Softening of commodities’ prices will help traditional firms recover volume growth: FMCG makers


With prices of major commodities, which have fallen in case of some items like palm oil, leading FMCG companies say they are keeping a close watch, citing the decline in prices has not been “secular and broad-based”.

On the issue of reducing the prices of FMCG products, firms point that rates of some other major items including wheat are still firm and they would wait before taking any call on reducing the price, news agency PTI reported.

Softening of commodities prices will help the FMCG firms in improving their profit margins and also some elbow room to pass on the benefits to consumers by lowering the MRP (maximum retail price) of their products.

Stating that softening in commodity prices is not secular and broad-based, Nestlé India Chairman and Managing Director Suresh Narayanan said the company is watching the situation.

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“We will watch the situation and evaluate our next step. The price decline in commodities is not secular and broad-based,” Narayanan said.

Asked about launches of new products this fiscal, he said: “There will be some new initiatives.”

In recent months there has been also a drop in the prices of edible oil, beside palm oil. Few FMCG makers have slashed prices or increased grammage for soaps and some large packs of packaged food extending the benefit to consumers recently.

Earlier last week, leading bakery maker Britannia Industries Vice-Chairman and Managing Director Varun Berry had said overall commodity prices are not softening right now. However, expressed hope that they should come in control going forward.

“The only commodity which is softening right now is palm oil. Wheat prices are on the rise. Sugar has been stable. On a balance, we are almost flattish to slight inflation. Hopefully, as we go forward, things should come under control,” he said.

Expressing that softening of prices in some of the commodities would help the traditional FMCG companies to recover their volume growth, Nuvama Group Executive Director Abneesh Roy had said, “Promotion and grammage can increase which will drive recovery in volume growth gradually.”

Even Pidilite Industries Managing Director Bharat Puri has said the inflation is still high compared to the past, but it has come down to a “manageable level”.

Data analytics firm NielsenIQ in its latest report on the FMCG industry had said it continued to witness a consumption slowdown in the September quarter. It added that rural markets registered a higher decline in volumes compared to the three months that ended June.

The FMCG industry witnessed an overall volume decline of 0.9 per cent in the September quarter in comparison to the preceding three months.

However, the report also added that FMCG manufacturers continued to bring new offerings as in the third quarter of 2022, the contribution of new launches was higher across key FMCG categories than year-ago levels.

With PTI inputs.

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