New Delhi: Fast Moving Consumer Goods (FMCG) companies like Hindustan Unilever, Godrej, Marico and ITC are going to give a shock of inflation to the consumers. In fact, due to food inflation and rising production costs, the margins of FMCG companies making everyday items like soap, oil, toothpaste and grocery have been badly affected. Its effect is also seen on the financial results of the second quarter of the companies.

Why did the costs of FMCG companies increase?

FMCG companies use products like palm oil, coffee and cocoa as raw materials. The prices of these items have risen drastically in the last few days. This has increased the manufacturing cost of companies, to compensate for which some companies are considering increasing the prices.

Hindustan Unilever (HUL), Godrej Consumer Products Limited (GCPL), Marico, ITC and Tata Consumer Products Limited (TCPL) have expressed concern over the decline in urban consumption. Urban consumption accounts for 65-68 per cent of the total sales of the FMCG sector.

Consumption is happening more in villages than in cities

GCPL MD and CEO Sudhir Sitapati said on the announcement of second quarter results, "We believe this is a short-term setback and we will recover margins through prudent price increases and stabilizing costs." Importantly, the rural markets, which were lagging behind earlier, have maintained their growth momentum compared to urban markets.

Another FMCG company Dabur India also said that the demand environment was challenging in the September quarter, including 'high food inflation and subdued urban demand'. The company's consolidated net profit in the September quarter declined by 17.65 percent to Rs 417.52 crore. During this period, the company's operating income declined by 5.46 percent to Rs 3,028.59 crore.