- Crude oil prices dropped below $80 but FMCG prices may not fall immediately
- FMCG firms still hold inventory bought at crude prices above $120 per barrel
- Freight and packaging costs remain high, keeping input costs elevated
Even as crude oil prices have corrected sharply to under $80 per barrel from their highs, the decline is unlikely to translate into immediate savings for shoppers, as makers of fast-moving consumer goods (FMCG) continue to grapple with elevated raw material costs.
Industry executives said they are still working through inventories purchased when crude was trading above $120 a barrel amid the West Asia conflict. They also pointed out that input cost pressures are still elevated, with freight and packaging expenses remaining high despite the fall in crude prices.
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"We are in a wait-and-watch situation and do not expect any immediate price correction," said Harsha Vardhan Agarwal, Vice Chairman & MD, Emami Ltd. "Even though oil prices have come down, we are carrying inventory for the next 2-3 months that was procured at higher rates" he added.
"The benefit of lower crude hasn't yet flown through...raw material costs, including packaging and freight are still higher," said Mohit Malhotra, global chief executive, Dabur India Ltd. Dabur is, in fact, may take selective price hikes to protect margins, though the quantum could be lower than earlier planned if crude prices sustain at the current levels.
According to industry estimates, packaging costs - linked to crude derivates - have risen 15-50% and freight costs 20%, driving price hikes across categories in the past three months.
Companies also indicated that any benefit from lower crude prices is likely to reach consumers after three months, particularly ahead of the festive season.
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India's largest biscuit maker, Parle Products has also indicated that it doesn't see any immediate reduction in MRP. "We are currently monitoring the input cost situation... we need to be sure where prices finally settle," said it's vice-president Mayank Shah.
"If input prices continue to soften, there could be some price correction, discounts and offers during the festive season."
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