FMCG cos keep a wary eye out as input prices shoot up
margins, we think companies would be reluctant to hike prices in the near term…this poses a risk to consensus margin assumptions,” analysts at BNP Paribas said in their note.
Companies have largely maintained that pricing actions are behind them and will be on a need basis.
Krishnarao Buddha, senior category head at Parle Products, agreed, saying price adjustments will be made as necessary, especially in light of soaring cocoa prices impacting products like candies and biscuits.
On Tuesday, global cocoa prices surged above $10,000 per tonne for the first time, signalling worries for chocolate and confectionery makers.
“We are looking at needbased pricing action wherever we feel that suddenly prices have gone up. Cocoa prices are really under stress, their prices have shot up disproportionately. We have candies and biscuits where we use cocoa-based products which will have some bearing. Oil prices and sugar have been pretty benign—while we took some slight disproportionate price increases last fiscal that impacted the top-line but improved the profitability,” said Buddha.
Similarly, Godrej Consumer Products Ltd (GCPL) is closely monitoring the impact of rising prices of palm oil, commonly used for soap manufacturing, after having implemented price cuts on its Godrej No 1 portfolio between March 2023 and March 2024 to navigate previous inflationary periods.
“It (pricing) tends to follow oil prices. Palm prices this financial year have been soft—though there has been some firming up in the last few weeks. Prior to that it was highly inflationary,” said Sudhir Sitapati, managing director and CEO, GCPL.
Over the past two years, FMCG companies significantly increased prices in response to the surge in raw material costs. Products within categories such as detergents, oral care, and soaps experienced price adjustments ranging from 15% to over 20% during this period. Notably, the oral-care segment witnessed the most substantial hikes, with prices continuing to climb even further.