NEW DELHI, Jan 4: Households are set to feel the pinch as more price hikes in staples and household products are in the offing as fast moving consumer goods (FMCG) companies take steps to protect their revenues and profitability margins against rising raw material costs.
The third quarter saw price increases of up to 10 per cent on some categories and analysts expect FMCG companies to take another round of price hikes in the fourth quarter as well.
“Commodity inflation has posed a problem as urban demand remains weak with rural gradually recovering,” Nuvama Institutional Equities said in a report on the sector. “We expect some FMCG companies to take another round of price hikes in Q4FY25,” it added.
According to data culled from several broker firms, prices have increased in the range of 0.3 up to 10 per cent, as prices of raw materials such as palm oil, copra, tea, cocoa, and coffee have surged 35-175 per cent year to date.
The categories that saw sharp double digit price hikes in Q3 were soaps, tea, coffee, edible oils, and some hair oils, according to Nomura, which said that this would affect the sales volumes of the companies concerned in the quarter. According to its data, Marico, Nestle and Godrej Consumer Products had taken the highest price hikes in the quarter.
Hindustan Unilever and Godrej Consumer have gradually raised soap prices by around 10 per cent last year, according to Nuvama Research, which forecast more hikes in tea and soap prices in the future. HUL likely raised prices by an average of 2 per cent in Q3 and Godrej Consumer by 4 per cent, Nomura estimated.
Snackmaker Bikaji had raised prices by around 2 per cent in previous quarters and Nuvama said a further 2 per cent hike is expected in Q4 due to spike in palm oil prices.
Copra prices have risen double digit so far and Marico raised prices of Parachute coconut oil by 10 per cent in the first half of FY25, while it also took a 20 per cent price hike on Saffola oil with double digit growth in edible oils, the brokerage firm said. On an average Marico likely took a 7.3 per cent price hike in Q3, according to Nomura.
Cocoa prices have risen 175 per cent year to date and Nestle is expected to take gradual prices hikes, while Tata Consumer Products is expected to raise tea prices by 25-30 per cent, as tea prices have risen by a third. Nomura estimated Nestle’s price hike at 4.9 per cent in Q3.
According to analysts the price hikes taken so far by some of the FMCG companies have lagged rise in raw material prices, due to the depressed demand environment.
For most FMCG companies the strategy has been to premiumise as most of the demand is at the higher end of the consumer category. “We expect a gradual uptick in gross margins over the coming quarters as companies implement calibrated price hikes and benefit from increased premiumisation,” said HDFC Securities in its results preview on the consumer sector. (Agencies)
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