Pricing Strategy of Fmcg Firms

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FMCG firms in a fix over pricing strategy|
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Some relief is on the way for fast-moving consumer goods( FMCG) companies, with prices of crude oil, wheat, milk and palm oil either on the decline or stabilising. Even as flexible packaging prices — which had become a new headache for FMCG companies — may come down on the back of stable crude oil prices, the verdict on production costs is still unclear. While palm oil prices have crashed by almost 40 per cent, wheat and milk rates are stable. Sugar prices too, which were expected to climb further, have come down by 40 per cent in the past two months, while wheat prices have stabilised. |

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While stable prices of raw materials have spelt relief for most FMCG companies, the industry is still having a tough time in defining the future pricing strategy. Most companies have indicated that input costs have hit their margins, while others maintained that if inflation continued unabated, there would be further correction in prices. Many FMCG companies have either raised prices or reduced the size of their products to combat the rise in farm commodity prices and packaging costs, at a time when there is a perceptible economic slowdown. While the price hike has helped manufacturers deal with commodity-driven inflation, not much could be done to tackle the rising cost of packaging. A crude oil derivative is used in packaging shampoos, while PET, a petroleum-based plastic product, is employed in manufacturing hair oil bottles and packaged water bottles. Crude oil derivatives account for almost 17 per cent of the total cost of corrugated boxes. Meanwhile, demand for products like soaps and shampoos has seen a decline. “Price hikes for some products are still underway, the impact on growth for certain categories is visible. Soap sales have been flat by value,” said H K Press, executive director and president, Godrej Consumer Products. Industry observers see demand for food and beverages...
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