FMCG firms plan price hikes amid high palm oil costs
23/03/2025 (Financial Express) - Fast-moving consumer goods (FMCG) companies are likely to implement further price hikes in the coming weeks, particularly for products that rely heavily on palm oil. Despite a recent cooling in the prices of key commodities like coffee, palm oil continues to remain expensive, adding to cost pressures for manufacturers.
Speaking to Fe, Manoj Verma, chief operating officer of ethnic snacks company Bikaji Foods International, confirmed that the company plans to raise prices by approximately 2% within the next 30 to 40 days. This would mark the second price revision in less than three months.
“While we have observed some softening in the prices of commodities such as dal and spinach, edible oil prices remain elevated and are unlikely to ease in the near future,” Verma said. The company had already implemented a 2-2.4% price increase at the end of December.
According to Naveen Malpani, partner at Grant Thornton Bharat, persistent high palm oil prices are expected to continue pressuring operating margins. “Margins could remain at the lower end of expected ranges, especially as weak urban demand complicates pricing strategies,” he noted.
Palm oil is a crucial raw material for a wide range of consumer products, including snacks, soaps, and personal care items. Industry estimates indicate that palm oil prices have surged by around 30% over the past six months due to adverse weather conditions in key producing nations such as Indonesia and Malaysia, coupled with growing demand. The increased use of palm oil in biodiesel production has further strained supply, making it more expensive for FMCG firms.
As the world’s largest importer and second-largest consumer of palm oil, India is particularly affected by these price fluctuations. Several major FMCG firms have already responded with price hikes or strategic changes. Godrej Consumer, which produces Cinthol soaps, recently stated that its previous price hikes had not fully offset rising costs, and additional increases would be necessary. During the October-December quarter, the company’s gross margin shrank by 175 basis points year-on-year, marking its first contraction in two years amid escalating palm oil prices.
Meanwhile, Hindustan Unilever, the maker of Dove soaps and shampoos, has begun reformulating its products to reduce dependence on palm oil. Biscuit-maker Britannia has already increased prices this quarter and is expected to end it with an overall price rise of 4-4.5% compared to the same period last year.
Analysts suggest that upcoming price hikes will likely be more moderate than those seen in the previous quarter, as they were driven by broad-based commodity inflation. Currently, palm oil appears to be the primary cost concern.
“The price hikes taken in Q3 will start reflecting in financial results this quarter and the next,” an industry analyst said. “Companies may refrain from further aggressive hikes too soon to avoid impacting sales volumes,” he added.