FMCG companies plan to hike prices, cut grammage

MUMBAI: Your next bottle of soft drink could cost you more and chances are that you will get lesser value out of the pack of biscuits or chips you buy. Consumer goods companies are implementing a mix of selective price hikes and grammage cuts to pass on some of the steep rise in input costs to consumers.

Some firms are also looking at the option of smaller packs to make products more accessible for consumers. The West Asia conflict, which has now entered its fourth week, has triggered a surge in crude oil prices, shooting up raw material costs for companies. Crude oil has a direct bearing on packaging and logistics costs. Besides, crude derivatives are also used to manufacture several household products.

"Some price corrections were already overdue over the past two years. Given the current environment, we have advanced this decision and will be implementing selective price increases effective April 1. In certain larger SKUs (stock keeping units), the increase may be slightly higher as there was some flexibility available through trade margin adjustments," said Nikhil Doda, co-founder and chief operating officer at Lahori Zeera.

Parle Products is looking to take selective price actions or grammage adjustments, said chief marketing officer Mayank Shah. "A more immediate and critical concern at this stage is the availability of fuel itself. It is important that policymakers differentiate between industrial users, with priority given to sectors linked to essential commodities like food to ensure there is no disruption in supply," Shah said.

Dabur will take price hikes wherever necessary, a company spokesperson said without sharing additional details. For FMCG companies, which had been betting on GST cuts to spur consumption after a long spell of sluggishness, the war risks slowing the pace of demand recovery just when revival was in sight. Firms had underlined improving consumption trends in their Q3 earnings.

AWL Agri Business is pushing a wide range of pack sizes to the retail shelves starting from 200 ml. "If inflationary pressures continue, smaller pack sizes may help consumers manage their monthly household budgets more efficiently," said managing director & CEO Shrikant Kanhere.

"Household staples from soaps to packaged foods face margin pressure as petrochemical inputs rise. FMCG firms are weighing price hikes vs pack reduction-balancing margin protection with consumer demand," said analysts at The Knowledge Company, who estimate packaging costs to have surged by 15%-20% on higher crude prices.


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