The prices of daily use items, i.e., FMCG products, may increase in the country soon. Due to geopolitical tensions, the cost of raw materials, i.e., input costs, is continuously rising. In view of this, major FMCG companies in the country are preparing to increase the prices of their products in the current, i.e., September quarter. Prior to this, in the previous, i.e., April-June quarter, companies had increased prices by an average of 2 to 5%.
In this quarter, i.e., July-September, apart from directly increasing rates, companies are resorting to ‘shrinkflation’. This means the price of the product will remain the same, but the quantity, i.e., weight in the packet will be reduced. Companies say that fluctuations in the prices of palm oil, sugar, and crude oil are increasing pressure on margins.
In India, major FMCG companies like Hindustan Unilever (HUL), ITC, Nestle, Dabur, Britannia etc. are active in these products. FMCG are those everyday consumer goods that sell and get consumed quickly.
Britannia: Weight of ₹5 and ₹10 biscuit packets will reduce
The country’s leading bakery and snack company Britannia may increase prices by another 1.5 to 2% in the current quarter through ‘shrinkflation’. This reduction will mainly be seen in the company’s ₹5 and ₹10 biscuit packs.
The company’s Managing Director and CEO Rakshit Hargave stated that prices of raw materials like sugar and palm oil still remain high. Our growth in the first quarter was largely dependent on shrinkflation. This trend will have to continue in the current quarter as well. However, the demand environment in the market still appears quite strong.
Hindustan Unilever Limited: Inflation could increase by 2% to 5%
Hindustan Unilever Limited is also considering increasing prices across its different product categories. The company estimates that inflation could be 2% to 5% higher in the September quarter compared to the June quarter.
Godrej Consumer: Waiting for Crude to Stabilize
Godrej Consumer Products Limited had increased prices by an average of 5% in the June quarter. The company says that it is currently avoiding immediate large price hikes in the current quarter and is waiting for the commodity market to stabilize.
Company CEO Sudhir Sitapati stated that many of Godrej’s input costs are linked to crude oil. He said that Brent Crude is currently hovering around 80 to 85 dollars per barrel. If crude remains in this range, we will not need any major price hikes. We will easily achieve our revenue target for FY27.
Dabur India: Impact May Be Visible on Volume
Dabur India’s Global CEO Mohit Malhotra said that rising raw material costs may continue in the coming days. Companies have no option left but to pass on this cost burden to consumers.
Tata Consumer and Nestle: Keeping an Eye on West Asia Crisis and El Nino
Tata Consumer Products Limited’s MD Sunil D’Souza stated that the cost impact is quite dynamic. If needed, the company will make changes to prices going forward.
Meanwhile, Nestle India has cautioned in its investor presentation that overall consumption may be slightly sluggish in the short-term. The company said that the West Asia conflict and the potential impact of El Nino on monsoon are matters of concern for the food and beverage sector.
What’s Next: Attempting to Protect Margins Through Premium Products and Better Delivery
Despite price increases, the FMCG sector is confident that consumption will continue in urban and rural areas. Companies are focusing on reducing their operating expenses, increasing productivity, and boosting sales of premium products, so that they can maintain their margins during FY 2026-27.
What is ‘El Nino’ and ‘Input Cost’?
El Nino: This is a geographical phenomenon of abnormal warming of ocean water in the Pacific Ocean. Due to this, monsoon winds weaken in India, which creates a risk of drought or reduced rainfall. When rainfall decreases, crop production declines and food items become expensive.
Input Cost: The total expenditure on raw materials, fuel, transportation and labor required to prepare or manufacture any product is called input cost. When this cost increases, companies have to raise the prices of the final product to maintain their profit margin.
