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<ul><li>Earlier this week, the government reduced the base import prices of crude palm oil and soy oil.</li><li>Following this, edible oil companies have slashed prices of <keyword id="44868" type="General" weightage="20" keywordseo="cooking-oil" source="Orion">cooking oil</keyword>.</li><li>Additionally, prices of household products like soaps, biscuits, noodles and even shampoo, lipsticks and detergents will also fall as palm oil is one basic ingredient here.</li></ul>One of India’s top FMCG companies, Adani Wilmar reduced the prices of one of the priciest of groceries in recent times – cooking oil. "We are passing on the benefit of the reduced cost to our customers. We are confident the lower prices will also boost demand," said Angshu Mallick, MD and CEO at Adani Wilmar after reducing the price of Fortune refined Sunflower oil's one-litre pack by ₹10 to ₹210. This comes after Hyderabad-based Gemini Edibles &amp; Fats and Mother Dairy both cut prices of cooking oil by ₹15 on one-litre pack – bringing relief to this household essential which has been on the receiving end of inflation for months now. This sentiment could spread across more packaged products, by more FMCG majors. “We expect consumer and retail companies to pause taking further price increases though sector valuations appear rich, with improving out‐of‐home consumption,” said a report by Centrum Broking firm. In the last few months as input costs rose, <keyword id="160413" type="General" weightage="20" keywordseo="fmcg-players" source="Orion">FMCG players</keyword> have been resorting to reducing pack sizes while increasing pack prices. A reduction in base import of crude palm oil, soy oil could be passed on to other products in which it is used like — soaps, biscuits, noodles and even shampoo, lipsticks and detergents. It would mean a sharp reduction in household grocery bills, which have only been on the rise for consumers. Normal monsoon can aid the sector to remain green Lower prices would also mean the tapering demand for packaged products would also improve. Also, there are expectations that rural demand may recover on the back of higher government spending and normal monsoon. Rural demand has been hit after consumers <a href="https://www.businessinsider.in/india/news/life-in-rural-india-hit-by-a-wilted-rabi-crop/articleshow/92333426.cms">traded down to cheaper and smaller packets </a>after inflation hit their doorsteps much harder than it did for urban consumers. If and when consumers shift to smaller pack sizes, most FMCG players tend to lose market share to local and regional players who cater more variety at those price points. However, if pack prices improve, FMCG majors’ volumes will improve – which have been losing revenue for the last eight months. Rural economy is key for FMCG players as a cool off in agricultural commodities inflation will also help reduce their own costs and improve margins. “If commodity prices witness correction from the current level, margins of consumer goods companies might witness a sequential improvement from Q3 FY2023. Commentary of most consumer goods companies suggests recovery in sales volume from Q2/Q3 of FY2023, if the inflation environment stabilizes in the coming months,” said analysts at Sharekhan. An FMCG bull run The optimism around the sector picking up soon is reflected in companies share prices as well. In a weak market sentiment, shares of FMCG players were among the biggest gainers as their fortunes will improve irrespective of worries about global interest rates and a possible recession in the US. “We are very bullish on the FMCG sector from here because we believe costs are coming down from previous highs and they are in a position to pass on incremental costs to consumers, which will help to increase these companies' margins,” said Ravi Singhal, vice chairman at GCL Securities. An FMCG bull run in a market would actually buck the trend of an overall lack of enthusiasm in stocks — proving the theory that no matter what happens, people will keep buying essentials albeit at the right price. <div type="image" title="color fmcg" height="900" width="1200" msid="92336486" hostid="261"></div> <div type="javascript" title="Custom" contenttype="Image"><cdata><![CDATA[]]></cdata></div> SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/life-in-rural-india-hit-by-a-wilted-rabi-crop/articleshow/92333426.cms">Vanished savings, trading down to cheaper essentials – life in rural India hit by a wilted Rabi crop</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/science/environment/news/india-heads-into-the-thunderstorm-zone-right-after-the-heatwave-orange-alerts-issued/articleshow/92333863.cms">India heads into the thunderstorm zone right after the heatwave, orange alerts issued</a>

