FAST MOVING CONSUMER goods (FMCG) companies will continue to take price increases for the better part of the current financial year, as the decline in prices of palm oil and other commodities is yet to reflect in their raw material costs.
However, despite the price increases, margins will remain under pressure since price hikes do not match commodity inflation and companies are forced to absorb some of the increase, unless they lose out on demand and volumes. Also, there will be some rollover price increases, with companies continuing to hold high cost inventory.
"Inflation has further worsened in the June quarter and prices of many commodities are at a decadal high. Looking ahead, in the near term, growth will be price-led, as inflation continues to impact consumption," Sanjiv Mehta, CEO and managing director, Hindustan Unilever (HUL), said in an analyst call after its June quarter earnings.
Mehta said the company's net material inflation (NMI) as a percentage of total material costs in the June quarter was about 20%, which was on top of the 9% inflation seen in the quarter. While the correction in palm oil prices happened in the last weeks of June, the company continues to hold high cost inventory.
This story is from the August 12, 2022 edition of Financial Express Mumbai.
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This story is from the August 12, 2022 edition of Financial Express Mumbai.
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