With the uptick in palm oil prices, major Fast Moving Consumer Goods (FMCG) companies are expected to hike soap prices further in Q4, according to indications given by leading companies in the sector, who have warned that the hikes could be higher than seen in the third quarter.
The price of palm oil, a key input in the manufacture of soaps, saw a 40 per cent surge in the third quarter.
Cinthol maker Godrej Consumer Products, which implemented price increases on soaps in Q3, stated that the personal wash volumes declined to mid-high single digits. During the quarter the segment continued to witness significant cost pressures due to inflation in palm derivatives, it said.
“There is a requirement for another round of pricing in soaps. We have to get back to our normative margins. In this quarter, our India business had a 22 per cent margin but it should be between 24 to 26 per cent. Pricing growth in Q4 will be higher than the pricing growth in Q3. There is scope for one or two more pricing rounds in soaps,” said Sudhir Sitapati, MD& CEO of Godrej Consumer, in an earnings call.
Hindustan Unilever (HUL) stated that crude palm oil and tea prices remain inflated year-on-year. The company undertook price increases in its product portfolio in December to maintain margins. The personal care segment for the company declined 4 per cent.
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The FMCG maker has also announced the acquisition of the palm undertaking of Vishwatej Oil Industries Private Limited, as a part of HUL’s Palm localisation strategy. The palm undertaking is based in the Kamareddy district of Telangana and HUL plans to set up sapling nurseries, palm fresh fruit bunch collection centres and a palm oil mill in the state.
“This acquisition gives us the opportunity to contribute to India’s national mission of increasing domestic oilseed production and reducing import dependence,” said Rohit Jawa, CEO and Managing Director of HUL.
Going ahead, HUL is expected to further increase prices in small amounts depending on the commodity prices. The company will also relaunch Lifebuoy to address the decline in the hygiene segment.
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“If commodity prices remain where they are, a low-single-digit price growth is expected,” the company mentioned in its near-term outlook.