Cooking oil prices drop - soaps, noodles and detergents might follow suit

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<ul><li>Top FMCG companies have cut prices of soap, detergents and hair oils.</li><li>Competition has gone up in the sector after many smaller, regional players making a comeback.</li><li>FMCG players said last quarter that they had to cede some of their market share to smaller players.</li><li>At the time, rise in agri commodity prices is making some of them hike prices of items like coffee and other beverages. </li></ul>After facing the onslaught of smaller and regional players in the last quarter, FMCG majors are on a path to cut prices to boost volumes as well sales. This pricing action is being seen mostly in categories that contribute large volumes and with a high share of unorganized players — like soaps, detergents, hair oils and edible oils. <keyword id="6365619" type="General" weightage="20" keywordseo="hindustan-unilever" source="Orion">Hindustan Unilever</keyword> has taken price cuts to the tune of 9-10% in soaps, <keyword id="6361491" type="General" weightage="20" keywordseo="procter-gamble" source="Orion">Procter &amp; Gamble</keyword> too cut <keyword id="443581" type="General" weightage="20" keywordseo="detergent-prices" source="Orion">detergent prices</keyword> by 11%. <keyword id="4283144" type="General" weightage="20" keywordseo="patajali" source="Orion">Patajali</keyword> slashed its soap as well as hair oil prices, as per a recent report by Kotak Institutional Equities. Top FMCG players said at the end of the April-June quarter that they had to cede some of their market share to smaller players. As per Nomura, their impact on market share on organized players is under control as of now, but needs to be watched closely. A lot of these players have shut up during the pandemic, but have ‘mushroomed’ back. “As the raw material prices have come down and have remained stable, there is increased competition from smaller players. Hence, most FMCG companies have undertaken price cuts to pass on the raw material benefits, and at the same time, they have increased ad spending to protect their market share,” Preeyam Tolia, senior research analyst of FMCG at Axis Securities told Business Insider India. Moreso, the volume growth trend has slowed down for most FMCG players due to slower-than-expected growth in the rural areas. Besides, the trend of downtrading had taken over during the era of high inflation last year, when players had to increase their prices. In Q1, even as volume growth remained tepid, the profitability of FMCG companies was high due to softening of prices of certain raw materials. Palm oil prices were down 2% month-on-month and by 26% year-on-year. Copra/coconut oil prices (updated until July 2023) remained in deflation, down 8% month-on-month and by 11% year on year. “Currently crude and palm oil used to make soaps and inputs such as soda ash used in detergents are showing a downward price trend, that is the reason many soap brands have reduced the prices to increase their volume and are passing on the margin benefits to consumers,” said Sraboni Haralalka, executive director at Wodehouse Capital Advisors. Can price cuts help? Most experts believe that the benefits of these price cuts on volume growth can be seen with a lag, in the second half of the current fiscal year. A few however believe volume growth itself might not be enough for companies that have been banking on pricing-led growth in the last few quarters. “Most other categories did not resort to any pricing action (apart from soaps, detergents, hair-oil, edible-oils), leading to anniversarying of pricing and lesser contribution to overall value growth. We expect no or negligible contribution from pricing in coming quarters; optically lowering overall value growth for the sector,” said Nomura. Added to that, the ability to take a next round of price cuts might also be lowered, experts believe as the prices of crude are inching up again. While crude oil prices were down by 14%, they have jumped 8% on a month-on-month basis – showing that the trend might see a back up. “We must look at the impact of the recent increase in crude oil prices. Any further increase in crude oil price would delay the price cuts and, hence, volume recovery,” says Tolia. Shampoo, coffee &amp; toothpastes get pricier While tea and biscuits prices have remained steady, the prices of coffee have inched up due to hardening agri commodity prices — especially in the case of cereals and milk in the last few months. “Prices remained stable in dairy except for Nestle, which increased the prices of its milk powder and curd by 2% and 5%, respectively. Nestle took another round of around 3-5% of price increases in its baby food portfolio, taking cumulative increases to 6-11% in the past six months,” said Kotak Institutional Equities. Health food drinks witnessed price rises of around 2-8% by Abbott, Danone and Mondelez. “Agri-commodities products have surged up. Food companies such as Nestle and Britannia may either increase product prices or take a hit on their margins and focus on volume growth,” said Haralalka. Products like confectionery, toothpastes and shampoos also saw price hikes from players like Vicco, HUL, Dabur and P&amp;G. Also price rises are seen in face and body washes, deodorants, air fresheners, men’s grooming and feminine hygiene – especially in areas where end consumer purchasing power is high. The margins in personal care products are higher and consumers don’t downgrade as easily as they do in the laundry or hair oil segments. The year of FY24 is expected to be a year of volume growth as FMCG companies are fighting to bring back their ‘small pack’ consumers. At the same time, inflation on the horizon is presenting a very cloudy picture for companies – making them re-think their pricing strategy in a way that ensures volume and margins hold steady.

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