Interim Budget Day Two: Promotional offers on soaps to rise

Slashed duties expected to help reduce inflationary pressure on inputs such as palm oil, which goes into the making of soaps

Besides consumer durables, cars and mobile phones, duties on which have been cut in interim Budget 2014-15, the finance minister also cut Customs duty on non-edible industrial oil and its fractions, fatty acids and fatty alcohol, to 7.5 per cent.

This is likely to reduce inflationary pressure on soap inputs like palm oil. Analysts say companies might pass the benefits to consumers by way of promotional offers.

Vivek Gambhir, managing director, Godrej Consumer, said, “The reduction in excise duty should have a favourable impact on input cost pressures for the soaps category. As far as stimulating demand is concerned, much more will depend on overall GDP (gross domestic product) growth and consumer sentiment turning more positive.”

Hindustan Unilever did not respond to a mail seeking comment. Typically, soap makers increase promotional spends when input prices fall.

But soap makers typically increase promotional spends when input prices soften. In the March and  June quarters of 2013, Hindustan Unilever (HUL) passed on the gains made on the raw material side, notably, in soaps, following a drop in palm oil prices by as much as 25-30%.

While the rupee's depreciation did act as a spoil,  promotional pricing to the extent of 12-20% was initiated in soaps to prop up demand. This number could now stand at about of 5-10% in the wake of the budget.