Long showers and skincare regimes that turned luxuries post-Covid remain so despite raw material prices easing in the segment. The prices of home and personal care FMCG products weigh heavy on consumers’ pockets even as operating margins for most FMCG players have increased from FY23 to FY24.
CPI index in personal products has risen steeply between 2021 and 2024. The inflation index in the ‘toilet soap’ category has gone up 31 per cent in this period. Most other personal care items have witnessed price increases between 10 to 20 per cent.
businessline also sourced individual shopping bills, that show broad price hikes from 2021 to 2024. The humble Colgate Sensitive Plus toothpaste (140 grams) which cost ₹212 in April 2021 now costs ₹270 as of May 2024 clocking a 27 per cent increase. Similarly, Santoor soap has recorded a 54 per cent price increase from April 2021.
FMCG fortunes in FY2024
In FY24, FMCG majors clocked lower single-digit revenue growth and saw a slower-than-anticipated recovery in the rural segment and called out increased competition from regional players. Amid all this, profit growth in the health and personal care segment has largely been price-led.
P&G Hygiene and Healthcare, the owner of Pantene and Head & Shoulders brand of personal care products and detergent Ariel, recorded EBITDA margins of 26.4 per cent (up by 420 basis points y-o-y) in FY24, even as material costs as a percentage of sales fell to 37 per cent from 42.4 per cent.
At Marico, the EBITDA margin grew from 18.5 per cent in FY23 to 21 per cent in FY24 as raw material prices softened. FMCG major HUL too enjoyed a fall in raw material costs from 34 per cent of sales in FY23 to 31.6 per cent in FY24 but margins remained almost flat at 23.8 per cent as employee costs and advertisement and promotion expenses rose.
“In the last two years, manufacturers [of personal care products] have hiked the prices, and this is reflected in the fact that on average a household now pays ₹125 for the same weight of products that they were spending ₹100 in 2022,” said K Ramakrishnan, MD- South Asia, Worldpanel Division of consulting firm Kantar.
“However, manufacturers have also been responsible in most cases and have reduced the prices as soon as the stress of inflation eased out,” he added. businessline could not ascertain the specific instances of price cuts.
Namit Puri, Managing Director and senior partner and India Head - Consumer Products, BCG, said that in FY23, the FMCG sector saw 9-10 per cent revenue growth, largely on the back of price-led growth, but FY24 saw softer growth relatively and was marked by an increase in profitability with reducing commodity prices.
Companies have however spent more on wages and advertising and promotion, which has resulted in contracting margins. This could be a reason for companies maintaining elevated prices on some products.
Price action in FY25
The second half of the financial year 2024-25 may see further marginal hikes led by volatile prices of commodities such as crude oil and wage inflation. Addressing analysts in the recent earnings call, Rohit Jawa, MD and CEO of HUL, said that they expect to see a “positive low single-digit price increase” in the second half of financial year 2024-25 if commodity market trends remain the same as it is currently.
BCG’s Puri anticipates steady volume growth in FY25 from both urban and rural segments resulting in lower dependency on price increases. “However, factors such as volatile food and crude oil commodity prices inflation, wage inflation and a gradually weakening rupee can continue to push prices up moderately in low single digits,” he adds.