In India, prices of groceries, daily essentials and apparel are likely to fall over the next two quarters as input costs are expected to decline, spurring sales in the process, according to consumer goods makers.
Fast-moving consumer goods (FMCG) companies such as Hindustan Unilever, Britannia, ITC, Emami and Marico have indicated in their recent earnings calls that input cost pressure is set to ease in the next two quarters. The firms said they will pass on the input cost benefits by turning down the prices, increasing pack weights or running consumer offers.
Notably, commodity prices have fallen considerably in the past few weeks.
Cotton prices have declined 30% in the past four to six weeks, easing pressure on apparel makers, while in the last fortnight cooking oil wholesale prices have reduced 12% for rice bran oil, 5% for sunflower oil and 7% for groundnut oil.
Further, brent oil prices touched a fresh 10-month low last week which augurs well for FMCG companies as many raw materials are linked to the commodity.
Vegetable prices have also turned down with seasonal vegetables coming into the market. Since Diwali, in some cases, like onion, prices have plunged more than 50%. Wholesale onion prices crashed to Rs13-14 per kg on Monday at the benchmark Lasalgaon market in Maharashtra.
BV Mehta, executive director of edible oil industry body Solvent Extractors’ Association, stated, “While the international prices of cooking oils are stable, there is some downward pressure on domestic cooking oil prices amid expectations of healthy production of soybean, groundnut and cotton seeds, and the ongoing sowing of mustard is also expected to be good.
“Commodity prices have eased down, but the rupee has depreciated to 82 against the US dollar, nulling the impact since the earlier benchmark was Rs78. Otherwise, we could have also dropped the prices,” said Godrej Appliances business head Kamal Nandi.
Emami vice chairman Mohan Goenka commented, “The drop in input prices will lead to a 150 basis points expansion in gross margins sequentially in the coming two quarters.”
He further added, “Consumers can expect promotional offers in large packs in the next two quarters aided by the drop in input cost, but for sachets it is difficult since we did not tamper (with) prices or volumes even during the peak of inflation.”
A basis point is a hundredth of a percentage point.
India’s wholesale and retail inflation decline in October month after remaining high for several months post Covid while retail inflation, measured through Consumer Price Index, fell to a three-month low of 6.7% and Wholesale Price Index was at a 19-month low of 8.39%.
S&P Global ratings on Monday cut India’s economic growth forecast for current fiscal to 7% from 7.3% earlier but said the domestic demand-led economy will be less impacted by the global slowdown.
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