- Indian FMCG firms plan more price hikes in Q3 due to rising commodity costs from Iran war
- Britannia may raise prices 1.5-2% in Q3, using shrinkflation on Rs 5 and Rs 10 packs
- Hindustan Unilever expects 2-5% inflation in Q3, planning calibrated price increases
Indian consumers could be in for another round of price increases on everyday products.
FMCG (fast moving consumer goods) companies are preparing for more calibrated price hikes in the September quarter as higher commodity costs amid Iran war put pressure on margins. Some companies are also considering shrinkflation -- reducing the quantity in a pack rather than changing its price.
The industry had already raised prices by around 2-5 per cent in the June quarter. Now, several major companies are signalling that more action may be needed.
Britannia is among the clearest examples. The biscuit maker expects another 1.5-2 per cent pricing impact in the current quarter. A part of this could come through shrinkflation, particularly in its Rs 5 and Rs 10 packs.
The pressure is coming from key inputs such as sugar and palm oil. Britannia MD and CEO Rakshit Hargave has indicated that the price increases taken in the June quarter did not fully cover the rise in costs.
Hindustan Unilever is also preparing for higher inflation. The company expects sequential inflation of 2-5 per cent in the September quarter and plans to respond with calibrated price increases across categories.
Dabur India expects elevated input costs to remain a concern. Its management has said revenue and price growth could outpace volume growth as the company passes some of the inflation on to consumers.
Godrej Consumer Products and Tata Consumer Products have also left the door open for further pricing action if costs remain elevated.
The Liquor Paradox
On one hand, FMCG companies are concerned that higher prices may hurt sales. On the other hand, consumers are increasingly buying alcohol at premium prices.
United Spirits, Radico Khaitan and Allied Blenders and Distillers reported double-digit growth in their premium and above segments in the June quarter. United Breweries also recorded a 17 per cent increase in premium volumes.
Radico Khaitan stood out. Its premium portfolio volumes jumped 35.8 per cent during the quarter. The company reported a 13.22 per cent rise in revenue and a 76 per cent increase in consolidated net profit.
United Spirits also benefited from premium products. Its net profit rose 51.6 per cent, while revenue increased 5 per cent to Rs 6,113 crore. At the other end of the portfolio, its popular segment saw a sharp decline in net sales value.
