Shrinkflation, price hikes back on FMCG menu as costs climb

New Delhi: Rising input costs due to commodity inflation and geopolitical uncertainties are prompting leading FMCG makers to implement calibrated price hikes in the September quarter, as they remain optimistic about demand, citing resilient consumption trends, premiumisation, and improved revenue growth.

The FMCG sector, which took an average hike of around 2-5 per cent in the June quarter, is going for shrinkflation by reducing the grammage weight or selective pricing actions in the current quarter to protect margins, even as they stay watchful of inflationary pressures, crude oil volatility and weather-related risks such as the monsoon and El Nino.

Leading bakery food company Britannia said it expects to add another 1.5 to 2 per cent in pricing in the second quarter through “shrinkflation” in its Rs 5 and Rs 10 biscuit packs, as commodity prices for sugar and palm oil are on the higher side.

Britannia said its Q1 pricing-led growth came mainly from shrinkflation, and expects further pricing actions in the current quarter.

“Going ahead in the quarter, you will see something more coming in. If the overall impact was 1 per cent, you would probably see maybe another 1.5-2 per cent coming in,” said its MD and CEO Rakshit Hargave in the earnings call.

However, Hargave also said “demand environment is strong” and “see that the trend is good”. It expects to preserve FY27 EBITDA margins at least at FY26 levels if input costs remain elevated.

Godrej Consumer Products Ltd (GCPL), which took an average price increase of around 5 per cent in the June quarter, may implement a hike in the current quarter, though it is holding back on any pricing actions until commodity cost trends become clearer.