The price of consumer goods will not be slashed despite the correction in two important commodities, crude and palm oil.
Palm oil is used in making soaps, biscuits and noodles, while crude is used in detergents and packaging. Crude oil has retreated to less than $107 per barrel, down from a peak of $130, while palm oil has dropped below $1,300 per metric tonne. More than half of companies’ input costs are attributed to these. Food, home and personal care product makers said margins are still under pressure despite the reduction in import duties in the segment.
There won’t be price cuts, but the pace of price hikes will come down, said the president of the consumer care business.
Consumer care and lighting sells brands such as Santoor. We have taken a hit on margins and cut costs in order to pass on half the commodity inflation burden earlier.
Household budgets are impacted.
Between February and April, the market for fast- moving consumer goods fell 1%. The recent deflation is a good sign, but it’s not clear if it will be sustained.
The deflationary trend is aided by Macro events such as rate hikes, liquidity dry-up and risk-off. Abneesh Roy, senior vice-president of wealth management and advisory firm, said that Indian companies and consumers benefit from competitive exports from Malaysia and Indonesia.
Securities make up 4% of the stock market. The household budget has been impacted by the rising prices of products. The pack size was reduced on average by 15% during the February-April period compared to a year ago, while consumers paid 10% more per kilogram of product. “There will not be further price hike and package weight reduction which was in the offing since companies were taking gradual price hikes,” said Parle Products senior category head Mayak Shah. The price stability will help the recovery of the market since inflation and price hikes were a major concern.
For the 10th quarter in a row, the aggregate gross margin of nearly a dozen listed FMCG companies has contracted, as price hikes were offset by further increases in commodity rates.
In the second half of the financial year, companies are hoping for a normal monsoon, elevated farm prices and less inflationary pressures. The reduction in input costs will help, but the company will wait for them to recover before taking action on prices. He said that they have to assess the situation. Consumers will have more in hand which they can spend on discretionary items if prices are stable.
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Until prices become more reasonable or people get more money and higher salaries to compensate for the continued higher prices, consumers will continue to maintain their restricted buying habits.
When it comes to price hikes, what goes up never comes down.
Hike prices immediately when prices go up, but do nothing when prices go down. The GOI needs to be active in making sure the prices of oil are reduced.
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