FMCG firms worry over high inflation, squeezing urban market; hint price hike

Leading FMCG companies face margin decline due to high input costs, food inflation, and slowing urban consumption.

Leading FMCG companies reported a decline in margins in the September quarter on account of higher input costs and food inflation, which ultimately slowed down the pace of urban consumption.

Rising prices of commodity inputs such as palm oil, coffee and cocoa were also accentuated and some FMCG firms have hinted at a price hike.

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HUL, Godrej Consumer Products Ltd (GCPL), Marico, ITC, and Tata Consumer Products Ltd (TCPL) have expressed concerns over squeezing urban consumption, which according to industry experts forms 65-68% of FMCG total sales.

"We think this is a short-term hit and we will recover the margins through judicious price increase and stabilising of costs," said GCPL Managing Director and CEO Sudhir Sitapati in a Q2 earning statement.

GCPL, makers of Cinthol, Godrej No 1, HIT had a steady quarter given the headwinds of oil costs and tough consumer demand in India and its standalone EBITDA margin was lower, caused entirely by high inflation in palm oil.

The rural markets, which were earlier lagging behind, continued their growth journey ahead of urban. Besides, FMCG players reported growth from premium products and from sales through quick-commerce channels.