Indian fast-moving consumer goods (FMCG) and consumer durables companies are grappling with soaring input costs, driven by high crude oil prices and the West Asia conflict, leading to imminent price hikes for consumers.
Key Points
- FMCG companies are in a 'wait-and-watch' mode, anticipating potential low single-digit price hikes if crude oil and raw material costs continue to rise.
- Consumer durables companies have already implemented price increases, with some appliance prices going up by 7-10 per cent and ACs by up to 15 per cent.
- Rising prices for crude derivatives like plastic and palm oil, exacerbated by the West Asia conflict, are eating into company margins.
- Companies like Parle Products and Archian Foods are closely monitoring the situation, with some considering increasing distributor prices to protect margins.
- The industry faces a challenge balancing necessary price hikes with potential impacts on consumer demand.
Several fast-moving consumer goods (FMCG) companies are in a wait-and-watch mode, closely monitoring crude oil prices before deciding on price hikes, though some anticipate low single-digit increases in the immediate term.
Consumer durables companies have already started passing the price increase on to consumers.
Prices for crude derivatives like plastic, as well as palm oil, have increased due to the West Asia conflict and rising fears of raw material scarcity.
A company executive, speaking on the condition of anonymity, said there is a risk of a 3-4 per cent price hike in the immediate near term.
"If the conflict continues for another month, there could be another round of price hikes, depending on how raw material and crude oil prices move," the packaged goods executive said.
FMCG Firms Monitor Situation
Parle Products is closely monitoring the situation before initiating price hikes.
"We have seen the impact of negotiations on crude oil prices and are closely monitoring the situation before we undertake any price hikes for consumers.
"We hope the situation is resolved soon," Mayank Shah, vice-president, Parle Products told Business Standard.
For Chandigarh-based Archian Foods, which makes Lahori Zeera, the rise in prices of resin may force the company to hike prices for distributors.
"The current crude oil prices are unsustainable and have impacted our gross margins.
"While we won't raise prices for customers, we may have to increase distributor prices to protect margins if the situation does not ease in the coming week," co-founder and chief executive officer Saurabh Munjal said.
Consumer Durables Already Hiking Prices
While FMCG companies are still in wait-and-watch mode, consumer durable companies are seeing a more severe impact and already pushing price hikes.
Plastics used in consumer appliances have seen a sharp increase in prices, which has caused prices to go up, said an appliance maker on the condition of anonymity.
"Everyone is worried currently, due to the raw material prices shooting up," the executive said.
"Prices will go up by 7-10 per cent across categories, depending on the raw material used in the designs and models.
"We are running our plants at full capacity and intend to do so until May unless there are supply chain constraints.
"However, there is a challenge in terms of how the price hikes will impact demand," said Kamal Nandi, business head and executive vice president, appliances business, Godrej Enterprises group.
Companies like Bluestar and Haier, too, have raised prices of their ACs by up to 15 per cent, as input costs continue to surge.
Headwinds Ahead
- FMCG companies are in wait-and-watch mode.
- There is a risk of a 3-4 % price hike in the immediate near term.
- In consumer durables, firms have started passing the price increase to consumers.
- Prices for crude derivatives like plastic, as well as palm oil, have increased due to the West Asia conflict.
- Companies like Bluestar and Haier have raised prices of their ACs by up to 15 per cent.
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