AWL Agri Business flags 20% rise in oil-linked packaging costs as Middle East conflict drives brent above US$110

INDIA – Indian consumer goods maker AWL Agri Business is grappling with a roughly 20% surge in crude-linked input costs for chemicals, packing materials, and coal as the Middle East conflict drives Brent crude prices from the low US$70s a barrel before the conflict to above US$110, translating into a cost impact of roughly 25 to 50 basis points, according to CEO Shrikant Kanhere.

The pressures reflect a broader industry trend, with peers such as bottled water maker Bisleri and Dove soapmaker Hindustan Unilever raising prices to counter higher conflict-linked input costs. 

AWL, home of brands including Fortune cooking oil and Kohinoor rice, is adjusting prices in line with market movements, absorbing part of the increase while passing the rest on to consumers.

The Packaging Cost Transmission Mechanism

Crude oil is the base feedstock for polymers such as polypropylene and polyethylene, which are converted into flexible films, rigid containers, caps, and closures. 

When crude prices rise, resin prices follow, and packaging converters pass those increases to consumer goods companies. 

AWL’s 20% surge in packing material costs illustrates the transmission chain from geopolitics to grocery shelf. 

The company is cutting packaging and fuel use at its plants to limit the hit to profits and expects per-ton margins to be broadly stable in fiscal 2027.

Volume Growth and Distribution Expansion

AWL forecasts sales volume growth of 8 to 9% in fiscal 2027, nearly double last year’s pace, with edible oils growing at a mid-single-digit rate and foods posting double-digit growth. 

The company is expanding distribution and investing heavily in online channels and large-format grocers, which together posted nearly 50% growth last year, in a push to scale up volumes.

A 50 Basis Point Squeeze

A 25 to 50 basis point cost impact on a low-margin consumer goods business is not trivial. For AWL, the 20% rise in packaging material costs is not the only headwind, chemicals and coal have also increased, but packaging is the category where the company has the least flexibility to substitute inputs. 

Unlike fuel, which can be reduced by route optimisation, packaging is a function of sales volume. If AWL sells more rice and oil, it must buy more pouches, labels, and corrugated boxes.

When the War Reaches the Kitchen Shelf

The crude oil that crosses the Strait of Hormuz becomes the polymer that becomes the pouch that holds Fortune cooking oil. 

AWL’s 20% packaging cost increase is the mechanical link between geopolitics and the price of dal chawal. The company is absorbing some, passing some, and hoping volumes grow faster than margins shrink.

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