Neutralising Consumption War Premium

Supply chain disruption caused by Russia-Ukraine war has compelled consumer product companies to undertake another round of steep price hikes, slash trade margins and use substitute ingredients.

- AJITA SHASHIDHAR

IN JANUARY this year, India’s largest consumer products company, the ₹45,311-crore Hindustan Unilever (HUL), increased prices of its soaps, shampoos and deter-gent brands by 3-20%. Within a couple of weeks, the FMCG major came up with a second round of price increase, this time not just in home and personal care brands but also in the food portfolio.

With commodity prices such as crude and palm oil more than doubling through FY22, and freight rates almost trebling, the company had little choice but to undertake calibrated price cuts, HUL MD and CEO Sanjiv Mehta said during the second- and third-quarter earnings announcements. “Commodity prices have been unprecedented and two-third of our business is exposed to commodities,” Mehta had said in the Q3FY22 earnings call.

Mehta had hoped that inflation would moderate by the second half of 2022. But little did he anticipate the geo-political turn of events since January. With the Russia-Ukraine war bringing global supply chains to a complete halt, prices of crude derivatives and commodities such as wheat hitting a 10-year high, and crude rising to $130 a barrel before moderating to $120, analysts wonder whether HUL would be mulling a third round of price hikes to make ends meet.