FMCG Companies Plan Price Reductions and Larger Pack Sizes for Consumers
You will soon be able to save more on your grocery bills as prices for a variety of everyday products, including jams and shampoos, are set to decrease. With the new Goods and Services Tax (GST) rates rolling out in just a week, fast-moving consumer goods (FMCG) companies are finalizing their price reduction strategies. Major brands like Hindustan Unilever (HUL) and Procter & Gamble (P&G) have already begun announcing specific price cuts, which are expected to make essential items more affordable for many households.
Price Reductions from Major Brands
Hindustan Unilever, a leading player in the FMCG sector, is implementing price cuts ranging from ₹5 to ₹76 across various products and pack sizes. This move aims to make popular brands like Dove, Lakme, and Horlicks more accessible to a broader audience. For instance, the price of a 400g pack of Horlicks Women’s Plus will drop from ₹320 to ₹284, while the Lakme 9to5 compact will see a reduction of ₹76. Although a price decrease of ₹30-80 may seem minor to upper-middle-class families, it can significantly impact low to mid-income households, allowing them to purchase larger or upgraded product versions that were previously out of reach.
Procter & Gamble is also joining the trend, reducing prices for its well-known brands, including Pampers, Pantene, and Vicks, by ₹3 to ₹100. These changes will take effect starting September 22. The FMCG sector plans to pass on the benefits of GST cuts through a combination of price reductions and increased product grammage, especially since smaller pack sizes constitute a significant portion of their offerings. Companies have already begun adjusting their production lines to accommodate the new maximum retail prices (MRPs).
Consumer Benefits and Stock Clearance
Consumers can expect some immediate benefits as several companies, including HUL and Ferrero, are offering temporary discounts to clear out existing stock before the new prices take effect. This promotional period will last until September 20-21, providing shoppers with an opportunity to purchase products at reduced rates. Additionally, the government’s decision to allow companies to display revised MRPs on older packaging has facilitated a smoother transition to the new pricing structure.
Despite these positive developments, the industry is still waiting for formal guidance from the government regarding the implementation of price reductions through increased grammage. An industry executive noted that discussions with the tax department took place last week to clarify these matters. The challenge remains that cutting prices on smaller sachets may not be feasible, which could limit the extent of savings for consumers.
Impact on the FMCG Sector
Parle, known for its popular Hide & Seek and Monaco biscuits, has announced that it will pass on savings of approximately 10-13% to consumers through a mix of price cuts and increased product sizes. Notably, around one-third of Parle’s business comes from larger pack sizes, which will benefit from these adjustments. Similarly, Bikaji Foods plans to reduce prices on its large snack packs by 6-7%, according to CFO Rishabh Jain.
Experts believe that these GST cuts could stimulate volume growth in the FMCG sector and gradually shift consumer preferences toward premium products. Krishna Khatwani, head of sales at Godrej Consumer Products, emphasized that the price reductions could lead to increased demand for higher-quality items as consumers take advantage of the new pricing landscape.
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