FMCG companies are prioritizing volume growth over steep price increases despite rising input costs, according to industry executives. As reported by Business Standard, companies are implementing selective and limited price hikes while maintaining focus on driving consumption. An FMCG company executive stated that while price hikes are inevitable, the company plans to take only 1-2% price hikes across its product basket, with volume growth remaining the primary focus.
Several factors are contributing to increased costs for FMCG companies, including freight costs, packaging costs, and a weakening rupee. According to Business Standard, Mayank Shah, vice-president at Parle Products, noted that urban demand has remained strong due to income-tax reductions, which continue to be one of the primary reasons for higher consumption. The rabi crop has also been good, supporting overall sector performance.
Beverage companies are facing significant supply chain challenges this summer, with soft drink players such as Coca-Cola experiencing disruption in aluminium can supplies sourced from West Asia. As reported by The Times of India, D2C coffee brand Sleepy Owl is tapping South-East Asian markets but costs have increased by 15% due to high demand and procurement delays. CEO Ajai Thandi noted that cans make up 25-30% of the company's portfolio, making these cost increases particularly impactful. Beer makers are also affected, with both aluminium cans and glass bottles experiencing cost spikes despite about 80% of industry supplies being sourced locally.
Companies are implementing gradual pricing strategies to avoid demand destruction. Chandubhai Virani, founder and director of Balaji Wafers, explained that the company will increase prices through grammage reductions, but these changes are not immediate and are likely to come into effect only after two to three months. According to Business Standard, the company specifically targets mass-volume packs priced at ₹5 and ₹10, with grammage reduction limited to 1 gram and 2 grams respectively. As reported by The Times of India, beverage companies acknowledge they will have no option but to pass on increases to consumers going forward.
Discretionary products are expected to see greater impact than essentials and food products due to cost pressures. As reported by Business Standard, companies are waiting for packaging costs to stabilize before passing on increases to consumers, as they cannot allow cost increases to hurt demand. The sector's focus on volume growth reflects confidence in underlying consumption trends despite challenging input cost environments. However, the convergence of sticky food inflation and energy volatility is forcing a fundamental rotation in Indian portfolios, with investors pivoting from consumption-heavy defensives toward export-resilient sectors.
