FMCG firms may pass on tax gains to consumers

MUMBAI: Fast-moving consumer goods (FMCG) could witness a price reduction in select categories, which is likely to boost sagging volumes. The FMCG industry is reeling under a major slowdown. An increase in profits, following the corporate tax bonanza, could also go into product promotions and advertising spends, said experts.
Marico MD & CEO Saugata Gupta said the move will boost consumption.He expects better pricing and greater investments in the medium term.
The much-needed reduction in corporate taxes will enable more investments by firms — in consumers, in employees and in manufacturing capacity, said Godrej Consumer Products MD & CEO Vivek Gambhir. “For buyers, this could take the form of more promotions, selective price cuts and more spend on advertising to stimulate demand,” said Gambhir.
Parle Products category head Mayank Shah said categories that yield higher gross margins could see steeper price cuts. Certain high-end personal products and valueadded products fall in the high-gross margin bracket, and these could become more affordable for the consumer if manufacturers so decide.
Biscuit makers, which operate on thin margins, could pass on price cuts to the tune of 4-5%, said Shah. This is expected to provide the requisite ammunition to branded and packaged biscuit companies to compete better with unorganised players.
“Given the competitive context, no company can retain tax benefits. We are working on the calculations. The biggest challenge is revival of demand. A price reduction would certainly help in that direction,” said Shah.
Some FMCG companies like Dabur India avail fiscal benefits and would thus not be materially impacted on the tax rate by the move.