Ukraine Conflict Likely To Result 10% Higher Prices For Fast -Moving Consumer Goods

The Ukrainian conflict resulted in 10% higher prices for Indian consumers

The escalating Russia-Ukraine conflict has pressed fast-moving consumer goods companies (FMCGs) in India to consider another round of price hikes to offset unprecedented increases in commodity prices such as wheat, palm oil and packaging materials.

Crude oil prices and various types of commodities have risen since Russia invaded Ukraine over supply concerns.

Indian inflationary pressures had already increased even before Russia invaded Ukraine on 24 February. In fact, retail inflation for February rose above the Reserve Bank of India’s upper target range of 2-6 per cent for the second consecutive month.

That was even before the impact of the Ukrainian conflict began and did not consider a sharp rise in international oil costs.

Crude oil prices have risen sharply to over $ 100 a barrel, and the FMCG firm predicts further increases in the cost of wheat, edible oil and crude costs.

Companies such as Dabur and Parle are monitoring the situation and will conduct price increases that are calibrated to offset such inflationary pressures.

According to some media reports, makers such as Hindustan Unilever (HUL) and Nestle have raised the prices of food products last week.

“We expect a 10-15 per cent increase by the industry,” Parle Products Senior Category Head Mayank Shah told PTI.

Mr Shah further stated that prices saw high volatility, and therefore it is difficult to tell about the same increase due to price volatility.

The price of palm oil increased to Rs 180 per liter and has dropped to Rs 150 per liter. Similarly, he added that the price of crude oil has risen to almost $ 140 a barrel and has now declined to $ 100 a barrel.

“However, it is still higher than before,” Mr Shah said, adding that the company was also hesitant in taking the price hike significantly as demand recovered after COVID. They don’t want to mess with it.

Last time, makers didn’t take a price increase to fully reduce the impact and absorb some of it.

“Everyone at the moment is talking about a 10-15 per cent price increase, even though input costs have increased more than that,” he said.

Asked whether Parle would also climb, Shah said it currently had sufficient stock of packaging materials and other stocks and would take a decision after a month or two on the matter.

Expressing similar thoughts, Dabur India chief financial officer Ankush Jain said inflation remained unstoppable and was a source of concern for the second year.

“Inflationary pressures and consequent price hikes have caused consumers to tighten their belts and revisit discretionary purchases, while also downgrading to smaller packs. We are closely monitoring the situation and will conduct calibrated price increases to reduce inflationary pressures,” he said. he said.

Commenting on the current situation, Edelweiss Executive Vice President of Financial Services Abneesh Roy said FMCG makers are channeling high inflation to consumers.

“FMCG companies like HUL Nestle have high price power. They are lowering inflation in Coffee and packaging materials. We expect all FMCG companies to increase further by 3 to 5 per cent in Q1FY23,” he added.

According to several news reports, HUL and Nestle major FMCG have raised the prices of food items such as tea, coffee and noodles, putting little burden on consumers to maintain margins.

The report claimed that HUL had raised the prices of Bru coffee, Brooke Bond tea etc., as the company faced inflationary pressures.

While Nestle India has raised the price of the famous Maggi noodles by 9 to 16 per cent, it has also taken up the price of milk and coffee powder, the report added.

A HUL spokesman said: “We are witnessing a titration of consumer volume as a result of the effects of high inflation. In this environment, our priority is to deliver value to consumers, invest behind our brand and protect our financial business model.”

“We reduce cost inflation first by driving our savings agenda harder, looking at all cost lines with a laser -sharp focus and eliminating any non -value -adding costs,” he said.

“Given the existing strengths of our brand and the greatness of our execution, we have been able to provide the right price value equation to consumers, thus helping to protect our business model in a high inflation scenario,” the HUL spokesperson added.


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