Expensively Priced

The summer of 2014 was particularly hot for FMCG companies that were seeing input prices spike. Monsoons were no better as prices continued to hold up. It was not before October that input prices started cooling off. Some of the biggest falls were recorded in rice bran oil (down 11.4 per cent over the previous month), phtahlic anhydride (down 9.6 per cent), LLP (6.8 per cent) and copra (3.7 per cent). Consequently, some of the biggest gainers were Bajaj Corp, Dabur, Marico and Asian Paints. A number of other companies like Britannia, Hindustan Unilever and Nestle did not see their raw material prices cool down. FMCG companies on aggregate saw sales up 12.47 per cent in the last 12 months. Operating profit growth stood lower at eight per cent - a reflection of higher input costs. The sector has been witnessing anaemic volume growth for many quarters now. That has not changed much. A decline palm oil price and a stable currency could allow detergent and shampoo manufacturers to cut prices in a bid to entice volumes. Other categories like butter, milk, tea and biscuits that are not seeing raw material prices cool-off have no such advantage. Britannia and Hindustan Unilever raised prices of products in these categories. Outlook The sector still has to see the strong volu