The possibility of more price hikes is not over yet within the domestic fast-moving consumer goods (FMCG) space even as prices of key agri commodities remain firm.While crude oil and its derivatives such as titanium dioxide and linear alkyl benzene (LAB) are benign for now, and so is soda ash, which is down nearly 17% in six months, sector experts say that one half of the market, largely in the food space, will continue to raise prices. Home and personal care (HPC) companies, in contrast, are likely to be cautious with price hikes, after increasing product prices in the last two quarters.
“The FMCG commodity basket has two parts to it – agri and crude-linked. Food companies will continue to take price hikes, since food inflation has been high, HPC firms are likely to be circumspect in view of weak urban demand,” Sachin Bobade, director, equity research at brokerage Dolat Capital, said.
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Companies such as Nestle and Britannia have said that they will continue to increase prices by small margins to counter inflation. Godrej Consumer Products (GCPL), on the other hand, said that it will not rush to take price hikes in soaps despite palm oil inflation. Both Hindustan Unilever (HUL) and GCPL, the country’s number one and two soap makers, have increased soap prices by 10% each in the last few months. In tea, HUL and Tata Consumer Products have raised prices by at least 5-10% in recent months.
“The focus remains on reviving underlying volume growth and holding Ebitda (earnings before interest tax depreciation and amortisation) margins despite cost pressures in palm oil and its derivatives,” GCPL said last week in its Q4 business update. “We remain largely on track to achieve these stated objectives,” the company added.Besides soaps, palm oil goes into making washing powders, cosmetics, personal care products such as toothpastes, creams and lotions and snacks while cocoa goes into making chocolates, and copra in hair oils.
Titanium dioxide, meanwhile, goes into paints and LAB & soda ash are used in detergents.In the last six months, cocoa and Arabica coffee prices have seen a sharp uptick of 30-36%; copra and tea have risen by 15%,
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