Leading FMCG companies have had to take price hikes in the December quarter with persistent inflationary pressures even as they have been banking on cutting costs and focusing on sourcing efficiencies. Players said that they will need to continue to adopt calibrated price hike strategies to mitigate cost pressures.
According to NielsenIQ, the FMCG industry grew 10.6 per cent in terms of value in December quarter compared to the year-ago period. This was due to 7.1 per cent rise in volume and 3.3 per cent increase in prices.
Earlier this month in an earnings call, Varun Berry, Vice-Chairman & Managing Director, Britannia Industries, said that towards the beginning of the year, it seemed that inflationary pressures were abating and companies began to correct prices. “As we were doing that, there was a huge inflation which came at us. And we’ve started to take price increases, which are going to make sure that we are able to take in our stride. The total price increase that we have taken in the third quarter was about ₹100 crore, which works out to be 2 per cent. But it’s progressively going up. We will exit the fiscal, at about 4.5 per cent price increase,” he added.
Mohit Malhotra, CEO, Dabur India, said that during the December quarter, the company faced inflationary pressures and took judicious price increases in its portfolio. “I think, going forward, the inflation is inching up across the markets of business. We expect a 5 per cent inflation to actually hit us. Price increases will happen in toothpaste also and in juices. But we will have to take very calibrated price increases observing the competitive intensity in the market place so as not to become uncompetitive in the market,” he said earlier this month in an earnings call. Malhotra added that the company will be taking price increases in the premium oral care portfolio. In the juice segment too, price increase will be done in certain parts of the portfolio including Activ, drinks and health-based juice products.
Agri commodities
For instance, in the soaps segment, high palm prices necessitated sharp price increases including grammage cuts and trade scheme reductions by leading companies in the third quarter. Similarly, very high inflationary pressures are being witnessed in commodities such as coffee.
Nestle India Chairman and Managing Director, Suresh Naryanan, too, recently stated that while headline inflation is moderating, high prices persist on select agri-commodities. In a recent earnings call, he flagged super inflationary trends being seen in coffee prices as well as dramatic rise in cocoa prices. The company said there will be pricing pressure in the coffee segment due to unrelenting prices. “Other categories, by and large, the pressures would be less. I cannot tell you that there will be no price increase, but they will be of a much lower order compared to what they were in 2022 and 2023,” he added.
