FMCG firms brace for input cost surge as Israel-Iran conflict escalates

Business Standard

8 hours ago

Fast-moving consumer goods (FMCG) companies manufacturing packaged foods, beverages, detergents, and paints are bracing for potential cost pressures amid escalating tensions in West Asia. Industry executives warn that any prolonged conflict could send crude oil prices surging, disrupting the early signs of demand revival and destabilising recently cooling input costs, according to a report by The Economic Times.
The concerns come at a time when FMCG firms had started to report improving sales trends after a prolonged slowdown lasting five quarters. Positive indicators included Reserve Bank of India's rate cuts, tax incentives in the Union Budget, and early monsoon onset — all of which were expected to spur rural and urban demand in the coming months.
Crude-linked inputs a key pressure point
Companies are particularly concerned about the impact of oil price volatility on packaging and raw material costs. Petroleum derivatives account for 20 per cent–25 per cent of input costs for food companies and up to 40 per cent for paint makers. These materials are used both directly in products like detergents and paints and for packaging items such as snacks and beverages, the report said.
Bisleri, which recently entered a strategic tie-up with Dubai-based Apparel Group to expand into West Asia and Africa, is especially exposed to developments in the region.
The report said that most companies engage in hedging and forward contracts covering up to six months of crude-linked inputs, offering some near-term protection. However, a prolonged or severe escalation could wipe out these advantages.
Companies had recently paused price hikes after three straight quarters of increases, as costs of commodities such as palm oil and wheat began to stabilise. According to NielsenIQ's latest report, the FMCG sector recorded 11 per cent year-on-year value growth in the January-March quarter, with 5.6 per cent attributed to price hikes.
Over the past few quarters, persistent inflation led many consumers to downtrade — opting for lower-priced alternatives — or cut back on non-essential purchases. With Brent crude climbing back to $75 per barrel, up over 15 per cent from last month, firms fear a renewed rise in input costs could undermine fragile consumer sentiment once again, the news report said.
Israel-Iran conflict
Tensions between Israel and Iran have escalated sharply following Israel's launch of Operation Rising Lion on June 13. Under this offensive, Israeli forces targeted over 100 sites within Iran, including sensitive nuclear and missile infrastructure located near Natanz and Isfahan. The attacks resulted in the deaths of several high-ranking Iranian officials, including Major General Mohammad Bagheri, General Hossein Salam*, and six nuclear scientists associated with missile development and uranium enrichment programmes. Israel said that the operation aimed to disrupt Iran's nuclear capabilities.
In response, Iran launched a wave of ballistic missiles and drone attacks on major Israeli cities such as Tel Aviv, Haifa, and Jerusalem. The Iranian leadership warned that 'continued Israeli aggression would lead to stronger responses', and cautioned Western nations against extending support to Israel amid the growing conflict.
India calls for de-escalation, monitors student safety
India's Ministry of External Affairs (MEA) issued a statement urging both nations 'to de-escalate and resume dialogue'. On Monday, the ministry noted that the Indian Embassy in Tehran is actively monitoring the evolving scenario and maintaining communication with the students to ensure their safety. Some students have already been moved to safer areas with the embassy's assistance, and additional precautions are being explored.