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The FMCG industry expects a subdued low to mid-single-digit volume growth in the July-September quarter as weak macroeconomic conditions amid rising food prices and below-normal rainfall in some regions are impeding the recovery in rural demand.
Companies such as Marico, Dabur and Godrej Consumer Products Ltd (GCPL) in their quarterly updates said that though there was an improvement in consumption in the second quarter, the recovery has been gradual.
Moreover, the festive season this year has entirely shifted to the third quarter, due to which offtake related to festivals is delayed and will carry forward to the next quarter, the companies said.
Over their gross margins, the companies said they expect it to be better sequentially, helped by moderating inflation and easing price growths. This also helped them to go for higher A&P (Advertisements and Promotions) spending.
The Godrej Group’s FMCG arm faced a “tough operating environment” and despite that its organic business delivered “mid-single digit volume growth”.
Marico, which owns brands such as Parachute, Saffola, and Hair & Care, said demand trends in the second quarter of FY24 largely mirrored the trends observed in the preceding quarter.
It continued to witness “healthy trends” in offtakes, market share and penetration across key franchises. The newer portfolios, foods and premium personal care remained on course to achieve full-year aspirations.
Dabur India said FMCG consumption is showing improvement year-on-year, however, the recovery has been gradual.
“This quarter witnessed a mild summer and a slightly deficient monsoon. The festive season is later than normal this year due to which offtake related to festivals is delayed and will carry forward to next quarter,” it added.
The company expects its consolidated revenue is expected to register mid to high single-digit growth during Q2.
Over the rural demand, Nuvama Institutional Equities Executive Director Abneesh Roy said in the first quarter of FY24, there were some green shoots. However, given very weak rainfall in August (at 100-year low), rural demand has again turned weak.
“September has been better in terms of rains with a 13 per cent surplus, but it has still not lifted the spending spirits in rural given the shift in festival demand,” he said.
Rural sales contribute around one-third of sales for the FMCG industry through small value packs. However, it has been under distress in the last 6-7 quarters and had shown improvement in the previous April-June quarter.
Roy also added that urban-focused companies such as Nestle, Tata Consumer Products Ltd, GCPL and Colgate Palmolive will have an edge.
Moreover, “international businesses of most companies are likely to outperform their respective India operations”, he added.
Over the performance of its international business, Dabur said it “is poised for a strong performance, with double-digit growth in constant currency led by Middle East, Egypt and Turkey”.
Similarly, Marico’s international business “delivered double-digit constant currency growth” and GCPL Indonesia business, the second biggest market after India, “continued to deliver improving performance, with double-digit volume and value growth”.
FMCG companies are expecting a better performance in the next quarter and second half of the year.
“Consumption trends, particularly in rural, are expected to improve in H2 owing to retail inflation levels staying within RBI’s target range, hike in MSPs, healthy sowing season, easing liquidity pressures and government spending,” said Marico.
Dabur also expects a recovery in consumption in both urban and rural markets in India due to improving macro indicators, an increase in government expenditure and positive consumer sentiment.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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