Food Manufacturers Absorb Rising Costs Amid West Asia Crisis

Food Processing Sector Faces Rising Costs Due to West Asian Conflict

The food processing sector is facing significant challenges due to the ongoing conflict in West Asia, with companies experiencing increased raw material and freight costs. 20-25% increases in packaging material costs have been reported, while $123.15 per barrel, the average price of the Indian basket of crude oil in March, is significantly higher than $69.01 in February.

Industry executives warn that retail price increases may follow if the crisis continues. AWL Agri Business Ltd, a leading player in the sector, has reported that edible oil prices have been quoted at higher levels due to possible supply chain disruptions. mooMark, a dairy-product maker, estimates that cost pass-through to retailers and potentially to consumers may become necessary within the next 4-6 weeks.

Parle Products, another prominent player in the sector, has also warned that companies may have to pass on a part of the increased costs to consumers over time. BN Group, the owner of the Simply Fresh and Nurtica brands, has stated its commitment to protecting consumer affordability and has made efforts to reduce financial burdens affecting its operations.

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The conflict has also led to significant cost escalations in packaging materials, with polymers, films, and laminates used to pack fresh protein- daily! range experiencing significant cost increases. Shipping and freight rates have also climbed considerably due to global supply route disruptions, raising the cost of moving raw materials and finished goods through the supply chain.

The industry is also navigating tightening labour availability due to uncertainty in global markets, leading to lower workforce participation at some processing facilities. However, the FMCG and edible oils industry has demonstrated strong resilience against global commodity market challenges, with diversified sourcing from countries like Malaysia, Indonesia, and the US providing a strong buffer against supply shocks.