Robust demand helps FMCG cos pass inflation-hit to customers

As inflation breaches five percent once again to hit its highest level in three months thus translating to rising raw material prices, it is expected that this will result in an FMCG goods price hike for the common man. CNBC-TV18 spoke to K Ullas Kamath, Joint Managing Director at Jyothy Laboratories and Mohan Goenka, Director at Emami and asked these two industry veterans read the situation.

“We are seeing double-digit growth in most of the raw materials and this has definitely put pressure but only thing is that generally, we keep a month of stock of raw material. So to that extent, there is some cushion. We have already taken a small price hike a month ago of about 4 percent. If this continues then probably we will have to take a small price hike to maintain our EBITDA margin,” explained Kamath.

However, there is demand and thus growth and this is helping the industry pass on the hits with comparative ease. “We are seeing a robust double-digit growth both in urban and in the rural area and there is no dearth of demand, it is absolutely fantastic,” Kamath added.

Mohan Goenka also believes that the demand is pretty high at the ground level. “So we have been able to pass on the price hikes what has happened in the last two months. As of now, we have seen almost 2 percent inflation in our cost. We have already increased our prices by 2 percent as far as our summer portfolio is concerned. So I don’t see much worry as far as the margins are concerned as long as the demand is there,” he mentioned.

“The rural is pretty strong at this point in time,” Goenka added.