FMCG companies to go for around 10% price hike to mitigate inflationary pressures

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 level of 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 FMCG makers as they expect a rise in the prices of wheat, edible oil and crude.

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

According to some 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 USD 140 a barrel and has now slipped below USD 100 per barrel, he added.

"However, it is still higher than what it was earlier," Shah said, adding that the companies are also hesitant in taking price increases significantly because demand was reviving after COVID and they do not want to tinker with that.

Last time, the makers did not take the price hike to completely mitigate the 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.

When asked as to whether Parle would also go for a hike, Shah said right now it has enough stock of packaging materials and other stocks and would take a decision after a month or two on this.

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 high inflation 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, FMCG major 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 as the company was facing inflationary pressure.

While Nestle India has increased the price of its popular Maggi noodles by 9 to 16 per cent, it has also taken a price hike for milk and coffee powder, the reports added.

An HUL spokesperson had said: "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."

"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," he added.