Inflationary pressures and ensuing price increases have led consumers to tighten their wallets and rethink discretionary purchases, while also reverting to smaller packaging. We are closely monitoring the situation and will implement calibrated price increases to keep inflationary levels low. reduce pressure,” he said. said.
Commenting on the current situation, Abneesh Roy, Executive Vice President of Edelweiss Financial Services, said FMCG makers are passing on high inflation to consumers.
“FMCG companies like HUL Nestle have high pricing power. They pass on inflation in coffee and packaging materials. We expect all FMCG companies to see a further increase of 3 to 5 percent in Q1FY23,” he added.
According to some news reports, FMCG Major HUL and Nestle have increased the prices of foodstuffs such as tea, coffee and noodles, causing some trouble for consumers to maintain margins.
The reports claimed that HUL had increased the prices of Bru coffee, Brooke Bond tea, etc. as the company faced inflationary pressures.
While Nestle India has increased the price of its famous Maggi noodles by 9 to 16 percent, it has also hiked the price of milk and coffee powder, the reports said.
A HUL spokesperson had said: “We are witnessing consumer volume titration due to the impact of high inflation. In this environment, our priority is to provide value to consumers, invest in our brands and protect our financial business model.”
“We’re first mitigating cost inflation by toughening up our savings agenda, taking a sharp look at all cost lines and removing all non-value-adding costs,” he said.
“Given the inherent strength of our brands and our ability to execute, we have been able to provide the right price-value equation to consumers, protecting our business model in a high inflation scenario,” added the HUL spokesperson. .