Essential consumer products likely to get costlier

New Delhi, May 29: Essential consumer products in India are likely to become costlier in the coming months, according to a latest assessment report.

Companies across several consumer categories have already increased product prices by an average of 3-7 per cent over the past one to two months after raw material costs surged by nearly 8-10 per cent on average.

Further price hikes and grammage reductions are highly likely in the food and beverage (F&B) as well as home and personal care (HPC) segments as companies seek to protect profitability amid elevated input costs.

“We believe further price hikes/grammage cuts are highly likely near-term in F&B/HPC products as companies scramble to offset the inflationary impact with a combination of pricing, mix and cost savings,” says the Systematix Research report.

It highlighted sharp increases in the prices of key raw materials, particularly palm oil and crude-linked inputs.

Palm oil prices rose 11 per cent, while Brent crude oil prices jumped 32 per cent amid the ongoing geopolitical tensions in West Asia.

Packaging costs have also witnessed a significant increase, with High-Density Polyethylene (HDPE) prices surging 56 per cent.

HDPE is a petroleum-derived thermoplastic polymer widely used in packaging materials such as shampoo bottles, detergent containers, bottle caps, jerry cans and flexible packaging across F&B and HPC categories.

According to the report, the impact of rising input costs had already begun reflecting in company earnings during the March quarter.

Gross margins of major companies covered by the brokerage contracted by around 50 basis points year-on-year and nearly 30 basis points quarter-on-quarter during the fourth quarter of FY26.

The report said the majority of the current cost inflation impact is expected to become more visible during the first half of FY27, with companies likely to continue relying on a mix of price hikes, grammage reduction and operational efficiencies to manage profitability.

According to the report, pricing-led growth is expected to play a bigger role in the revenue growth of consumer staple companies during the first half of FY27, with pricing and volume contributions likely to remain evenly balanced at around 50:50.

It cautioned that persistent retail inflation could adversely affect consumption volumes in the months ahead, particularly in price-sensitive segments.

While recent price increases may help companies maintain absolute gross profits, pressure on gross margins is likely to persist through the first half of FY27, raising concerns over the broader margin outlook for the financial year.