Why Rains In Malaysia Are Making Your Soap Costlier?

FMCG players like Hindustan Unilever (HUL), Wipro Consumer Care, and Tata Consumer Products have raised soap prices by 7-8 per cent to counter the significant rise in palm oil prices, a key raw material in soap production. This price hike comes as palm oil derivatives have surged by over 30 per cent since the beginning of the year.

Palm Oil Prices Drive Price Adjustments
Wipro Consumer Care, which owns brands like Santoor and Chandrika, confirmed that the price of palm oil derivatives has increased by more than 30 per cent in 2024. As a result, the company has implemented a price increase of around 7-8 per cent to partially absorb the hike in input costs. CEO Neeraj Khatri stated, "Our pricing adjustments are aligned with the market trends driven by the significant rise in palm oil prices."

Similarly, market leader HUL, which owns soap brands such as Dove, Lux, Lifebuoy, and Pears, has also raised prices for its skin cleansing products to manage the impact of rising palm oil costs. A spokesperson for HUL emphasized that price hikes were necessary to maintain a competitive price-value equation despite global commodity inflation.

Impact of Palm Oil Price Surge
Palm oil prices have risen by 35-40 per cent since mid-September, mainly due to an increase in import duties and global price hikes. As of now, palm oil is priced at approximately Rs 1,370 per 10 kg, making it a significant cost driver for soap manufacturers. This surge in prices is largely attributed to palm oil imports from Indonesia and Malaysia.

Price Increases on Popular Soap Brands
The price hike has already been reflected in leading soap brands. For instance, the price of a 5-soap pack of Lux has increased from Rs 145 to Rs 155, while Lifebuoy's 5-soap pack now costs Rs 165, up from Rs 155. Similarly, the price of Pears soap (pack of 4) has risen from Rs 149 to Rs 162.

Wider Impact on the FMCG Sector
Other FMCG companies are also following the trend set by HUL, with many expected to implement similar price hikes in the coming months. According to Abneesh Roy, Executive Director (Research) at Nuvama Institutional Equities, "In FMCG, most companies follow the market leader, so we can expect other players to gradually raise their prices as well."

Gradual Price Hikes in Tea Segment
Tata Consumer Products Ltd (TCPL), which has also raised prices in the tea segment due to declining production from erratic weather conditions, has increased prices by 25-30per cent over several phases. CEO Sunil D'Souza explained that the company opted for gradual hikes to avoid a sudden demand shock while maintaining volume growth.

Godrej Consumer Products' Cautious Approach
Godrej Consumer Products Ltd (GCPL), the maker of Cinthol and Godrej No. 1 soaps, has also flagged the rising cost of palm oil and its derivatives. However, the company has opted not to pass the entire cost increase on to consumers. Instead, GCPL plans to implement more measured price hikes to avoid impacting demand.