Hindustan Unilever hikes prices on rupee and crude woes

FMCG (fast-moving consumer goods) leader Hindustan Unilever (HUL), owner of brands like Dove, Lux and Surf Excel, has effected a 2-12% price hike across its product range (that includes soaps and detergents, oral care and personal care), in response to the 7% rupee depreciation and 10% rise in oil prices since July.

Being the market leader, HUL may well have set the tone for similar price hikes by other FMCG players like Godrej Consumer, ITC, and Wipro, industry observers said. Abneesh Roy of Edelweiss Securities said, “It is likely that other players will also hike their prices soon and even the quantum of hikes will be similar to that of the market leader.”

Although the price of palm oil, a key ingredient in soaps and detergents, has remained largely flat, because it is an imported item, its cost has gone up, forcing HUL’s hand.

Also, the rise in crude prices in July and August would have impacted some 70% of HUL’s brand basket, leaving the company with no option but to hike prices, said another FMCG analyst.

Then, other costs have also risen. For instance, packaging, which is related to crude prices.

HUL declined comment except confirming that prices of some products have indeed been raised.

What makes the latest price hike significant is that prices of detergents have gone up for the first time in over a year.

Certain stock keeping units or SKUs of detergents like Surf Excel, Quick Wash, Rin, Wheel bar blue and Surf ExcelMatic are all up anywhere between 1.7% and 9.3%.

Even in the soaps category, prices are up in the range of 4.2%-8.7% in SKUs of Pears, Lux, Lifebuoy and Hamam.

This is a far cry from the previous quarter (April-June) when HUL said there was a price deflation (read discounts) as softening raw material prices then allowed companies to pass on savings to consumers.

Experts believe that the latest price hike will help HUL in protecting its gross margins as around 50% of its revenue comes from soaps and detergents.

HUL and other players have also hiked prices of toothpaste in the range of 4.8%-9.1%. For instance, HUL has upped the price of Close up Menthol, while Colgate has raised the price of Cibaca, Colgate Active Salt and Colgate Max Fresh brands. Similarly, GSK Consumer has increased the price of Sensodyne Rapid Relief.