The Russia-Ukraine war could step up FMCG inflation by a few more percentage points. With crude oil prices soaring to $110 per barrel (which was earlier hovering around $90-$95), FMCG industry veterans expect a further increase in prices of soaps, detergents, packaged food and an obvious slowing down of consumption.
"Crude price will have an impact on derivatives. Fuel prices, packaging material costs and cost of laminates will go up. Manufacturers will have to take an increase in costs yet again. Through this year brands have been taking price increases and I expect the same to happen in the next quarter too," says Krishnarao Buddha, senior category head, Parle Products. Most FMCG brands have taken calibrated price hikes of 10%-12% in the past year and Buddha doesn't rule out another 3%-4% increase in prices of FMCG products.
While the mass brands may at the most undergo grammage cuts, bulk of the price hikes, says Prem Kumar, founder, Snapbizz, will happen in the premium category. "Prices of premium brands in the past year have gone up by 15%-20%. This time round also I expect the price hikes to happen in the premium category as that is where the price elasticity is low."
Former Dabur India COO, Kannan Sitaram (currently venture partner, Fireside Ventures), expects most of the price hikes to happen in home and personal care brands since they use more oil derivatives. "Given the volatility in oil prices it is difficult to predict, but my guess is that the companies will take more frequent smaller price increases till they get a better handle on this."
However, the worst hit is likely to be edible oil, where there are even chances of a short supply. India imports over 80% (25-30 lakh metric tonnes per annum) of its sunflower oil requirement from Russia and Ukraine. Sunflower oil constitutes 15% of most edible oil brands that we consume, and thanks to the Ukraine-Russia war, the import of sunflower oil has completely stopped. "If the war doesn't end in the next 7-10 days we may land into a situation where there could be a short supply. However, we at Adani Wilmar have inventory for the next 45 days," says Angshu Mallick, CEO, Adani Wilmar.
Price of crude sunflower oil has shot up to ₹1,500 per quintal from ₹135 per quintal.