Lower input costs, excise cuts see fall in FMCG prices
Marico to follow HUL; Godrej to wait and watch.
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"While 2008 saw some price increases due to rise in prices of commodities such
as crude and palm, this should not happen in 2009."
--------------------------------------------------------------------------------
Amit Mitra
Purvita Chatterjee
Mumbai, Jan. 20 Economic slowdown notwithstanding, those buying consumer goods,
especially in the rural areas and the lower income groups, will be paying less
for their favourite brands of soap, detergent or hair oil in the coming months.
Sliding prices of vital raw materials that go into the making of these
products, coupled with the recent cut in excise duty, are prompting FMCG majors
to either slash prices or increase the quantity at the same price points for
mass consuming products. "While 2008 saw some price increases due to rise in
prices of commodities such as crude and palm, this should not happen in 2009,"
says Mr H.K. Press, Executive Director and President of Godrej Consumer
Products Ltd (GCPL).
While FMCG biggie Hindustan Unilever Ltd has confirmed cutting prices of
certain products in these two segments, Marico is likely to follow suit in the
next two months. GCPL, the makers of Cinthol and Godrej No 1 brands of soap,
however, does not have immediate plans to cut prices. Mr R.K. Sinha, Executive
Vice-President (Marketing and Operations) of the company, told Business Line
that "in October-November last year we did not increase our prices like HUL.
Now, we believe we are on par with them in terms of pricing and we have not
finalised any further price cuts yet."
HUL, which has a broad portfolio of FMCG products, is targeting to pass on the
relief of the excise cut and fall in raw material prices to consumers of its
high-penetration brands. Some of the products it recently cut prices include
the detergent brand Wheel Active Powder available at Rs 67 for a two-kg pack
instead of the earlier Rs 75. The price of Lifebuoy, popular in the rural
areas, was similarly cut from Rs 13 to Rs 12 for a 90 gm bar. It has also
increased the grammage of certain brands at same price points, like Lux toilet
soap, which is now available at 75 gm a bar instead of 60 gm at the same price.
Laundry brands
In fact, prices of HUL's laundry brands are currently at a level below the 2004
price level, although this segment contributes a turnover of Rs 10,000 crore to
its revenue, sources said.
Marico, known for its hair oil brand Parachute, may be taking similar steps in
the coming months.
"We can look at prices coming down only during March and April, when there
could be a sharp drop in commodity prices. Prices of Parachute oil depend on
prices of commodities like copra and kardi oil," Mr Chaitanya Deshpande,
Head-Strategy, M&A, Marico, said. Industry sources say that the sharp fall in
key inputs that are used to produce soaps and laundry products is a major
reason for companies to pass on the relief to consumers.
For example, prices of key inputs to the soap industry, like palm fatty acid
distillate (PFAD), crude palm and palm kernel oil (industrial grade) have come
down by nearly 50 per cent in the last six months. While the price of imported
PFAD in India (on C&F basis) slid from about $750 a tonne to the present level
of $384 per tonne in the last six months, that of imported palm kernel oil saw
prices fall from about $1,250 a tonne to $560 in the same period.
http://www.thehindubusinessline.com/2009/01/21/stories/2009012151120500.htm
ekamber
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