Market leaders in the FMCG sector will have to take the lead in slashing prices before others follow suit, said Marico Chairman Harsh Mariwala, in an exclusive conversation with CNBC-TV18. The doyen of Indian FMCG also said that he expects some easing out in inflation levels, come October.
“There is nothing wrong in companies reversing price hikes, but whether they happen or not will depend on individual players,” said Mariwala, adding, “I think market leaders will play a decisive role in deciding whether price-reversals occur. If they slash prices, smaller companies have to do the same.”
Earlier this year, a number of Indian FMCG majors like Dabur and Hindustan Unilever Ltd (HUL) announced price-hikes to counter inflation. HUL went so far as to tell investors that it expects growth to be price-led, while Dabur said that it hiked prices by 6 to 6.5 percent, across the board, in the April-June quarter. However, with reports of inflation easing out and raw material costs reducing, there is talk of manufacturers halting price hikes.
However, the question of whether big names in FMCG will in fact go the extra mile and slash prices, Mariwala thinks will depend on just how much of a hike they effected during inflation. “If companies merely hiked prices to cover margins, I don’t see anything wrong in slashing prices now,” he said, adding that the FMCG sector will drive future growth.
The Marico top boss said he expected inflation levels to come under control by October, some uncertainties notwithstanding. “I expect the inflation rate to be brought under control and even drop by either the third or fourth quarter,” he said. However, one can never be sure. “Nobody expected the war in Ukraine to break out a few months ago, so there’s just no saying for sure,” he said.
There have been reports doing the rounds quoting data suggesting that rural demand in India was underwhelming. However, Mariwala said he believed the difference between rural and urban demand isn’t much: “Inflation is impacting households in rural and urban centres alike. The impact may be slightly higher in rural markets, but the difference is negligible.”
The Marico chairman has been devoting a great deal of time to his non-profit organisation Ascent. The foundation, devoted to the cause of “trust-based” non-transactional peer-learning, has seen a particularly healthy growth in Chennai and neighbouring cities, with the number of entrepreneurs associated with the non-profit seeing a 25 percent growth, year-on-year.
Mariwala himself is bullish about tier-2 cities such as Coimbatore and Madurai contributing to the local chapter’s entrepreneur count. On the sectoral front, chemicals, automotive, textiles and construction have seen the largest number of individual business owners partner with ascent in the pursuit of peer-learning. “We work with around 103 entrepreneurs in our Chennai chapter, and hope to increase that number to between 130 and 140 by March 2023,” said Ascent CEO Archanna Das.
With the festive season approaching, there are projections of a rebound in sentiment, but the Marico boss believes the proof of the pudding will be in the eating: “It’s too early and difficult to predict festive trends; we’ll have to wait for the actual festive season to see what trade is like.”