FMCG firms tweak prices to combat slowing consumption

In the face of a slowdown in consumption, fast moving consumer goods (FMCG) companies have gone for selective cuts and hikes in product prices, based on the mixed trends in raw material prices and consumption pattern.

Market leader Hindustan Unilever (HUL) has cut the prices of soaps but has raised face wash prices.

HUL has increased the prices of face wash by 4-14 per cent across brands, including Pears, Dove, Ponds and Fair and Lovely. It has also increased the price of Pond’s Miracle Age cream by 8 per cent, finds Kotak Institutional Equities.

In contrast, the company has taken an overall price cut of 5 per cent recently in the soap portfolio. The company had noted that personal wash witnessed muted delivery, particularly in the popular segment.

“HUL does selective and judicious price changes across its portfolio in the normal course of its business. Given that the commodity prices are expected to remain benign for certain time period, we have taken price reductions in range of 4-6 per cent in Lux and Lifebuoy portfolio while it may be higher on certain packs in order to pass on the benefits to the consumers,” said the HUL spokesperson.

According to Edelweiss Securities, this is the right strategy considering soap volumes are soft and palm oil prices remain lower on a year-on-year basis, though they have picked up lately. “This will help HUL gain market share from unorganised and some of the smaller players. Any pressure on gross margins will be compensated by a cut in advertisement spends; so Ebitda margins should be fine,’ it said.

Other FMCG players also have gone for pricing changes for select products. Reckitt Benckiser has reduced price of Dettol soap by 8 per cent. Colgate has increased prices of select toothpaste brands by 5-6 per cent and Dabur has increased price of Meswak by a modest 2 per cent and the company has also increased prices of Almond hair oil by 3 per cent, pricing it at par with Bajaj Almond Drops Hair Oil, according to Kotak.

Wipro Consumer Care, makers of Santoor soap, has also slashed the prices. "We have also cut prices in soaps, passing on the benefit of lower raw material prices to the consumer,”  said Anil Chugh, President (India Consumer Care Business), Wipro Consumer Care.

ITC also cut prices of some soap brands. "ITC passed on the benefit of lower raw material costs to consumers through a downward revision in prices about 5-6 weeks back in certain packs of its soap variants," said an ITC spokesperson.

In the food and beverages segment, Britannia has reduced price of Good Day butter cookies by 9 per cent while Parle has increased price of Hide & Seek bourbon by 20 per cent to Rs 30/100 gm.. ITC too has increased price of Sunfeast bourbon. Dabur has increased the price of Glucose D, as sugar prices have remained firm in recent times.

Britannia has increased the price of cheese block and cheese slices by about 12 per cent. Amul has increased the price of Amul Gold milk by 3 per cent, Nestle has increased the price of condensed milk by 2 per cent and milk powder by 3 per cent as the milk prices have been firming up for some time.

Data analytics firm Nielsen had, in a report, last month said that sales of FMCG items, including soaps, slowed down in April-June quarter,.

"... This quarter has witnessed a slowdown across all food as well as non-food categories with salty snacks, biscuits, spices, toilet soaps, and packaged tea leading the slowdown," Nielsen had said.