Fast-moving consumer goods (FMCG) companies have increased prices by as much as 10% in efforts to stimulate top-line growth, which has been hampered by a prolonged downturn in demand.
In February, the majority of product categories such as tea, coffee, health drinks, hair oil, shampoo, and detergent powder experienced gradual price rises, with the notable exceptions of edible oil and soap. According to consumer goods distributors, the toothpaste category witnessed the most significant price hike.
Hindustan Unilever Ltd., the largest consumer goods manufacturer in India, has implemented a price increase of 2-10% for its Pepsodent line, as reported by its distributors. Colgate Palmolive India Ltd. has also raised prices by up to 10% across various products, including Charcoal Clean, Sensitive Clove, and Strong Teeth. Furthermore, the price of Colgate Visible White, in the 100-gram size, has seen a 15% increase. Additionally, Dabur has increased the price of its 200-gram Meswak toothpaste by 8%.
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In the detergent sector, HUL has increased the prices of its brands Rin and Surf Excel Quick Wash by 3-4%. Similarly, Procter & Gamble, a competitor, has raised prices for its 700 gm and 1.5 kg Ariel detergent packs by up to 4% and 2.5%, respectively.
While milk prices have mostly stayed steady, HUL has implemented a 1% price increase for Boost and a 4% increase for Horlicks Chocolate Delight. In a similar vein, Cadbury has raised prices by 2% for Bournvita Pro Health and 4% for Bournvita Lil Champ. Additionally, Zydus Wellness has also raised prices by 5-8% for Complan.
According to a monthly price check report by Emkay, soaps and edible oils were the sole categories experiencing negative pricing, whereas other categories witnessed gradual price increases throughout the month.
Regarding edible oils, the brokerage observed that Marico kept its prices steady for Saffola variants, whereas individual commodity oil producers reduced prices following recent government directives.
In the biscuit category, there have been varied pricing strategies, with Britannia‘s INR 25 Good Day Butter experiencing a 17% reduction through increased volume. Britannia reduced the price of Nice Time by 13%, while increasing prices for 50-gm Bourbon by 20% and 160-gm Milk Bikis by 7%, according to Emkay.
In the last quarter ended December, FMCG companies experienced weaker than expected topline growth. This was attributed to the ongoing decline in market pricing growth and the failure of anticipated demand recovery from Q3 FY24. Management’s outlook on demand remains cautious, with hopes pinned on a resurgence during the robust summer season and improved monsoons ahead.
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“In the near term, we remain cautiously optimistic,” HUL’s Managing Director and Chief Executive Officer Rohit Jawa said in a post-earnings media briefing. “We expect the gradual recovery in market demand to continue, aided by increased government spending, a recovery in winter crop sowing, and better crop realisations.”
Rural income growth will be a key factor in determining the pace of recovery, said Jawa.
Among other companies, Emami Ltd. announced a 3% price hike, whereas Dabur India Ltd. implemented a 2.5% increase across its food portfolio in the third quarter, with a portion of it reflecting in the current quarter.
“Price increases, definitely will come,” according to Dabur Chief Executive Officer Mohit Malhotra. “I think price increases going forward in the year will depend upon how inflation is actually trending.”
Regarding non-food items, aside from toothpaste, Dabur has increased the price of Dabur Sarso Amla hair oil by 5%. Marico Ltd. has also raised prices by 11% for 200- and 300-ml units of Parachute, while Bajaj Consumer has implemented a 3% price increase for the 475-gm Bajaj Almond Drops.
While copra prices have experienced moderate inflation on a month-on-month basis, the primary raw material for hair oil companies is anticipated to undergo a price correction starting in April with the onset of the flush season. However, Marico foresees prices having an upward bias once the seasonal months conclude.
“If you look at history of Marico the sweet spot for us, especially in Parachute, is a scenario as follows: low food inflation, copra inflation, therefore we position gains as we deliver high volume growth and profitability is protected,” said Marico MD and CEO Saugata Gupta. “We see that scenario likely to happen in the second half of next year.”
Analysts expect further price hikes to help companies with earnings delivery.
“Contrary to the common perception of FMCG companies effecting price cuts to pass raw-material benefits, players are emulating the case for price growth in line with inflation ahead,” according to Nitin Gupta, senior research analyst at Emkay Global Financial Services Ltd. “We now see the emergence of a scenario where further price hikes should help companies drive margins, which will support double-digit earnings momentum.”
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