FMCG pricing power to stage a comeback

FMCG pricing power to stage a comeback

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Inputs that determine pricing action in fast-moving consumer goods (FMCG) have been inching up.

Brent crude has jumped 21 per cent since January to $43.45 a barrel now.

Palm oil has also increased 21 per cent. Copra prices are forecast to firm up in the future.

“We have to consider the price-value equation and the strategic price points of our brands. We will respond based on these factors,” said Sanjiv Mehta, managing director and chief executive officer of Hindustan Unilever, the country’s largest consumer goods company.

“Pricing power will resume in the second half of the financial year. The hikes could be partial, based on demand,” said Sunil Duggal, chief executive officer, Dabur India.

“The company will respond with suitable price changes to maintain a trade-off between franchise expansion and margins,” Marico said in a recent quarterly update.

FMCG pricing power to stage a comeback

Analysts said price hikes were imminent because the deflationary environment had wiped out top line growth for FMCG companies in 2015-16.

“The gap is widening between top and bottom line growth. Companies will want to bring stability to the top line,” said G Chokkalingam, founder, Equinomics Research.

Amnish Aggarwal, senior vice-president, research, at brokerage house Prabhudas Lilladher, said price hikes were likely in the September quarter.

“The trend has been to cut prices. But with input costs moving up this is bound to reverse,” he added.

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