Hindustan Unilever Ltd (NSE: HINDUNILVR) and Godrej Consumer Products Ltd (NSE: GODREJCP) stocks were under pressure on Monday, October 10, as Street sentiment turned cautious. The companies have decided to cut some soap brands by up to 15 per cent on easing input costs following a slump in prices of palm oil and other raw materials.

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Shares of HUL, one of the country's largest fast-moving consumer goods (FMCG) players, and Godrej Consumer tanked more than 2 per cent each in early trade to Rs 2,545, Rs 813, respectively, on the NSE at 10 AM.

While HUL has reduced prices of its offerings under popular soap brands Lifebuoy and Lux by 5 to 11 per cent in the western region, Godrej Group arm GCPL, which owns soap brand Godrej No 1, has cut prices of soaps by 13 to 15 per cent.

Analysts opine that the reduction in prices would help drive growth in volumes in the second half of the current fiscal year, especially since overall demand remains sluggish due to high inflation. One of the reasons for the price reduction is the decline in global prices of palm oil and other raw materials, they added.

"With commodity prices coming down, GCPL is one of the first FMCG companies to pass on the price reduction benefit to consumers," Commenting on the development, GCPL CFO Sameer Shah said.

"For soaps specifically, GCPL has reduced prices between 13 to 15 per cent. We reduced the price of the bundle pack (five units of 100 gm each) of Godrej No.1 soap from Rs 140 to Rs 120," he added.

"For Lifebuoy and Lux, there has been a price drop in the West region," an HUL spokesperson said without elaborating on the quantum of reduction and whether similar cuts will be made in other regions also.

However, according to reports, prices of these soap brands have been reduced by 5-11 per cent.

The spokesperson, however, denied reports about reduction in prices of other brands such as Surf, Rin, Wheel, and Dove.

Commenting on the price cut by HUL, Edelweiss Financial Services Executive Vice President Abneesh Roy said it is a proactive step by the company to retain a market share in an era of falling raw material prices. "When raw material prices fall, regional players tend to come back." He expects this to drive volume growth for HUL in H2FY23 and FY24.

"In the past one year, volume growth for HUL was impacted due to grammage cuts and price hikes. Now the reverse is happening with grammage increase/price cuts," Roy said.

FMCG companies continued to face challenges of high retail inflation and slowdown in rural areas in September quarter 2022. These companies had ramped up production of "bridge packs" that are priced between popular entry-level packs and big packs.

Hindustan Unilever Ltd share price 52-week range is Rs 2,734 - Rs 1,901. The share of the company hit an all-time high of Rs 3,234 on February 25, 2000 and its all-time low was Rs 100.50 on July 30, 2004. In the past one year, the share has given a negative yield of Rs 96.90 or 3.66 per cent. 

Similarly, Godrej Consumer share price 52-week range is Rs 1,072 - Rs 660. The scrip has given a negative yield of Rs 214 or 20.93 per cent in past year.