Kolkata: The ugly head of inflation is going to show up, this time in the form of higher prices of FMCG items. Prices of everyday FMCG goods in India are
once again under pressure to rise. Companies manufacturing soap, biscuits, tea, coffee, and other packaged goods are preparing to raise prices on some products in the September quarter. This is largely due to rising raw material costs and geopolitical uncertainty. However, companies are confident that consumer demand remains strong. Last week, while briefing the decision of the Monetary Policy Committee, RBI governor Sanjay Malhotra also mentioned that GDP could inch up by 10 basis points in FY27, consumer demand being the primary driver.
Prices also increased in the June quarter
FMCG companies raised prices by an average of 2-5% in the June quarter or Q1FY27. Now, in response to rising costs, companies are once again adopting the strategy of increasing prices on select products or reducing the quantity in a package. This is called ‘shrinkflation,’ meaning the price remains roughly the same but the quantity in the package is reduced slightly.
Britannia may increase prices again
Britannia Industries has indicated that it may make further price changes of approximately 1.5-2% in the second quarter. Shrinkage may be used, particularly in bicuit packs priced at Rs 5 and Rs 10. According to the company, sugar and palm oil prices remain high.
The FMCG major said the demand environment remains strong despite the price increase. If raw material costs remain high, it expects to maintain its operating margin in fiscal 2027 around the same level as the previous fiscal year.
Dabur and HUL may also increase prices
Dabur India stated that the impact of higher raw material costs is likely to persist for some time. The company is implementing cost reduction measures along with limited price increases to protect margins. Hindustan Unilever (HUL) is also preparing to make further price changes across various categories in the September quarter. The company expects costs to increase by 2 to 5 percent in the second quarter compared to the April-June quarter.
Godrej and Tata Consumer can also hike prices
Godrej Consumer Products raised prices by approximately 5% in the June quarter. The company is considering further price increases, but is currently monitoring fluctuations in commodity prices. Tata Consumer Products also stated that if cost pressures persist, the company may make further price changes. However, given the situation in West Asia, the company wants to avoid any hasty price increases.
Impact on customers
If companies increase prices or reduce package contents, it will have a direct impact on consumers’ pockets. However, FMCG companies hope that strong consumption and growing demand for premium products will offset some of the impact of price increases.
The biggest challenge for companies in the coming months will be to strike a balance between saving profits by increasing prices and maintaining strong customer demand.
