Daijiworld Media Network - Mumbai
Mumbai, Aug 10: Leading fast-moving consumer goods (FMCG) companies are planning calibrated price hikes in the September quarter as rising commodity costs and geopolitical uncertainties put pressure on margins.
Companies including Britannia Industries, Godrej Consumer Products, Dabur India, Hindustan Unilever and Tata Consumer Products are considering selective price increases or shrinkflation while remaining optimistic about demand, supported by resilient consumption, premiumisation and improving revenue growth.
The FMCG sector had taken average price increases of around 2-5 per cent in the June quarter. Companies are now looking at further selective pricing actions and reducing product grammage to protect margins while closely monitoring inflation, crude oil prices and weather-related risks, including the monsoon and El Nino.
Leading bakery products maker Britannia expects to take another 1.5-2 per cent pricing action in the second quarter through shrinkflation in its Rs 5 and Rs 10 biscuit packs, amid elevated sugar and palm oil prices.
Britannia said its pricing-led growth in the first quarter was mainly driven by shrinkflation and indicated that further measures could be taken during the current quarter.
"Going ahead in the quarter, you will see something more coming in. If the overall impact was 1 per cent, you would probably see maybe another 1.5-2 per cent coming in," MD and CEO Rakshit Hargave said during the company's earnings call.
However, Hargave said the demand environment remained strong and the company was confident about maintaining its FY27 EBITDA margin at least at FY26 levels if input costs remained elevated.
Godrej Consumer Products Ltd (GCPL), which implemented an average price increase of around 5 per cent in the June quarter, may take further pricing action in the current quarter.
CEO Sudhir Sitapati said the company was holding back from larger price increases until commodity cost trends became clearer, particularly because of volatility in crude oil prices.
Asked whether GCPL had taken further price hikes at the end of the quarter, Sitapati said, "No... We may get a similar kind of price increase in Q2 as well..."
He said several input costs were linked to crude oil and usually reflected changes in crude prices with a lag of three to four weeks. With Brent crude hovering around USD 80-85 a barrel, GCPL believes its existing pricing is broadly adequate and does not currently foresee the need for a significant additional increase.
"With revenue growth tracking ahead of our original expectations and input costs beginning to ease, we enter the remainder of FY 2027 with increased confidence," Sitapati said.
Dabur India also expects elevated input costs to persist in the near term and plans calibrated price increases along with greater focus on productivity and cost efficiencies to protect margins.
The company remains confident of achieving double-digit revenue growth in FY27, supported by its brands, innovation pipeline and disciplined execution.
Dabur India Global CEO Mohit Malhotra said growth would increasingly be driven by revenue and pricing as inflationary pressures forced the company to pass higher costs on to consumers.
"Price growth and value growth are becoming higher than volume growth. Volumes will be under pressure as the inflation is too much," Malhotra said during the earnings call.
He said Dabur wants profit growth to remain accretive to top-line growth while closely monitoring rising costs linked to geopolitical uncertainties.
Hindustan Unilever Ltd (HUL) is also expected to increase prices across several product categories during the September quarter as it anticipates sequential inflation of 2-5 per cent compared with the April-June quarter.
HUL had already raised prices by 2-5 per cent in the first quarter of FY27. CEO and Managing Director Priya Nair said the company would continue taking calibrated pricing actions depending on how inflation develops while seeking to protect volume-led growth.
"Between the September quarter versus June quarter, we see sequential inflation, which could range between 2 to 5 per cent. We will continue to take calibrated pricing into the quarter, depending on how inflation pans out," Nair said.
Tata Consumer Products Ltd is also keeping the option of further price increases open as input costs remain dynamic.
"If need be, we will also make further pricing interventions because the cost has been fairly dynamic and we are also coming to terms with the exact inflationary impact on the margins," Managing Director Sunil D'Souza said during the company's earnings call.
D'Souza said the situation in West Asia remained dynamic and the company did not want to rush into price increases without sufficient cost justification. Tata Consumer is targeting mid- to high-single-digit growth.
Nestle India, meanwhile, has flagged geopolitical and inflationary pressures as key concerns, warning that overall consumption could moderate in the short term.
In an investor presentation, the company identified the West Asia conflict and the potential impact of El Nino on the monsoon as key factors to monitor for growth in the food and beverage sector.
With commodity prices, crude oil and geopolitical developments remaining uncertain, FMCG companies are expected to balance selective price increases and cost-control measures with efforts to sustain consumer demand in the coming quarters.