Large listed FMCG companies including Hindustan Unilever, Britannia Industries, and Dabur India have begun raising prices across their portfolios as commodity costs accelerate beyond fuel and packaging into food inputs.
The West Asia conflict has pushed up crude-linked input and freight costs while driving a rise in global edible oil prices. India imports nearly 60 percent of its edible oil requirement, making companies vulnerable to global market shocks. On 15 May, Amul and Mother Dairy raised milk prices by 2 rupees per litre, with smaller regional cooperatives including Sanchi Milk and Milma following suit.
Scale of price action
Hindustan Unilever told reporters it was taking 2 to 5 percent price hikes across its portfolio. Dabur India announced a 4 percent price increase across different parts of the business to mitigate inflationary impact tied to the West Asia conflict, with Mohit Malhotra, global CEO of Dabur International, warning the company could take a second round depending on how the war evolves. Britannia Industries CEO Rakshit Hargave said the company may respond with price hikes and grammage cuts in lower-priced packs, including 10 rupee products.
AWL Agri Business reported that the edible oil complex rose close to 10 percent in March, with every player passing the increase on to consumers by mid to end-March.
Inflation spreading beyond packaging
Milk, wheat and edible oils are now squeezing margins, forcing companies to pass on costs through price hikes and lower grammage packs. India's wholesale price index rose 8.3 percent year-on-year in April, driven largely by higher prices of mineral oil, crude, natural gas and metals. Retail food inflation accelerated to 4.2 percent in April from 2.1 percent in January, partly due to rising edible oil and vegetable prices.
The Food and Agriculture Organization's world food price index showed edible oil prices rose 5.9 percent month-on-month in April to their highest level since July 2022. Wheat prices came under pressure after unseasonal rains earlier in the year raised output concerns. Hargave noted that Britannia expects elevated temperatures and a possible El Niño impact to keep milk prices firm.
Lower prices of some inputs such as copra and cocoa are no longer providing enough relief. Nestle India chairman Manish Tiwary told Mint that while coffee and cocoa prices had softened, rising costs of milk, packaging material, petroleum and utilities were offsetting those gains.
Risk to demand recovery
The latest round of price increases threatens to weigh on consumer demand just as consumption was beginning to recover after last September's GST cuts. Anand Ramanathan, partner for consumer industry at Deloitte South Asia, told Mint that FMCG demand typically reacts with a lag to inflationary pressures and could remain under strain even if the war eases. "From Q2, you will start seeing demand falling as an effect of all these factors," Ramanathan said, warning that consumers would increasingly look for value-for-money products and that festive season demand from August to September could come under pressure.