Leading consumer goods companies are grappling with the impact of see-saw movements in commodity prices. This volatility is affecting their decision-making processes, product pricing, and demand recovery efforts. The fluctuations in commodity prices have implications for various sectors, including FMCG and manufacturing.
HUL has reported increased inflation in categories like health food drinks and coffee, impacting volume recovery. ITC has observed a sequential uptick in certain commodities such as wheat, maida, and sugar, despite commodity price deflation on a year-on-year basis. Both companies are facing the challenge of balancing pricing strategies to maintain consumer demand while managing increased input costs.
Parle Products, a major biscuit manufacturer, has faced a 10-15% increase in wheat prices and a 20-25% increase in sugar prices in the last few months. The gains made from the fall in edible oil prices have been wiped out due to shortages, resulting in an overall deflationary environment. Parle Products is unable to pass on the full benefit of the dip in edible oil prices to consumers, impacting their input cost deflation expectations.
The U.S. economy is enjoying solid growth, but global weakness and moderating demand reduce the chance of oil price spikes in the near term. The conflict in Ukraine has disrupted the grain commodities market, leading to uncertainty and price fluctuations.
RTM Watch’s Take
The uncertain movement of commodity prices poses significant challenges for top consumer goods companies. Balancing pricing strategies, managing input costs, and maintaining consumer demand are crucial for sustained growth. FMCG companies have responded by reducing prices or increasing grammage to stimulate volume recovery. As companies navigate these challenges, proactive risk management and strategic pricing decisions will be key to maintaining profitability and competitiveness in the market.
