With prices of non edible oil rising by around 10% in the last six months and no signs of abatement, FMCG companies are planning to either hike prices of soaps in the next few months or reduce pack sizes.
Most soap manufacturing companies like ITC, Hindustan Unilever Ltd (HUL) and Godrej Consumer Products Ltd (GCPL) are getting impacted by the rise in palm oil prices as it constitutes about half the input cost of making soaps. However, since these companies enter into long-term contracts, which mostly span around three months the impact may not be immediate.
Dalip Sehgal, managing director, GCPL, said, ?Even though there are no plans of increasing prices of soaps in the short-term, we are watching the situation. If the inflation continues then we will have to take some step. However, the inflation is nowhere near the peak compared to the October- November period last year?. Godrej Consumer Products Ltd is currently the second largest producer of soap in the country. In value terms it commands 11% of the market and in volume terms it commands around 12% of the market.
Sehgal, however, did not totally rule out any hike in soap prices in the future. ?We will take a decision in the next few months after reviewing where the palm oil prices are heading,? he said.
Hindustan Unilever declined to comment, stating, ?We do not have any specific comments to offer?. HUL currently commands 44% of the soap market in both value and volume terms. Pinaki Ranjan Misra, partner and national leader, retail, E&Y said, ?FMCG companies are most likely to go for a reduction in grammage of soaps rather than increase in prices?.
Experts feel that soap making companies will not go for increasing soap prices outright because consumers are already reeling under higher food prices. So, the strategy that most of them are going to adopt is that while keeping the price points intact companies will reduce the weight of soaps in the pack. This is a psychologically comforting situation for the consumer as he does not have to pay more.