Due to the unprecedented level of inflation in commodity prices such as wheat, palm oil and packaging materials, FMCG companies are mulling another round of price hike in order to offset the same. As a result, consumers shall have to pay more for their daily essential purchase.
A bolt out of the blue is the Russia and Ukraine war which has resulted into the price increase in wheat, edible oil and crude.
Price Hike By Dabur, Parle, HUL, Nestle
In order to mitigate the inflationary pressures, calibrated price increases shall be undertaken by companies like Dabur & Parle.
HUL and Nestle have increased the prices of food products last week, said some media reports.
Mayank Shah, Parle Products Senior Category Head said that “We are expecting a 10-15 per cent hike by the industry”.
The exact increase due to volatility of price is difficult to tell as the prices are undergoing high fluctuations.
He added that the price of palm oil had increased to Rs 180 per litre and now has come down to Rs 150 per litre and the prices of crude oil had risen to nearly USD 140 a barrel and has now slipped below USD 100 per barrel and has now slipped below USD 100 per barrel.
Since the demand is reviving post the Covid situation, the companies are also hesitant in taking price increases significantly with the fear of tinkering with the demand.
Some part of price hike was absorbed by the makers previously and did not resort to price hike in order to completely mitigate the impact. He added “Everybody is currently talking about a price hike of 10-15 per cent, although the input cost has gone much more than that”.
Shah said that Parle has enough stock of packaging materials and other stocks and would take a decision after a month or two on the price hike.
Ankush Jain, CFO, Dabur India said that the inflation remains unabated and is a cause of concern for the second year in a row. He said that
“The inflationary pressures and resultant price increases have led to consumers tightening their purse-strings and relooking at discretionary purchases, while also down trading to smaller packs. We are closely watching the situation and will undertake calibrated price increases to mitigate the inflationary pressures.”
What Corporates Have To Say About It?
Abneesh Roy, Executive Vice President, Edelweiss Financial Services said that the FMCG makers are passing high inflation to consumers. He added “FMCG companies like HUL, Nestle have high pricing power. They are passing on inflation in Coffee and packaging materials. We expect all FMCG companies to take a further hike of 3 to 5 per cent in Q1FY23”.
Passing off some burden to the consumers to maintain margins, companies like HUL and Nestle have increased the prices of food items such as tea, coffee and noodles. According to the reports, prices of Bru coffee, Brooke Bond tea etc have been hiked by the company.
Reports added that in addition to the price hike of its popular Maggi noodles by 9 to 16 per cent, it has also taken a price hike for milk and coffee powder. A HUL spokesperson said that “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 behind our brands and protect our financial business model.”
He added that “We mitigate cost inflation first by driving our savings agenda harder, looking at all cost lines with a laser-sharp focus and removing any non-value-adding cost. Considering the inherent strength of our brands and our execution prowess, we have been able to provide the right price-value equation to the consumer, thus helping protect our business model in a highly inflationary scenario.”
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