FMCG cos expect price rise to ease

FMCG companies expect inflationary pressure to ease in the next two quarters. However, if it remains unabated, companies might look at further price rise going ahead.

Inflation — both among agri commodities and non-agri commodities — has seen a considerable upside in the recent months. Most of the companies had gone for price hikes besides undertaking cost-cutting measures.

Wholesale inflation in the recent quarters has been truly unprecedented at over nine per cent, said Dabur India CEO Mohit Malhotra. However, the sector expects inflation to ease going ahead.

“Typically what we have seen is that inflation is highest or the input costs are highest in the fourth quarter of the calendar year, which is OctoberDecember and then they start gradually cooling down. So, going forward in the first quarter of the calendar year 2022, we expect raw material prices to soften a little bit, though they may not go down much,” said Mayank Shah, Senior Category Head at Parle Products.

If inflation is under control, companies might hold on to the prices. “There will be no price hikes as most of the companies have already increased rates in the last six months. More than one price hike has been taken to take care of increasing the input cost. So at least for the next one or two quarters, we expect prices to remain stable,” said Shah.

However, if the situation continues, they will have to pass on the increased cost to the customers.

“If we continue seeing this kind of inflation, a further course correction might be required in terms of bringing the rates at parity with the inflation,” added Shah.

Dabur too does not rule out further price hikes.

“We have taken up prices by around 3-4 per cent, besides undertaking several cost-saving initiatives, to mitigate part of this impact. We are watching the situation now and if the inflation continues unabated, we may look at another round of price increase in Q4 of this year,” said Malhotra.

“While inflation remains a big concern going forward, our intent is to mitigate this impact through calibrated price increases and cost saving initiatives,” he added.

The FMCG companies also expect the demand to get better in the coming quarters. “We are seeing consumers going out, spending more rather than saving for the rainy day. Hence, we see the demand to remain robust in the coming year. At least for the consumer goods segment and FMCG, we expect 2022 to be a year when we’ll see robust demand. In the last quarter of 2021, we have seen a good revival in demand and we expect demand to be robust in 2022,” said Shah.

In the past two quarters, rural demand was lagging behind urban demand. However, the rural demand too is expected to catch up in the coming quarters. The revival in demand might support both essential products as well as discretionary goods.