Crude Is Falling But Consumer Brands Are Not Ready To Cut Prices Yet, Here's Why

As global crude oil prices retreat from conflict-driven highs, consumers hoping for cheaper everyday products may have to wait a little longer.

Brent crude, which had surged to as high as $126.4 per barrel during the peak of geopolitical tensions, has now eased to around $79 per barrel on June 22. While the decline has brought some relief to manufacturers, most consumer-facing companies say the benefits have yet to fully flow through their supply chains, making immediate price reductions unlikely.

Industry executives across edible oils, food processing, poultry, incense sticks and FMCG distribution told Outlook Business that lower crude prices could eventually improve margins. However, persistent pressures from packaging materials, freight, labour costs, export cuts and currency fluctuations continue to weigh on businesses.

Limited Scope for Immediate Rollbacks

For edible oil manufacturers, the biggest impact of higher crude prices was felt through packaging and logistics rather than the core product itself.

Ashish Khandelwal, Managing Director of BL Agro Industries Limited, said the company experienced a rise in the cost of packaging-related inputs.

"Yes, initially, we saw a substantial price increase for key inputs such as resins, polypropylene, and packaging bottles. However, due to our robust inventory planning and adequate stock levels, the immediate business impact was minimal," he said.

While crude prices have moderated, BL Agro is not considering immediate price reductions. "Given that the price adjustments were modest, we do not see an immediate need for a roll back at this stage," Khandelwal said.

Although softer crude prices are encouraging, broader input costs remain elevated, Akshay Modi, MD of Modi Naturals Ltd, expressed a similar view.

"Crude oil prices have softened, but that hasn't yet translated into a broader reduction in input costs," he said, pointing to packaging materials and currency-related pressures.

Both companies indicated that if lower crude prices persist, the primary benefit would be greater stability in operating costs rather than immediate price cuts.

Industry Body Highlights Export Disruptions

Beyond domestic costs, the conflict also disrupted trade flows. The Iran-US blockade of the Strait of Hormuz led to exponential decline in exports to West Asia

DN Pathak, Executive Director of the Soybean Processors Association of India (SOPA), said that rising crude prices increased the cost of key consumables such as diesel and hexane used in processing, adding that the "Exports to middle east have stopped because of closure of sea routes, etc."

Pathak noted that estimating savings from lower crude remains difficult from the energy prices as domestic energy costs are significantly influenced and controlled by the government's taxes and duties.

Poultry Sector Faces Supply Chain Pressure

For poultry businesses, the impact has been broader and more immediate.

SVV Dora Reddy, Co-Founder of Abhi Eggs, said rising fuel costs affected virtually every stage of operations. "The effect is not limited to one area; it has affected production, packaging materials, logistics, transportation, and labour costs."

Transportation has emerged as one of the most significant challenges, with higher fuel prices pushing up freight rates and reducing truck availability.

While the company has not raised prices so far, Reddy cautioned that continued cost pressures may eventually force action.

"If the current cost pressures continue for another month or month-and-a-half, we may be left with no choice but to increase prices, as absorbing these costs indefinitely is not sustainable," he said.

FMCG and Consumer Goods Players Remain Cautious

For consumer goods companies, the relationship between crude prices and retail pricing remains indirect. However, with the festive season approaching, the sector is expected to witness a rising demand.

"Historically, raw material prices react quickly when crude rises, but take much longer to soften when crude declines," said Ankit Agrawal, Director at Mysore Deep Perfumery House (MDPH).

The incense sticks (agarbatti) industry continues to grapple with rising raw material costs across categories, he added.

Even though the festive season approaching could boost demand, Agrawal pointed out that the prices could remain elevated despite lower oil prices. "At present, we remain in a wait-and-watch mode," he said.

Even though the individual businesses may not be looking to reduce the prices in the near furture, BuyBuyCart, an FMCG and local commerce platform, said that it may consider selective price reductions if lower crude prices remain sustained.

"Under the conditions we are facing at the moment, such a trend will result in a decrease in our total input expenses by 1-2%," said Ashish Pandey, Director and Co-Founder of BuyBuyCart.

Hence, any potential reduction of product prices could range "between 2-5% depending on product categories and supplier negotiations," he said, adding that a final decision would likely take one to two quarters.

Packaging and Freight Replace Crude as Key Concerns

Across sectors, a common trend has emerged. From edible oil producers and poultry operators to incense stick manufacturers and FMCG distributors, companies say cost inflation has become more diversified.

While crude-linked cost pressures dominated during the conflict period, businesses now also identify packaging materials, freight, logistics and labour as key challenges.

While lower crude prices may provide relief over time, but unless packaging, transportation, imported inputs and commodity costs also soften, consumers are not likely to expect widespread price cuts anytime soon.