Inflation will increase cost of Indian household essentials by 5-20%
What's the story
Inflation is expected to disrupt household budgets, worsening urban demand.
Indian households are preparing to see a major spike in their grocery bills as fast-moving consumer goods (FMCG) companies announce price hikes on daily essentials.
From tea, edible oil, and soap to many more, these items are likely to become 5-20% costlier. This marks the biggest price jump in a year.
Price adjustments
FMCG giants implement price hikes amid rising costs
Major FMCG companies such as Hindustan UnileverLts (HUL), Godrej Consumer, Dabur, Tata Consumer, Parle Products, Wipro Consumer, Marico, Nestle, and Adani Wilmar have already started increasing prices.
The move is an attempt to offset the rising commodity prices and higher customs duty.
The companies' cost of production has increased due to a 22% hike in import duty on edible oil in September and up to 40% throughout 2024.
Brand impact
Parle Products announces price increase across brands
Mayank Shah, Vice President at Parle Products, confirmed that they are increasing prices across all their brands.
This is the first major price hike in a year for the company famous for its popular biscuits like Hide & Seek and Fab.
Despite fears of already strained demand, Shah hoped this move would not negatively impact consumer interest in their products.
Market trends
FMCG market growth and price adjustments
Data from retail intelligence platform Bizom shows a 4.3% year-on-year (YoY) growth in India's FMCG market in October, driven by rural demand.
However, November witnessed a decline of 4.8% with both urban and rural sales dropping compared to the previous year.
HUL has increased prices for soaps and tea, while Dabur has done the same for healthcare and oral care products.
Nestle has also adjusted prices for its Nescafe coffee brand due to these market trends.
Industry outlook
Companies remain hopeful despite price hikes
Despite the price hikes, FMCG companies are still hopeful that urban demand won't be severely impacted in the next two quarters.
Neeraj Khatri, CEO at Wipro Consumer Care, said that while these hikes may affect volumes to some extent, the impact is usually less severe in consumer staples and essential categories.
However, analysts remain wary of near-term growth prospects amid higher prices and tepid demand.
Distribution impact
Uniform implementation of price hikes
FMCG distributors have observed that the latest round of price hikes are being carried out uniformly across all pack sizes, unlike previous cases where only larger packs were affected.
This shows a widespread impact on consumer goods due to the prevailing inflationary pressures.
Nestle India's spokesperson emphasized that pricing adjustments are necessary to ensure value growth and long-term sustainability amid these tough market conditions.