The recent surge in raw material prices is causing concern for fast-moving consumer goods (FMCG) manufacturers, as it could potentially impact their gross margins. Key raw materials such as crude oil, palm oil, coffee, and cocoa have seen significant price increases, which could disrupt the growth in margins that FMCG firms have experienced in recent quarters.
Businesses are now faced with the challenge of deciding whether to pass on these cost increases to consumers, considering the competitive market and the need to maintain sales volumes. According to a report by BNP Paribas, most raw material prices are experiencing inflation, which could negatively impact the sector’s profitability.
The rise in raw material prices comes at a time when FMCG companies have seen substantial growth in gross margins due to lower input costs in previous quarters. The current price rise is seen as a negative trend for the sector, as it could lead to margin pressure and impact overall profitability.
FMCG firms are likely to proceed with caution and closely monitor the situation to make informed decisions on pricing strategies. The industry will need to navigate these challenges to maintain growth and profitability in the face of rising raw material costs.
