Prices of edible oil, a category that witnessed the most significant inflation in the consumer basket following the Covid pandemic, have decreased by 13-30% in the past year. However, prices of everyday groceries and household items, such as rice, soaps, and detergents, remain slightly higher compared to 2022, as per the latest price tracker report by Bizom. The report is based on data analysis derived from orders at nearly 7.5 million kirana stores.
During the past two years, the majority of consumer goods companies increased prices by over a quarter to counter escalating costs in areas such as raw materials, supply chain, and energy. The inflation in costs originated with the pandemic but was further intensified by Russia’s invasion of Ukraine. However, this inflationary trend has now subsided.
“The industry has already rolled back about two-thirds of the price hike taken last year, which was in the vicinity of 20-25%. The main reason for rollback is to negate the pressure on volume growth even as input cost inflation still persists, although to a lower extent,” said Mayank Shah, vice-president at Parle Products.
As per the Boston Consulting Group, the prices of household care products, foods, and beverages have more than doubled in the last decade, with a steeper increase observed post-Covid. In the past year, while the prices of rice, milk, soaps, and detergents saw a rise between 1.5% and 6%, categories such as shampoo, hair colour, and flour (atta) experienced a decrease of 1-3%, according to Bizom.
“Among essential products, we see prices in control for most across food and non-food categories except rice. The essential non-food products also are seeing a low single-digit rise in prices as input costs have dropped for these products, leading to a greater focus of brands on gaining market share by controlling prices,” said Akshay D’Souza, chief of growth and insights at Mobisy Technologies, which owns Bizom.
Over the past year, there has been a distinct decline in rural volume, attributed to inflation and unpredictable monsoons. The year-on-year FMCG volume growth for the September quarter stood at 7.2%. According to Kantar, during the June-September 2023 quarter, rural FMCG sales expansion recorded a growth of approximately 6% year-on-year, while urban sales volume witnessed an 8% increase.
City demand is spearheading the overall growth, propelled by the resilience of urban incomes. Companies anticipate a revival in rural volume, driven by a favourable monsoon. Typically, this leads to increased sales with a quarter’s lag.
Companies have indicated that they are reducing price tags, but the impact on sales will only become apparent in the next quarter, once the existing trade pipeline of higher-priced products is completely replenished.
“Large organised players have been squeezed a bit from both ends—regional and unbranded players in rural, and D2C (direct-to-consumer) and new-age players at the premium end. We feel that the market will start showing good volume growth by the next two quarters, fuelled by rural recovery and pricing action by the large players, which has already taken place. The economy is stable and inflation is getting under control,” stated Saugata Gupta, Managing Director at Marico, in a recent statement earlier this month.
Unilever also mentioned that India is currently experiencing deflation, especially in categories exposed to chemical-based raw materials. This has resulted in a disparity between value and volume, putting pressure on pricing growth.
“In the short-term, we are seeing some pressure on that. That will sustain in quarter four, probably a bit of Q1. But I feel that we are going to grow out of that pretty quickly,” Unilever’s chief executive officer Hein Schumacher said at a Barclays Fireside conference.