FMCG firms mull 10% price hike to ease cost pressures

New Delhi: Consumers may have to pay more for their daily essential items with FMCG companies mulling another round of price hike to offset the impact of an unprecedented inflation in commodity prices such as wheat, palm oil and packaging materials. Besides, the ongoing war between Russia and Ukraine has also added another blow to fast moving consumer goods makers as they expect a rise in the prices of wheat, edible oil and crude.

Companies such as Dabur and Parle are watching the situation and will undertake calibrated price increases to mitigate the inflationary pressures.

According to media reports, makers such as HUL and Nestle have increased the prices of food products last week.

"We are expecting a 10-15 per cent hike by the industry," Parle products senior category head Mayank Shah told PTI.

Shah further noted that the prices are witnessing high fluctuation and hence it would be difficult to tell about the exact increase due to volatility of price.

The price of palm oil had increased to Rs 180 per litre and now has come down to Rs 150 per litre. Similarly, crude oil prices had risen to nearly $140 a barrel and has now slipped below $100 per barrel, he added.

"However, it is still higher than what it was earlier," Shah said, adding that the companies are also hesitant to hike prices significantly because dem-and was reviving after Covid and they do not want to tinker with that.

Last time, the companies did not go in for price hikes to completely mitigate the cost impact and had absorbed some part of that. "Everybody is currently talking about a price hike of 10-15 per cent, although the input cost has gone much more than that," he said.

Expressing similar thoughts, Dabur India chief financial officer Ankush Jain said inflation remains unabated and is a cause of concern for the second year in a row.

"The inflationary pressures and resultant price increases have led to consumers tightening their purse-strings and relooking at discretionary purchases, while also downtrading to smaller packs. We are closely watching the situation and will undertake calibrated price increases to mitigate the inflationary pressures," he said.
Commenting on the current situation, Edelweiss Financial Services executive vice president Abneesh Roy said FMCG makers are passing on price increases to consumers.

"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," he added.

According to some news reports,HUL and Nestle have already increased the prices of food items such as tea, coffee and noodles, passing off some burden to the consumers to maintain margins.

The reports had claimed that HUL had hiked prices of Bru coffee, Brooke Bond tea, etc.
While Nestle India has increased the price of Maggi noodles by 9 to 16 per cent, it has also taken a price hike for milk and coffee powder.