Soaring prices for household cleaning products weigh on household budgets

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Soaring prices for household and personal care products like soaps, detergents, toothpastes and shampoos, due to soaring prices for palm oil and crude derivatives, are putting a heavy strain on household budgets.

The increase in soap prices was the largest in any category, ranging from 25% to even 50% compared to last year.

Hindustan Unilever (HUL) increased the price of pears by 9% in April compared to February. ITC increased the price of Fiama Di Wills by approximately 11% over the same period, while Godrej Consumer Products (GCPL) increased those of Cinthol and Godrej No1 soaps by approximately 5-24%. Patanjali soaps also became more expensive by 22%.

Among other products, HUL raised prices for facial cleansers by 3-4% in April, while Colgate raised prices for its Palmolive body wash by 15%.

Detergents saw a strong price increase, with soda ash prices rising 20% ​​month-on-month. HUL raised prices for Surf Excel and Rin detergent bars 5-13% and detergent powders 2-8%. Similarly, Procter & Gamble (P&G) raised prices for Ariel detergent powders by 4-13%. Dishwasher bar prices also rose, with HUL and Jyothy Labs introducing increases of 4% and 18%, respectively, according to analysts at Kotak Institutional Equities.

At its earnings call last month, HUL management said consumers should expect further price increases on the back of the 10% increase in the March quarter as it battles price inflation of key inputs.

Sanjiv Mehta, CEO and Managing Director of HUL, said commodity prices are expected to rise further in the coming quarters. “We will have to take some price increases. An immediate price increase is our last resort and we have managed a lot of that by reducing the grammage,” he said.

GCPL also said there will be additional price increases across the company’s personal wash portfolio. Sudhir Sitapati, managing director and CEO of GCPL, said on a call with analysts: “Like all companies frankly, we have to take sensible price increases.”

Marico was able to increase gross margins sequentially for the quarter ended in March, the third consecutive quarter with calibrated price increases, cost rationalization and a deflationary trend in copra prices. However, Saugata Gupta, MD and CEO of Marico, warned that if crude continues to grow at these levels, there will be price increases in the value-added hair oil category. “The company took a 5-6% price hike in this segment in March,” he said. Also in April, Marico raised prices for certain categories of Parachute coconut oils by 10%, while prices for amla hair oils increased by 3-7%.

Dabur’s management told analysts after the earnings release that inflation was around 9% in the quarter ended March and there were no signs of slowing.

Mohit Malhotra, CEO of Dabur India, said: “It will again be in the range of 7% to 8%, on top of last year’s inflation of 6% to 7%. There may be a price increase that we will have to take to avoid gross margin contraction. At least for two quarters, we will have to watch very carefully and see if we can accept price increases or cut costs, as the inflationary environment continues as we speak. However, we expect inflation to ease a little in the second half. Dabur’s gross margins suffered a decline of 130 basis points in the March quarter.

Tea prices are expected to remain range-bound as they have moved significantly away from their peak. Analysts at Motilal Oswal expect tea prices to remain range-bound for Tata Consumer Products, with good monsoon forecasts leading to a better harvest season. However, the company’s Indian food business, which includes salt and Sampann brands, is expected to come under cost pressure in the near term.

ITC, however, bucks the trend among FMCG players, with its FMCG profitability surprising positively in the January-March quarter, with Ebitda margin up 75 bps YoY to 9% , despite inflationary headwinds. “In addition to pricing measures and cost control, a favorable business mix also helped. FMCG are battling slowing growth and commodity pressures, ITC is seeing a recovery in earnings, with good momentum across all verticals and high margin visibility,” Jefferies analysts said.

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