With the urban market not living up to expectations and rising input costs pressures, the FMCG segment is hoping the rural pockets to drive growth
As the sector grapples with an urban consumption slowdown, the rural markets have been driving the charge by outpacing their urban counterparts for the fast-moving consumer goods (FMCG) companies even in the fourth quarter of the financial year 2025 (Q4FY25). The expectation of retail inflation undershooting the apex bank’s estimate augurs well for the companies, despite the surge observed in the prices of key commodity inputs.
As companies continue to navigate the improving trajectory in rural pockets, the mixed trends in urban settings are likely to impact their earnings in Q4, going by the quarterly business updates shared by the listed FMCG major like Dabur, Marico and AWL Agri Business (formerly Adani Wilmar).
Dabur Expecting Flattish Revenue
“During Q4, rural continues to be resilient and grew ahead of urban markets…Due to delayed and truncated winters and a slowdown in urban markets, India FMCG business is likely to decline in the mid-single digits. As a result, Dabur’s consolidated revenue is expected to be flattish during Q4FY25,” Dabur informed in an exchange filing.
Highlighting that FMCG volume trends continue to be subdued during the quarter, the homegrown FMCG major said that due to the impact of inflation coupled with operating leverage, it anticipates the Q4 operating profit margin to contract by around 150 to 175 basis points on a year-on-year (YoY) basis.
“We remain committed to driving profitable growth despite the current headwinds in demand… Furthermore, we anticipate that the incentives outlined in the recent Union Budget will stimulate consumption and facilitate a recovery in the FMCG sector which Dabur is well placed to capitalise on,” the company added.
Marico’s Sequential Uptick
Highlighting that the sector experienced stable demand trends amidst the improving trajectory in rural and mixed trends across mass and premium urban segments during the quarter, another FMCG major Marico stated that the India business posted a sequential uptick in underlying volume growth with improving market shares across key franchise.
“Consolidated revenue growth moved to high-teens on a year-on-year basis, as steady growth trends across key segments was supplemented by incremental pricing interventions in the domestic business. The consolidated business delivered low double-digit revenue growth on a full-year basis, thereby meeting the aspiration set at the start of the year. We expect to maintain the double-digit revenue growth momentum in FY26,” the company said.
Expecting gradual improvement in overall consumption sentiment on the back of moderating retail and food inflation, the company maintains its aspiration of delivering sustainable and profitable volume-led growth over the medium term.
AWL Agri Business’ Rural Boost
AWL Agri Business (formerly known as Adani Wilmar) recorded a seven per cent YoY volume growth in Q4. Revenue saw a significant 36 per cent YoY increase in Q4 compared to the previous year. For the entire fiscal year, the company reported strong volume growth of 10 per cent YoY, with edible oils contributing 10 per cent YoY increase and Food and FMCG sectors achieving a robust 28 per cent YoY growth.
“The Company witnessed better growth in rural towns compared to urban markets, especially in the Foods category, driven by expanded reach and market penetration. The company met its objective of extending its reach to 50,000 rural towns through the addition of distributors, sub-distributors, and an expanded rural sales force. This represents a ten-fold increase over three years, up from 5,000 rural towns in FY22,” the company’s business update for the quarter revealed.
The company’s strategy to capture a fair share in under-indexed markets is yielding strong results. Specifically, the South region experienced a 25 per cent YoY growth in branded edible oils and foods in FY25, with the region’s share of overall branded sales surpassing 10 per cent, as per the information shared by the company.
Godrej Consumer Products On-track
Expecting its standalone underlying volume growth (UVG) to be in the mid-single digits and revenue growth to be in the high single digits, Godrej Consumer Products revealed that it remains largely on track to achieve the objectives.
“Management focus for Q4 remained on reviving Underlying Volume Growth (UVG) growth trajectory in Standalone, hold EBITDA margins in standalone despite significant cost pressure and maintain the trajectory in International business performance,” it stated.
The company expects to continue to do well in terms of profitability. At a consolidated (organic) level, it expects high-single digit INR sales growth with midsingle digit UVG.
Surge In Key Input Prices
The quarter reported a rise in the prices of key commodity inputs that put pressure on margins. Items like copra and vegetable oil remained at peaks. Companies reported that the contraction in gross margin is expected to be largely in line with the preceding quarter. AWL Agri Business reported that higher raw material prices led to increased realisations and sunflower and mustard oils continued to outperform the overall segment growth in FY25.
“Among key inputs, copra and vegetable oil prices remained firm at peak levels, while crude oil derivatives remained rangebound. Despite sharp input cost pressures and continued commitment towards A&P investments, we expect marginal operating profit growth on a year-on-year basis in this quarter,” Marico said.
Godrej Consumer Products stated that personal care continues to go through a price-volume rebalancing on account of rising input costs.
Modern Channels Dominating
As far as the channels are concerned, traditional trade (kirana shops) continues to be under pressure, with companies reporting that modern trade channels like ecommerce and quick commerce are maintaining their growth momentum.
“Our quick commerce sales volume has experienced exceptional growth, marking the best quarter in two years with over 100 per cent YoY increase in Q4. This growth reflects our strategic focus on operational improvements, particularly in product assortment, availability, and promotions and advertisements, allowing us to tap into the rapidly expanding quick commerce channel,” AWL Agri Business reported.
Dabur said that organised trade, including modern trade, ecommerce and quick commerce, maintained their growth momentum, while general trade continued to be under pressure during the recently concluded quarter.
Retail Inflation Trends
The consumer price index (CPI) or retail inflation is expected to undershoot the Reserve Bank of India’s target in the fourth quarter of the current financial year (Q4FY25). A report has expected the CPI to be at 3.8 per cent in Q4, compared to the RBI’s estimate of 4.4 per cent.
A report by the Bank of Baroda stated that CPI inflation got the respite from a considerable correction in food inflation led by seasonality factors and better arrival statistics of TOP vegetables (Tomato, Onion and Potato). The report also noted that one needs to be vigilant on account of hotter than expected summer, stickier international edible oil prices and risks from global inflationary policies.
Higher Consumption To Drive FMCG Sector
The economic survey, released on 31 January 2025, had mentioned that indicators of urban demand have presented mixed trends and FMCG sales in urban areas have recorded a moderate growth in the first half of the fiscal 2025 (H1FY25). The experts believe that a focus on boosting infrastructure, logistics, and digital payments will streamline retail operations, making it easier for businesses to expand their reach, especially in Tier 2 and Tier 3 cities.
“The Union Budget 2025 takes a balanced approach by strengthening rural infrastructure, manufacturing, and consumer spending—three critical pillars for the FMCG sector. Investments in rural development and job creation will boost economic activity and drive higher consumption, opening new opportunities for market expansion,” said Aasif Malbari, Chief Financial Officer – Godrej Consumer Products.
With there being a rise in input costs and the urban market not living up to the expectations, it comes down to the rural pockets to steady the ship of the FMCG segment. As the companies enter a new fiscal year, they aim to capitalise on the expected increase in the disposable income, while hoping that ease in inflation keeps them out of harm’s way.
