Biscuits, Tea To Other Essentials; Why Indian FMCG Sector Braces For Fresh Price Hikes In September Quarter

The conflict in Iran is driving significant instability in global commodity markets, and the heat is forcing Indian FMCG companies to prepare for another round of price hikes for essentials such as biscuits, Tea, soaps, and other daily essentials in the September quarter. With costs for essential inputs like sugar and palm oil surging, businesses are under immense pressure to protect their margins, leading many to consider further price increases or reduce package sizes to avoid direct price hikes.

The industry had already implemented price adjustments of 2-5 per cent during the June quarter. However, according to media reports,  major FMCG players are now signalling that these measures were insufficient, and further corrective action will be necessary to offset the ongoing cost volatility triggered by the geopolitical situation.

According to an NDTV report, Britannia is expecting an additional 1.5-2 per cent pricing impact in the current quarter. A significant portion of this adjustment is likely to fall under reducing the size of products, particularly affecting the company's popular Rs 5 and Rs 10 entry-level packs or biscuits.

The core of the issue lies in the rising costs of raw materials, specifically sugar and palm oil. Britannia MD and CEO Rakshit Hargave has pointed out that the price increases initiated earlier this year were not enough to fully cover these soaring expenses, necessitating further intervention.

Hindustan, Dabur And Other Plans Cost Increase

Hindustan Unilever is similarly bracing for continued inflation, anticipating sequential cost increases of 2-5 per cent throughout the September quarter. The company is preparing to roll out calibrated price hikes across its various product categories to maintain financial stability.

Dabur India has also highlighted concerns over elevated input costs. Management has indicated that as they pass a portion of these inflationary pressures on to consumers, the growth in revenue and pricing will likely outpace overall volume growth for the near future.

Other FMCG Companies 

According to the report, other industry giants, such as Godrej Consumer Products and Tata Consumer Products, are maintaining a cautious stance, keeping the door open for additional pricing measures if these input costs remain at their currently elevated levels.

Robust Demand 

While FMCG companies worry that rising grocery prices might dampen demand, consumers are simultaneously demonstrating a robust appetite for premium alcoholic beverages.

Companies such as United Spirits, Radico Khaitan, and Allied Blenders and Distillers have reported double-digit growth in their premium and super-premium segments during the June quarter, while United Breweries saw a 17 per cent jump in premium product volumes.

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Radico Khaitan was a standout performer, with its premium portfolio volumes surging 35.8 per cent, contributing to a 13.22 per cent rise in revenue and a 76 per cent jump in consolidated net profit.

United Spirits also saw significant gains from its premium strategy, reporting a 51.6 per cent increase in net profit and a 5 per cent revenue growth to Rs 6,113 crore, even as its lower-end "popular" segment experienced a sharp decline in net sales value.