Savings in store: FMCG companies to cut prices, increase pack sizes

MUMBAI: You will soon be able save more when you shop for groceries because prices of a host of products you use daily - from jams to shampoos are set to get cheaper. With barely a week to go for the rollout of the new GST rates, FMCG companies have begun firming up price cut plans with a few of them having announced product-wise cuts through advertisements as mandated by govt.

HUL, the biggest player in this space, is slashing prices by Rs 5-Rs 76 across products and pack sizes, making its brands such as Dove, Lakme and Horlicks a bit more affordable for a higher share of households. A 400gm Horlicks Women's Plus for instance will cost Rs 284 from Rs 320,while the price of Lakme 9to5 compact will come down by Rs 76. A price reduction of Rs 30-80 may not mean much for upper middle-class households, but it can enable many low to mid-income households to buy a bigger pack or an upgraded version of an item they otherwise couldn't.

P&G is also cutting prices for its brands including Pampers, Pantene and Vicks by Rs 3 to Rs 100. The change in prices will come into effect from Sept 22. In FMCG, GST cuts will be passed through a mix of price reductions and grammage increases, given that small packs make up for a large share of the product slate of companies. Firms have already begun shifting production to new MRPs, TOI reported last week. In fact, consumers can also hope for some early cheer as few companies such as HUL and Ferrero are offering discounted prices to consumers (for few days until 20-21 Sept) to clear old stock from retail shelves, communication sent to trade partners showed. Govt's move to allow firms to display revised MRPs on old packs of products has also helped them expedite their internal plans.

The industry, though, is awaiting a formal directive from govt on allowing benefits to be passed through grammage increases, said an executive, adding that representatives had met the tax department (CBIC) last week to discuss the matter. Cutting prices on Rs 5 or Rs 10 sachets is not feasible.

Parle, which makes Hide & Seek and Monaco biscuits, said that the company will pass on savings of 10-13% on an average to consumers through a mix of price cuts and grammage additions. Nearly a third of the firm's business comes from large packs.

Bikaji Foods will be reducing prices of its large snack packs in the range of 6-7%, said CFO Rishabh Jain. The GST cuts could accelerate FMCG volume growth and gradually shift consumer demand towards premium products, said Krishna Khatwani, head of sales (India) at Godrej Consumer Products.