Prices for biscuits, snacks, detergents, and soaps are set to rise by 6-7% in the next quarter following the government’s decision to increase customs duty on edible oils. This could hit consumer wallets hard as companies brace for higher input costs, particularly for palm oil and wheat.
Prices of everyday essentials such as biscuits, snacks, and personal care products could jump by 6-7% next quarter, after the government raised basic customs duty (BCD) on crude and refined edible oils by 20%. Industry players expect the cost of refined palm oil, which accounts for 12-20% of raw material costs for these products, to increase sharply.
With existing inventory covering only 1-2 months, companies will likely pass on the rising input costs to consumers, marking the end of a nine-month pause on price hikes. “Apart from palm oil, wheat prices are also rising. We expect to implement a 7% price hike by next month to balance growth, which has been largely volume-driven recently,” said Krishnarao Buddha, Senior Category Head at Parle Products.
India imports 95% of its edible oil, making the price hike a critical issue for fast-moving consumer goods (FMCG) companies. Palm oil derivatives are key ingredients in home and personal care products like soaps and detergents, as well as food items such as biscuits and snacks.
Other raw materials are also seeing inflation, with Dabur’s CEO Mohit Malhotra warning of further price hikes as food inflation impacts everything from tea to fruits and vegetables. “We anticipate some inflation in the second half of the year, and we might need to raise prices in the food business,” he said.
The consumer goods industry, already facing price-sensitive demand, may see further pressure. After raising prices by almost 25% following the pandemic, companies had started lowering them last year due to consumer shifts toward cheaper alternatives. However, Britannia’s Executive Vice Chairman, Varun Berry, recently indicated that price hikes might return soon if inflation persists.
Larger players are expected to benefit from the current environment, potentially gaining market share as smaller, unorganized companies struggle with financial constraints. A report by Nuvama Institutional Equities suggests that big companies may emerge stronger, leveraging their financial stability to weather the storm of rising costs.
The price increases are anticipated to take effect in the next quarter, potentially altering the competitive landscape of the FMCG sector.