Market research agency Kantar said last week that it saw the domestic FMCG market remaining subdued till the September 2024 quarter, though the tide would turn in the December quarter as market sentiment would improve.
Fast-moving consumer goods (FMCG) companies may hike prices by 2-3% by the second half of 2024-25, led by volatile commodity prices, notably of food and crude oil, and wage inflation.
Small, calibrated price hikes may also boost price-led growth, which has been flat to negative for most firms through FY24.
“As we are in the process of preparing our budgets for FY25, we find that there is likely to be some amount of inflation in the next financial year. Some amount of price increases therefore will come back, to the tune of 2-3%. So, even as the emphasis is on volume growth within FMCG, small price hikes will be there,” Mohit Malhotra, chief executive officer at Dabur India, said.
Harsh Agarwal, vice-chairman & managing director at Kolkata-based Emami, said there could be price hikes of 1.5-3% next year in the personal care and healthcare categories. “Price hikes could happen in the second half of FY25 as the FMCG market may stabilise by then from a demand perspective. There could be nominal price hikes after factoring in the input price and demand scenario in different categories,” he said.
While FY24 saw largely benign commodity costs, Malhotra said some products such as spices, cereals and honey have seen double-digit inflation during the year. Dabur operates in the spices and honey categories with the Badshah and Dabur Honey brands, respectively. It also operates in hair oils, shampoos, oral care and healthcare, among other segments.
“The skew of inflation is shifting towards food. The rest of the commodity bucket is less inflationary for now, but you never know what could spike in the future,” Malhotra said.
For instance, benchmark Brent crude neared $84 a barrel last week after Organization of the Petroleum Exporting Countries and its allies (OPEC+) extended voluntary oil output cuts of 2.2 million barrels per day into the second quarter. It settled at about $82 a barrel at the end of trade, and continues to hover around that mark.
Tarun Arora, chief executive officer at Zydus Wellness, the maker of the Complan brand of health food drinks, said companies also had to account for wage inflation. “Wage and salary bills are inching up. Besides, there are other operating costs such as sales and distribution expenditure that also move up. While cost control measures are in place at most firms, some amount of inflation is normal in FMCG,” he said.
Market research agency Kantar said last week that it saw the domestic FMCG market remaining subdued till the September 2024 quarter, though the tide would turn in the December quarter as market sentiment would improve. NielsenIQ notes that the domestic FMCG market would grow by 4.5-6.5% in calendar year 2024, led largely by volume growth and some price-led growth, notably within food.
In 2023, Nielsen said that while price-led growth came in at an average of 2.85% versus 10% seen in calendar year 2022 as commodity costs remained soft, volume growth turned positive (6.4% average growth seen in 2023) after remaining in the negative territory throughout 2022.
Source:financialexpress.com