Mother Dairy on Tuesday joined a host of fast-moving consumer goods (FMCG) companies to announce price changes following a rejig of tax rates by the GST Council earlier this month. The changes, effective September 22, will cover milkshakes, butter, ghee, jams, cheese, frozen products, ice-creams, pickles, coconut water and tomato puree, which have moved to the 5% tax bracket from 12% earlier. UHT Milk and paneer have been exempted from GST from 5% earlier. The price reduction ranges from Rs 2 to Rs 30 depending on the product.
“The recent GST reduction across a wide range of food products represents a progressive step that will boost consumption. We are passing on 100% of the tax benefit to consumers,” Manish Bandlish, MD, Mother Dairy, said.
Rivals likely to follow suit
Mother Dairy’s move is expected to push rivals such as Gujarat Co-operative Milk Marketing Federation (GCMMF), which makes the Amul brand of products, to announce price changes ahead of the GST 2.0 rollout next week. Last week GCMMF MD Jayen Mehta had indicated that the co-operative would announce the revised pricing of its products through advertisements to avoid confusion and ensure consumers were informed of the changes.
Majors such as Hindustan Unilever (HUL), Procter & Gamble (P&G) and L’Oreal have already announced price cuts of 5-15% each from September 22 across personal care and food & beverages (in the case of HUL), as part of the mandate set by the government last week to inform consumers of price changes under the new tax regime. The price changes cover mostly larger packs across categories for now.
While HUL has cut prices in soaps, shampoos, toothpaste, face powder, jams, ketchups, nutrition, coffee and soups, P&G has revised its prices across shampoos, healthcare, baby care, oral care and male grooming. L’Oreal has slashed prices across shampoos, face powders and compact powders and shades.
Transition challenges ahead
“The direct transfer of benefits is the primary objective of the GST reforms. Our collective commitment is vital to making this transition impactful by ensuring these savings are reflected in consumer pricing,” L’Oreal India said in a communique on GST 2.0.
The company has also told trade that invoices to them would reflect the new MRP starting September 22 and that it was working on re-labeling impacted categories with the new pricing by then.
“But we anticipate a transition period where physical products will reflect both old and new MRPs. We request (consumers) to refer to the new MRP before purchasing goods,” the company said.
HUL and P&G have also indicated to trade that the new stock with the reduced MRP is in the process of reaching the market, while consumers will be entitled to lower MRP from September 22.
Though most FMCG companies have rolled out discounts of about 5-20% on existing stock to help retailers liquidate their inventory quickly, sector experts say that it is unlikely to get exhausted by next week, when the revised pricing on products will kick in.