According to analysts, starting January there have been only minor price hikes across categories in the personal care segment, while in edible oil and some home care segments there has been a price cut.
After three quarters of significant price hikes taken by the consumer companies in soaps, detergents, edible oil, biscuits and shampoo, the trend seems to have moderated since January.
In the past three months, the companies have restricted the price increases and other interventions to offset rising inflation to select stock-keeping units (SKUs) only.
The current financial year has witnessed unprecedented commodity price inflation, forcing FMCG players to hike prices all through the year to offset the rising raw material costs. Prices of soaps, detergents, edible oil, biscuits and shampoo have risen 15-20% on a year-on-year basis in the first nine months of the year.
These increases have impacted volumes for FMCG companies as has been evident in the third-quarter results. Volume growth of consumer goods major, Hindustan Unilever (HUL) sustained its positive momentum in the quarter ended December 2021 at 2%, however, the volume growth halved compared with the third quarter last year. HUL was prudent in its price hike strategy as it decreased grammage in most products, rather than taking steep price hikes all across, which impacted volumes.
FMCG companies have been walking the tight rope in the last year as they balance price hikes with sustaining volumes and margins. However, the commodity inflation has been much higher than anticipated, but the companies have not passed on the entire increases for the fear of losing out on-demand and down trading.
The input costs were expected to cool off by the first quarter of the next financial year, but the conflict between Russia and Ukraine has served a further blow to already high commodity prices. According to analysts, while the prices have started to cool off again after a big spike, they are still higher sequentially for commodities such as crude, palm oil, LAB and TIO2. However, companies have moderated price hikes in the last three months to let consumers absorb all the increases so far, and in the hopes that the commodity prices will stabilise.
According to analysts, starting January there have been only minor price hikes across categories in the personal care segment, while in edible oil and some home care segments there has been a price cut.
Shampoos, as well as oral care, have seen price hikes in the last three months, while hair oils and cosmetics have been relatively stable, according to a BNP Paribas report. In the soaps category, the median price hike has been around 20% with smaller competitors having raised prices with a lag compared with market leader HUL. In the home care segment, there have been price hikes in detergents as well as surface cleaners. In the packaged food segment, price hikes in biscuits with Britannia’s price hikes being ahead of Parle’s, while there have been some price cuts in the edible oil category.
Britannia has reduced the grammage of Tiger Rs 10 pack from 115 gm to 100 gm which is an effective price hike of 15%. Parle has also reduced the grammage for Rs5 pack from 65 gm to 55 gm; however, its grammage reduction in theRs 10 pack is relatively lower.
In noodles, two major brands – Maggie and Yippee have taken price hikes. Maggie has taken a significant price hike of 17% with the 70gm packet costing Rs14 against12 earlier.
Edible oils prices corrected slightly in the last three months as inflation tapered down in September-October. However,
Detergents and toilet cleaners have seen a mixed impact of inflation in the last three months, with some categories seeing an increase and some a reversal of the trend too. HUL, for instance, has recently taken a small price correction in its detergents portfolio possibly to revive volume growth, analysts at BNP Paribas said. Home insecticides have not been impacted much because of the raw material inflation, and prices have remained stable, while Godrej Consumer Products reversed some hikes in electric refill packs for better market penetration.
