Essential consumer product prices to rise further amid inflation: Report

Prices of essential consumer products are set to rise further as companies face inflationary pressure on raw materials, a Systematix Research report stated. Firms have already raised prices by 3-7% and more hikes or grammage cuts are likely.

Prices of essential everyday consumer products are likely to rise further in the near term as companies continue to face inflationary pressure on raw materials, according to a report by Systematix Research. The report stated that companies across categories have already increased product prices by 3-7 per cent on average over the last one to two months as raw material basket costs increased by around 8-10 per cent on average.

Further Price Hikes and Grammage Cuts Likely

According to the report, further price hikes and grammage cuts are highly likely in food and beverage (F&B) as well as home and personal care (HPC) products as companies attempt to offset higher input costs. It stated, "We believe further price hikes/ grammage cuts are highly likely near-term in F&B/ HPC products as companies scramble to offset the inflationary impact with a combination of pricing, mix and cost savings".

Impact on Revenue and Consumption

The report noted that pricing growth is expected to become a larger contributor to revenue growth of consumer staple companies during the first half of FY27, with pricing and volume contribution likely to remain around 50:50. However, it also cautioned that rising retail inflation could impact consumption volumes in the coming months.

Systematix Research said that while recent price hikes may help companies protect their absolute gross profits, the pressure on gross margins is expected to continue during the first half of FY27. The report added that this could create concerns around the overall margin outlook for FY27.

Key Drivers of Cost Inflation

The report also highlighted that costs have sharply increased in certain categories, especially palm oil and crude-linked inputs. Palm oil prices rose 11 per cent, while Brent crude oil prices surged 32 per cent amid the ongoing West Asia conflict.

The report also noted a sharp rise in packaging costs, with HDPE (High-Density Polyethylene) prices increasing 56 per cent. HDPE (High-Density Polyethylene) prices represent the market cost of a highly durable, petroleum-derived thermoplastic polymer. It is one of the most widely used plastics in the world, serving as a critical raw material for manufacturing shampoo bottles, detergent containers, jerry cans, bottle caps, and flexible packaging within the Food & Beverage (F&B) and Home & Personal Care (HPC) sectors.

Timeline of Impact and Corporate Strategy

According to the report, part of the sharp raw material inflation was already visible during the March quarter, as gross margins of major companies under its coverage contracted by around 50 basis points year-on-year and around 30 basis points quarter-on-quarter during the fourth quarter of FY26.

The report said most of the impact from the current cost inflation is expected to be reflected during the first half of FY27. It added that companies are likely to continue using a mix of price hikes, grammage reduction and operational efficiencies to manage profitability amid elevated input costs. (ANI)

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