Brands focus on leaner product lines amid surging input costs

Kolkata: Smartphone, television, and fast-moving consumer goods (FMCG) companies have begun trimming product portfolios as rising input costs due to the Iran war is forcing them to pivot towards high-demand, high-margin offerings. Cost of key components such as memory chips and crude-linked packaging materials have surged amid severe global supply headwinds sparked by war and a surge in development of AI infra.

According to market researcher Counterpoint Research, smartphone makers are rationalising their portfolios by 5-7%, prioritising profitability and improving channel efficiency. TV manufacturers, too, are scaling back model line-ups, after price increases of up to 20% in the past four months rendered several variants unviable at their intended price points, industry executives said.

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Companies are concentrating on fewer, better-selling models to sustain margins without compromising competitiveness. In FMCG and groceries, firms have rationalised stock keeping units (SKUs), or packs, by up to 20% as packaging material costs have soared in the backdrop of the war.

Executives said pruning low-rotation SKUs is helping optimise supply chains and improve production efficiency.

"Most companies are focussing on rationalising pack sizes with limited SKUs to maximise production efficiency," said Mayank Shah, vice president at Parle Products, India's largest biscuit manufacturer. "Almost 15-20% of the SKUs have been trimmed as of now depending on sales velocity."

TV maker Super Plastronics chief executive Avneet Singh Marwah said the company is shedding some models as, after the price increases, they have lost relevance in the entry-level segment. "The reductions are in 32-43 inch TV segments where demand has also been slower than the rest of the portfolio," he said. The company manufactures televisions under the Kodak, Thomson, and Blaupunkt brands.

Prices of memory chips used in smartphones, TVs, laptops, tablets, and smart connected appliances have surged 50-90% over the past 4-5 months, fuelled by global supply constraints and strong AI-led demand. Oil prices have climbed 15-25% since the Iran war intensified, while packaging material costs-linked to petrochemical derivatives-have risen 20-35%, significantly increasing input costs for consumer goods companies. A weaker rupee and increase in logistic costs is also weighing on companies' operating costs.

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"We expect portfolio optimisation to become more visible in the coming quarters as cost pressures due to memory price hike will continue to rise," said Sumit Kumar, senior research analyst at Counterpoint. "Brands are expected to become more selective and focus on fewer, high-impact models within each price band rather than multiple variants. This trend is likely to be more pronounced in the mass and mid segments."

The All India Mobile Retailers Association (AIMRA) pointed out that instead of new technology launches, major brands are preparing "box-change" introductions with leaner portfolios, compared with the usual 100-plus unique models every year.

"The number of new model launches can see a steep double-digit drop, replaced instead by a wave of surrogate launches where brands simply repackage last year's technology under new model numbers," said Kailash Lakhyani, founder chairman, AIMRA. "This year, new launches will not match the scale of 2025 as brands look to reduce operational expenses. Smartphone supplies will reach their worst levels in the second half of the year."

Counterpoint Research data showed smartphone makers launched 10 entry-level 4G handsets in the March quarter, a modest increase from seven a year earlier.