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Friday, October 4, 2024

FMCG sales surge this quarter driven by strong rural recovery and easing inflation

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Consumer goods firms are experiencing notable sales growth this quarter compared to July-September 2023, driven by a normal monsoon, lower inflation, and robust festive stocking. This indicates a turnaround from the recent slowdown, according to industry executives. Leading fast-moving consumer goods (FMCG) companies͏͏ like͏͏ Procter͏͏ &͏͏ Gamble,͏͏ Parle͏͏ Products,͏͏ and͏͏ Amul͏͏ have͏͏ reported͏͏ a͏͏ revival͏͏ in͏͏ both͏͏ value͏͏ and͏͏ volume͏͏ sales,͏͏ particularly͏͏ in͏͏ rural͏͏ areas.

However,͏͏ some͏͏ analysts͏͏ caution͏͏ that͏͏ volume͏͏ sales͏͏ could͏͏ be͏͏ affected͏͏ in͏͏ the͏͏ coming͏͏ months͏͏ due͏͏ to͏͏ anticipated͏͏ price͏͏ hikes͏͏ in͏͏ several͏͏ categories,͏͏ driven͏͏ by͏͏ increased͏͏ import͏͏ duties͏͏ on͏͏ crude͏͏ and͏͏ refined͏͏ edible͏͏ oils.

P&G͏͏ Notes͏͏ Positive͏͏ FMCG Trends:

“We’re͏͏ certainly͏͏ seeing͏͏ green͏͏ shoots͏͏ emerging͏͏ within͏͏ the͏͏ FMCG͏͏ industry,”͏͏ said͏͏ Mrinalini͏͏ Srinivasan,͏͏ chief͏͏ financial͏͏ officer͏͏ of͏͏ P&G͏͏ Hygiene͏͏ and͏͏ Health͏͏ Care.

“Inflation͏͏ has͏͏ been͏͏ steadily͏͏ easing,͏͏ with͏͏ both͏͏ July͏͏ and͏͏ August͏͏ coming͏͏ in͏͏ below͏͏ the͏͏ RBI’s͏͏ medium-term͏͏ target͏͏ of͏͏ 4%.͏͏ Monsoons͏͏ have͏͏ been͏͏ normal͏͏ or͏͏ above͏͏ normal͏͏ in͏͏ 75%͏͏ of͏͏ districts,͏͏ and͏͏ rural͏͏ demand͏͏ is͏͏ anticipated͏͏ to͏͏ follow͏͏ these͏͏ positive͏͏ trends,”͏͏ said͏͏ Srinivasan͏͏ of͏͏ P&G͏͏ Hygiene͏͏ during͏͏ a͏͏ recent͏͏ investor͏͏ call.

Continue͏͏ Exploring:͏͏ Global͏͏ FMCG companies͏͏ boost͏͏ efforts͏͏ to͏͏ capture͏͏ India’s͏͏ expanding͏͏ market

FMCG Market͏͏ Set͏͏ for͏͏ 12%͏͏ Growth:

The͏͏ overall͏͏ FMCG͏͏ market͏͏ is͏͏ projected͏͏ to͏͏ grow͏͏ by͏͏ 12%͏͏ in͏͏ value͏͏ during͏͏ July-September,͏͏ compared͏͏ to͏͏ the͏͏ same͏͏ period͏͏ last͏͏ year,͏͏ when͏͏ it͏͏ declined͏͏ by͏͏ 2.3%͏͏ due͏͏ to͏͏ rising͏͏ food͏͏ inflation͏͏ and͏͏ erratic͏͏ monsoons,͏͏ according͏͏ to͏͏ Bizom,͏͏ which͏͏ tracks͏͏ kirana͏͏ sales.

Sales͏͏ rose͏͏ 13%͏͏ year-on-year͏͏ in͏͏ August͏͏ and͏͏ 8%͏͏ in͏͏ July,͏͏ according͏͏ to͏͏ Bizom͏͏ data.͏͏ The͏͏ June͏͏ quarter͏͏ saw͏͏ a͏͏ 9%͏͏ year-on-year͏͏ growth,͏͏ while͏͏ the͏͏ March͏͏ quarter͏͏ recorded͏͏ 7%,͏͏ indicating͏͏ a͏͏ sequential͏͏ improvement͏͏ as͏͏ well.

