The Fast-Moving Consumer Goods (FMCG) sector experienced a rise in sales volume and an increase in gross margins during the June quarter. This growth was supported by a decrease in inflation, which also provided a boost to smaller players in specific product categories. A number of these smaller players, who had previously withdrawn from certain market segments due to high inflation rates, reentered the market and heightened competition at the local level. As a result, several major FMCG companies had to adjust their prices in response to this intensified competition.
The majority of the FMCG companies listed on the stock exchange indicated growth in terms of product volume within the sectors of home care, personal care, beauty, and food products. However, the ice cream and beverages segment experienced a setback due to unexpected rains in April and early May, affecting performance during the quarter.
With a shift in material inflation from high single digits to low single digits, there has been a noticeable increase in sales volumes across both urban and rural markets. This uptick signifies encouraging indications of demand recovery. Leading companies such as HUL, ITC, Godrej Consumer, Dabur, Marico, and Tata Consumer are responding to this trend by boosting their investments in advertising and promotional activities.
Furthermore, FMCG manufacturers are currently transmitting the advantages of decreased input expenses to consumers, leading to a gradual decline in price escalation. In light of the projected decrease in prices, FMCG firms are also observing distributors and retailers diminishing their inventory levels by only 1 to 3 days. This insight was shared by a prominent industry leader during their earnings conference call.
Dabur India CEO Mohit Malhotra said, “During Q1/FY24, most of the economies witnessed a moderation in inflation. In India too, inflation showed signs of easing, as witnessed in both CPI and WPI data. With this moderation in inflation, there has been an uptick in volumes in both urban and rural markets, indicating promising signs of recovery in demand.”
He further said, “Now inflation is kind of abated in our portfolio” and will be “investing money back into advertising for surging demand”.
In the June quarter, Dabur posted a 5 percent rise in net profit, reaching INR 464 crore, while the total income surged to INR 3,240 crore.
Britannia Industries, a bakery food enterprise, disclosed a substantial 35.65 percent increase in its combined net profit, reaching INR 455.45 crore. Concurrently, net sales experienced an 8.64 percent upswing, totaling INR 3,969.84 crore.
However, Britannia Executive Vice Chairman & Managing Director Varun Berry also said, “In this quarter, commodity prices marginally softened & hence, the local competition intensified. In view of that situation, certain price corrections were initiated to remain competitive & continue to drive topline while maintaining profitability,” said Berry.
During the earnings conference call, he mentioned that local players have managed to acquire a slight increase in market share due to their localized pricing strategies.
Leading FMCG maker HUL CFO Ritesh Tiwari in the earnings call said, “We are also seeing the resurgence of small and regional players in select categories and price points, many of whom had vacated the market during peak of inflation.”
HUL announced an underlying sales expansion of 7 percent alongside an underlying volume increase of 3 percent. The consolidated sales for the June quarter surged by 6.34 percent, reaching INR 15,240 crore.
“Market volumes are recovering, although gradually. Rural market volume growth has just turned positive in the quarter, and we are seeing sequential improvements,” said HUL CEO and MD Rohit Jawa.
In the June quarter, ITC, a diversified conglomerate, witnessed a 16 percent upsurge in revenue generated from FMCG products, amounting to INR 5,172.71 crore. This growth was primarily propelled by robust performance in various categories including staples, biscuits, noodles, beverages, dairy, agarbatti, and premium soaps.
“The businesses continued to drive improvement in profitability through multi-pronged interventions viz premiumisation, supply chain optimisation, judicious pricing actions, digital initiatives, strategic cost management and fiscal incentives,” said ITC in its earning statement.
Godrej Consumer Products Ltd (GCPL) achieved a ten percent increase in volume growth within its Indian operations, driven by a well-rounded performance across its Home Care and Personal Care divisions.
Excluding exceptional items, the consolidated net profit of the Godrej group’s FMCG division exhibited a 19 percent year-on-year expansion, while its sales recorded a growth of 10.45 percent, reaching INR 3,417.86 crore.
According to GCPL CEO & MD Sudhir Sitapati, “Our performance in Q1 FY ’24 was ahead of our expectations on both volume and profit growth.”
Nonetheless, Saugata Gupta, the Managing Director and CEO of Marico, noted that the FMCG sector’s volume growth remained in positive territory for the second consecutive quarter. This growth was primarily driven by consistent expansion in urban areas, although noticeable signs of recovery in rural areas were still not apparent.
Marico, known for its well-loved products including Saffola, Parachute, and Livon, disclosed a 15.64 percent increase in its combined net profit, reaching INR 436 crore. However, the revenue generated from its operations experienced a decline of 3.16 percent, totaling INR 2,477 crore during the June quarter. This decrease was attributed to pricing reductions in significant domestic portfolios and challenges posed by currency fluctuations in international markets.
Tata Consumer Products Ltd (TCPL) announced a notable 29.67 percent increase in its combined net profit, reaching INR 358.57 crore. Concurrently, its revenue stemming from operations displayed a growth of 12.45 percent, totaling INR 3,741.21 crore.
Regarding the future perspective, Jawa from HUL commented that the operational landscape remains characterized by volatility.
“On the weather front, the situation remains challenging. We have seen some extreme weather events playing out in the last few months, such as the unseasonal rains in the summer, followed by the heat phase and delayed onset of monsoon. El Nino has set in early and hence, that could impact the latter part of the monsoon,” he said.
Another FMCG manufacturer noted that the influence of irregular weather patterns and the uneven distribution of rainfall on rural agricultural earnings could also play a role in shaping sentiment in the immediate future.
