West Asia War Hits Indian D2C Brands: Repricing Amid Supply Chain Chaos

The global economic landscape has been characterized by persistent uncertainty in recent years, marked by events ranging from the Covid-19 pandemic to various economic slowdowns. The latest catalyst for disruption is the ongoing conflict in West Asia, which has severely impacted global supply chains and forced a significant recalibration for India’s Direct-to-Consumer (D2C) and new-age retail brands. This escalating crisis is pushing these businesses into an unavoidable repricing mode, as their unit economics face unprecedented pressure from rising operational costs.

Initially, many Indian D2C brands attempted to absorb the increasing costs internally, delaying the direct impact on consumer prices. However, with oil prices reaching record highs, critical supply chain components becoming scarce, and foreign investors increasingly withdrawing from India, the situation has become unsustainable. The sustained conflict in West Asia has created a new reality where margins and bottom lines are clearly under strain, compelling brands to implement strategic price adjustments across their product portfolios.

West Asia Conflict Squeezes D2C Supply Chains

The ripple effect of the West Asia war is profoundly disrupting the D2C supply funnel in India, manifesting as increased operational costs at manufacturing units and significant hikes in both input and distribution expenses. Early days of the conflict saw a paucity of workers at factories, exacerbated by high LPG prices displacing labor. Now, manufacturing is more expensive due to input price surges, and distribution costs are set to skyrocket following recent fuel price hikes by the Indian government in major metros, creating a dual challenge for homegrown brands.

Packaging, a critical component, has been particularly hard hit. Manish Chowdhary, founder of WOW Skin Science, revealed that the beauty and personal care startup has experienced an approximate 40% jump in input costs over the past few months. He attributed this primarily to a supply crunch in packaging materials, with prices for these items almost doubling, while raw material costs have risen by around 35%. Shankar Prasad, founder and CEO of skincare startup Plum, highlighted the deep linkage between beauty packaging and petrochemical supply chains, which are essential for producing bottles, pumps, caps, and dispensers. These components, derived from crude oil, make the segment highly susceptible to oil price volatility.

India’s substantial reliance on West Asian countries such as Saudi Arabia, Iraq, and the United Arab Emirates for a significant portion of its crude oil requirements means that tensions in the region directly disrupt energy markets and shipping routes. This geopolitical instability translates into immense pressure on petrochemical-linked packaging costs for D2C beauty brands. Similarly, packaged food brands are confronting parallel challenges, with laminate costs—the plastic films used for sealing and wrapping products—increasing by 30-35%, according to Vinay Kothari, founder of Indian treats and sweets startup GoDesi.

Raw Material Imports and Logistics Face Significant Headwinds

Beyond packaging, the import of essential raw materials presents another substantial obstacle for numerous D2C brands, depending on their product and ingredients. India’s dry fruit supply, encompassing dates, cashews, pistachios, and almonds, is heavily dependent on Middle Eastern markets. With vessel movement and trade through the critical Strait of Hormuz hampered for months, prices for these goods have climbed sharply. GoDesi’s Kothari noted that raw material prices in the dry fruits category have surged by almost 50% compared to January figures. He further emphasized that while oil prices might stabilize with increased production, shortages of certain raw materials are likely to persist, indicating that supply-side pressures will continue even if fuel costs ease. The Beauty and Personal Care (BPC) segment also faces intense pressure, as India relies heavily on the affected West Asian regions for crucial components such as specialty chemicals, surfactants, and fertilizers.

The logistics landscape, initially more stable for fuel prices in India compared to the global market, is now rapidly deteriorating. While no startup initially highlighted distribution concerns, diesel and petrol prices have significantly increased. This places brands with single manufacturing units at a structural disadvantage compared to larger players benefiting from distributed manufacturing, which allows for optimized freight networks. Furthermore, the rising fuel costs are also impacting quick commerce platforms, particularly their gig workers. The Gig & Platform Service Workers Union (GIPSWU) recently called for a nationwide five-hour shutdown of app-based services, demanding higher per-kilometre payouts from digital platforms and government intervention following the recent increases in petrol, diesel, and LPG prices. GoDesi’s founder stated, “We haven’t seen a major direct impact yet, but transportation costs are expected to rise as diesel prices continue increasing. Large distributed companies may still be able to absorb some of that pressure, but newer brands operating with a single manufacturing facility will feel the impact more sharply.”

The New Cost Reality and Strategic Repricing

The simultaneous movement of multiple cost points across the supply chain is forcing D2C brands to reflect, optimize, and make critical decisions regarding their unit economics. For BPC and packaged food brands, the fluctuations have profoundly reshuffled their financial models. The lack of subsidies for petroleum prices on commercial laminates means that the 30-35% increase in its cost directly impacts D2C brand margins, which are often already thin. Packaging can account for a significant portion of total manufacturing costs; at companies like GoDesi, it represents as much as 25% to 40% of the total manufacturing cost per product, depending on the SKU. Packaging costs are particularly high for smaller SKUs with lower retail prices, where margins are typically narrower.

According to Genext Labs, a private label skincare manufacturer, packaging constitutes the largest share of costs for BPC brands, typically ranging from 30-40% of the total product cost. Raw materials contribute another 15-25%, while R&D, manufacturing and labor, and distribution each account for 10-20%. With both packaging and raw material costs being significantly affected, the market anticipates price hikes of approximately 30-50%. This overall surge in production costs will inevitably be passed on to consumers unless brands possess the financial capacity to absorb the margin hit, a luxury not all can afford. WOW Skin Science’s Chowdhary acknowledged this challenge, stating, “Margins are shrinking. Demand itself is volatile right now. Marketplaces and modern trade are in the middle of resetting their stock levels, panic buying hasn’t set in yet, so we’re navigating a tricky middle ground.”

D2C brands operating in beauty, skincare, packaged food, and lifestyle categories are at a critical juncture, grappling with how much of these elevated costs can realistically be transferred to the end consumer, especially in non-discretionary segments like beauty. While most brands have, until recently, absorbed the cost increases within their margins, the escalating conflict is now prompting them to strategically pass on some of these costs without alienating their customer base or diminishing market share. This complex repricing exercise is demanding intense focus from business and category managers to ensure the financial calculations are precise and sustainable.

WOW Skin Science, for instance, has implemented a measured 6–7% price increase across its categories and has deliberately reduced discounting to avoid further inflating prices. Chowdhary explained their cautious approach, citing intense competition in the BPC market, stating, “Our approach is roughly 50-50 to absorb what we can internally, pass on the rest cautiously. There will be a bottom line hit this year. That’s the reality we’re planning around.” In contrast, GoDesi’s Kothari indicated that while his company had absorbed most of the financial burden to date, it plans to begin passing costs to consumers within the next 15-20 days, coinciding with its new packaging cycle. GoDesi intends to reduce the grammage of its final products as part of this strategy, expecting to absorb 30-40% of the impact through operational efficiencies, with another 30-40% likely affecting its profit and loss statement, and the remaining 20% potentially being passed on to consumers. The ultimate impact of these price adjustments on the growth trajectories of D2C brands, which were only just recovering from a similar price-change exercise due to GST rationalization last year, remains uncertain, casting a somber mood over the ecosystem.