FMCG firms offer deals to consumers as input prices cool

Many packaged goods companies were forced to raise prices over the last several months as commodities including palm oil, crude as well as packaging turned expensive. However, incessant price hikes have also impacted FMCG volumes.

Several companies Mint spoke to said that in order to maintain volumes and ward off competition, they are offering price cuts on modern trade shelves, or giving benefits such as extra cookies in a pack or more grammage.

It also helps that prices of some commodities such as palm and crude oil have cooled from their peaks.

“Now that the prices (of commodities) have sort of settled, companies are trying to lure consumers back because their profitability is sort of taken care of, they have taken necessary price corrections. They are left with a breather; so they are able to give a price-off, a volume promotion, or a freebie. However, in our biscuit industry, we are still impacted by prices of wheat and sugar—those are still high even through oil has cooled,” said Krishnarao Buddha, senior category head at Parle Products.

Companies selling edible oils and soaps were the first to start reducing prices as palm oil prices stabilized. However, those selling other packaged goods have resorted to other methods instead of direct price cuts. These include discounts at retail stores or extra grammage and freebies.

While commodity prices stay high, Amitabbh Singh, senior vice-president at Patanjali Ayurved Ltd, said the need to preserve market share amid growing competition and tepid consumer demand is prompting the company to run aggressive promotions. Patanjali that sells a whole range of fast moving consumer goods is running promotions on packaged wheat, hair care products, toothpaste, honey and chyawanprash, and recently cut soap prices. Singh said prices are unlikely to go down across the entire sector, with manufacturers instead choosing to do on-trade promotions. “We have to do it to gain volumes back and gain market shares. Companies will be unable to pass on direct price cuts to consumers but we will see some offers instead,” he said.