Operating margins for FMCG companies are projected to expand by 50-75 basis points to reach 20-21 per cent
India’s fast-moving consumer goods (FMCG) sector is expected to experience revenue growth of 7 to 9 per cent in the fiscal year 2024, driven by increased sales volumes and a resurgence in rural markets, according to a report by Crisil Ratings.
Urban consumers are expected to contribute steadily with a 7 to 8 per cent growth in sales volumes, supported by rising disposable incomes and a focus on premium products, particularly in the personal care and home care segments.
Operating margins for FMCG companies are projected to expand by 50-75 basis points to reach 20-21 per cent, buoyed by the trend towards premiumisation and growth in sales volumes. However, the margin expansion is somewhat tempered by escalating selling and marketing expenses amidst intensified competition from both organised and unorganised players.
While product realisations are anticipated to see modest growth of 1 to 2 per cent primarily due to slight increases in prices of key raw materials in the food and beverages (F&B) segment, stable prices are expected in the raw materials for the personal care (PC) and home care (HC) segments. The F&B sector constitutes nearly half of the FMCG sector’s revenue, with PC and HC segments each contributing a quarter.
Crisil Ratings Associate Director Rabindra Verma said that growth rates will vary across different product segments and firms. The F&B segment is expected to lead with a growth rate of 8-9 per cent, bolstered by improving rural demand. Meanwhile, the personal care segment is forecasted to grow by 6-7 per cent, and the home care segment, which outpaced others last fiscal year, is anticipated to grow by 8-9 per cent due to continued premiumisation efforts and stable urban demand.
