A bottle of shampoo, a packet of biscuits and a carbonated drink may sit in different aisles of a supermarket. But India’s consumer goods companies are confronting the same problem across all three: they are becoming costlier to produce as geopolitical tensions ripple through global supply chains, pushing up crude-linked raw material prices, disrupting shipping routes and increasing freight costs.
Industry executives say prices of some crude-linked derivatives such as polymers (like polyethylene and polypropylene used in packaging material) and specialty resins, have jumped 60-70% since the start of the Iran war, forcing companies to reassess sourcing, production and pricing strategies. The sharp spike has unsettled firms, with many considering calibrated price hikes and grammage cuts to mitigate inflationary pressures in the June quarter of FY27.
“We are seeing inflation of 10% hitting us across all our portfolios, barring home and personal care and healthcare. We have announced a 4% price increase across different parts of the business to mitigate this impact,” Mohit Malhotra, global CEO, Dabur, said.
“Selective price hikes will have to be taken in the June quarter. Pricing action will include both grammage adjustments and some price increase on packs above Rs 10,” Rakshit Hargave. MD & CEO, Britannia Industries, said. Britannia is also shifting export manufacturing from Oman to India to reduce dependence on the Strait of Hormuz, Hargave said, as the Iran war has disrupted shipments there.
Godrej Consumer Products MD & CEO Sudhir Sitapati said that unlike palm oil, where inflation hits mainly one category (soaps), crude-linked inflation impacts all segments. “The inflation is more spread out and easier to pass through over a few months. Between pricing, some cost actions, and portfolio mix, we should be able to recover most of it,” he told analysts in a post Q4-results call last week.
In April, GCPL increased prices of soaps by 5%. In detergents, it took up prices by 6-7%, and in household insecticides, it hiked prices by 4-5%. Despite these efforts, the company acknowledged margins could face pressure over the next two quarters if elevated oil prices persist, impacting gross margins by an estimated 100-250 basis points in certain segments.
Breaking the Buffer
Packaging costs, say experts, are becoming a serious concern because they move closely with crude. The exhaustion of packaging buffers has pushed companies into a high-cost procurement cycle, where daily price revisions from suppliers have replaced stable long-term contracts. With packaging accounting for nearly 15-20% of total manufacturing expenses for daily essentials, these “fresh purchases” are now directly eroding profit margins.
“Input cost pressures, particularly packaging, milk, and wheat, remain a concern. Geopolitical developments and monsoon trends could also impact demand. Our focus is on controlling what we can via execution and efficiency,” Manish Tiwary, chairman & MD, Nestle India, said.
The challenge is particularly acute because demand recovery remains uneven in FMCG. Rural consumption has improved gradually, but purchasing behaviour remains cautious. Urban consumers, meanwhile, continue to spend selectively, favouring smaller packs and discounts in mass categories while premium products perform relatively better. That leaves companies walking a tightrope between protecting margins and defending volumes.
Some companies have already started re-calibrating production strategies. Beverage makers are evaluating lightweight packaging to reduce PET as well as glass usage. Packaged goods firms are renegotiating supplier contracts and redesigning packs to optimise material consumption. Others are increasing local sourcing to reduce dependence on volatile international supply chains.
Volume Tightrope
Yet the room for manoeuvre is limited.
The memory of the last major inflation cycle, triggered by the war in Ukraine in 2022, still hangs over the sector. Consumer goods companies pushed through multiple price hikes then, only to see volume growth weaken as consumers either cut back purchases or shifted to cheaper regional alternatives. That experience is shaping boardroom conversations again.