Almost all the spices have seen their prices increase in double-digits over the last one year. Chilli Powder rose by 12.6%, while Garam Masala surged 15.6%, according to data from Bizom, a retail intelligence platform. Prices of turmeric, Jeera and Coriander increased 11.6%, 12.7% and 16.9% respectively during the last one year.
In the essential food category, prices of milk have gone up by 5.4% over last year period, while that of Atta and bread have risen 8% and 12.3% respectively. Branded bathing soaps and detergents, which come under the essential non-foods segment, too have seen double-digit increase in prices in the past one year.
Rising prices have also affected drop in consumption, especially in the rural areas. FMCG companies reported decline in volumes across categories in the last couple of quarters. According to a Nielsen report, volumes shrank 4% in the March quarter, led by a sharp drop in the non-food category.
In the June quarter too, volumes remained under pressure. FMCG giant HUL’s first quarter sales growth was largely driven by price hikes, while the underlying volume growth was muted at around 6%..
Godrej Consumer Products Ltd (GCPL) and Marico too said they expect a volume decline “in mid-single digits” in the first quarter. Experts say FMCG volumes might have contracted around 5 to 8% in the June quarter..
Mayank Shah, Senior Category Head, Parle Products says the sector already seeing signs of rural demand reviving in the current quarter. He expects overall demand revival by the end of the current quarter. Festive season could spur consumption on a large scale, he says.
Palm oil– one of the key commodities used in FMCG products—has come down to about $1,200/MT from the peak levels of $1,800-1,900/MT. So, is the worst behind for the industry and could there be any relief for consumers going forward? Akshay D’souza, Chief of Growth and Insights at Bizom, said a slight decline in commodity prices in some categories is likely. However, there is no pressure on companies to ease the price burden.
FMCG companies might look to focus on effective rates by offering higher value to the consumers at the same price to boost volume growth. There could also be competitive pressure on the companies in terms of offers and schemes ahead of the festival season.
A recent report by ICICI Direct Research said that prices of commodities may fall in three to six months due to the rise in interest rates globally. FMCG companies are betting heavily on the festive season to boost overall volume growth and a demand revival on the back of good monsoon could augur well for the industry.