Rural͏͏ Spending͏͏ Rises͏͏ with͏͏ Good͏͏ Monsoons:

“Good͏͏ monsoons͏͏ positively͏͏ impact͏͏ the͏͏ farming͏͏ sector,͏͏ leading͏͏ to͏͏ better͏͏ pricing͏͏ and͏͏ procurement,͏͏ which͏͏ puts͏͏ more͏͏ money͏͏ in͏͏ the͏͏ hands͏͏ of͏͏ rural͏͏ consumers,”͏͏ said͏͏ Jayen͏͏ Mehta,͏͏ managing͏͏ director͏͏ of͏͏ Gujarat͏͏ Cooperative͏͏ Milk͏͏ Marketing͏͏ Federation,͏͏ India’s͏͏ largest͏͏ dairy͏͏ producer͏͏ of͏͏ Amul͏͏ cheese,͏͏ milk,͏͏ butter,͏͏ and͏͏ ice͏͏ cream.

“This͏͏ is͏͏ resulting͏͏ in͏͏ an͏͏ uplift͏͏ in͏͏ positive͏͏ sentiment.”

“We͏͏ anticipate͏͏ strong͏͏ demand͏͏ across͏͏ all͏͏ dairy͏͏ categories,͏͏ driven͏͏ by͏͏ several͏͏ factors,͏͏ including͏͏ expanded͏͏ distribution͏͏ and͏͏ favourable͏͏ monsoons,͏͏ which͏͏ have͏͏ even͏͏ extended͏͏ in͏͏ some͏͏ regions,”͏͏ Mehta͏͏ said.

The͏͏ price-sensitive͏͏ consumer͏͏ industry͏͏ has͏͏ faced͏͏ a͏͏ demand͏͏ slump͏͏ after͏͏ companies͏͏ raised͏͏ sticker͏͏ prices͏͏ by͏͏ nearly͏͏ a͏͏ quarter͏͏ following͏͏ Covid͏͏ to͏͏ counter͏͏ rising͏͏ input͏͏ costs.͏͏ However,͏͏ about͏͏ a͏͏ year͏͏ ago,͏͏ they͏͏ began͏͏ cutting͏͏ prices͏͏ due͏͏ to͏͏ a͏͏ clear͏͏ consumer͏͏ shift͏͏ towards͏͏ more͏͏ affordable͏͏ products,͏͏ which͏͏ affected͏͏ their͏͏ value͏͏ growth.

Prices͏͏ have͏͏ remained͏͏ stable͏͏ over͏͏ the͏͏ past͏͏ few͏͏ months,͏͏ with͏͏ some͏͏ companies͏͏ even͏͏ raising͏͏ prices͏͏ as͏͏ sales͏͏ have͏͏ improved.

“Both͏͏ value͏͏ and͏͏ volume͏͏ sales͏͏ have͏͏ returned,”͏͏ said͏͏ Krishnarao͏͏ Buddha,͏͏ senior͏͏ category͏͏ head͏͏ at͏͏ Parle͏͏ Products,͏͏ India’s͏͏ largest͏͏ food͏͏ company.͏͏ “We͏͏ are͏͏ seeing͏͏ a͏͏ normalisation͏͏ effect͏͏ with͏͏ the͏͏ resolution͏͏ of͏͏ post-Covid͏͏ issues.͏͏ Several͏͏ factors—such͏͏ as͏͏ a͏͏ good͏͏ monsoon,͏͏ strong͏͏ stocking͏͏ ahead͏͏ of͏͏ the͏͏ festive͏͏ season,͏͏ and͏͏ rural͏͏ recovery—have͏͏ contributed͏͏ to͏͏ significant͏͏ value͏͏ and͏͏ volume͏͏ offtake͏͏ this͏͏ quarter.”

Continue͏͏ Exploring:͏͏ Rural͏͏ demand͏͏ in͏͏ FMCG sector͏͏ set͏͏ to͏͏ grow͏͏ further͏͏ in͏͏ the͏͏ coming͏͏ quarters:͏͏ Axis͏͏ Securities

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