FMCG Products up by 10%

Mumbai, Ta. 15 January 2020, Wednesday

The rise in prices of agricultural commodities like milk and sugar is becoming a concern for manufacturers of Fast Moving Consumer Goods (FMCG). The rise in raw material prices has led to inflationary pressure, which is slowing down, an expert in the sector said.

While there is currently no indication of a price drop, many FMCG products are on the verge of rising prices. As a result, the FMCG sector seems unlikely to improve in the near future.

Due to poor economic growth and employment cuts, rural and urban families are being forced to cut their spending. When prices of raw materials like milk, potato, sugar, wheat and palm oil have increased, consumers of dairy products, value added dairy products, biscuits, confectionery items will be forced to cut their purchases.

Manufacturers of various types of FMCG products are also looking to increase prices by five to 10 percent, he said. Although the corporate tax deduction could ease the extra burden on companies, he opined that companies would not avoid raising prices at marginal cost.

There is no denying that companies in the FMCG sector that have pricing power in the market can limit price increases. It is worth mentioning here that December retail inflation has increased to 8.7 percent. Inflation has risen due to a sharp rise in food prices.

Apart from the increase in the prices of agricultural commodities, other factors have also increased production costs. Considering this fact, manufacturers are also looking at increasing their efficiency.

Due to the competition, some FMCG companies are considering a strategy to reduce the weight of packets of Ready to Eat instead of raising the prices of their products, said another analyst.

It is worth mentioning here that the increase in import duty on palm oil imported from Malaysia has led to the rise in domestic palm oil prices recently. Due to the rise in oil prices, soap makers' costs have increased.