In one of the early signs of the ongoing United States-Israel-Iran war impacting daily consumables, FMCG (fast moving consumer goods) companies in India are considering raising prices or reducing grammage in packs.
According to a report by The Economic Times, FMCG players are staring at a supply chain disruption as the West Asian region was a crucial source of polymers for packaging materials.
Packaging materials are manufactured from polymers which are directly derived from crude oil. FMCG companies have increased sourcing of the required polymers from countries like China, Thailand and Singapore, the report said.
Polypropylene and polyethylene are among the widely used polymers derived from crude. These are used to manufacture packaging material used by FMCG companies.
“Packing alone accounts for 15-20 percent of our costs. Reducing grammage in small packs and increasing prices of bigger packs are options we are considering if oil prices remain at current levels,” Mayank Shah, vice president of biscuits and confectionery maker Parle Products, was quoted as saying.
Linear Alkyl Benzene (LAB) is another crude derivative that is used to manufacture detergents and cleaning products. LAB accounts for almost half of the raw material cost of detergent.
Executives in FMCG companies expect that price hikes were inevitable as crude supplies from West Asia remain at a halt.
“From the last three-four days, the industry has started to source polymer (which dominate FMCG packaging and are derived directly from crude oil) from suppliers other than the Gulf region – such as China, Thailand and Singapore,” Vimal Kedia, founder and promoter of rigid plastic packaging player Manjushree Technopack, was quoted as saying.
He said that before the war, the supply of these polymers was equally divided between the Gulf region and Southeast Asian countries.
If companies decide to raise prices or reduce grammage, this will nullify the gains of the GST (goods and services tax) rate revisions in September. Back then, companies had increased grammage and reduced prices to pass on the GST 2.0 benefits to consumers.
