Fast-moving consumer goods (FMCG) businesses have reported single-digit volume growth with improved margins in most divisions during the December quarter, boosted by dipped commodity inflation, yet the operational environment remained tough.
Some firms also reported a drop in topline numbers as they passed on the advantages of decreased commodity costs to consumers, affecting their gross sales figures.
Companies such as HUL, ITC, Marico, Dabur, and Godrej Consumer Products said that urban markets continued to develop moderately, but consumer demand in rural India remained weak, despite expectations for a recovery in the coming quarters.
Furthermore, the late arrival of winter influenced the availability of necessary items such as lotions, oils and creams.
Hindustan Unilever (HUL) reported a muted growth in consolidated net profit at Rs 2,508 crore and its sales were marginally down to Rs 15,259 crore.
“Overall, FMCG demand trends have largely remained stable and similar to what we saw last quarter. While market volumes grew at high single digits year-on-year, this came on a base period where volumes declined in mid-single digit,” said HUL CEO & MD Rohit Jawa in his latest earnings call.
Like previous quarters, contemporary trade channels are performing strongly and continue to outperform general trade.
Similarly, luxury items are growing at a far faster rate than mass products in the market.
Elaborating on this point of view, Marico stated, “General trade continued to drag as it grappled with liquidity and profitability constraints, while alternate channels grew healthily.”
Marico’s India business reported a volume growth of 2 per cent in the third quarter year on year though its turnover was down 3 per cent to Rs 1,793 crore.
“During the quarter, demand trends were stable with no visible improvement from the preceding quarter. Rural demand remained soft, while urban demand steadied its moderate growth trajectory,” said the earnings statement from Marico which owns brands like Saffola, Parachute, and Livon, among others.
Within the sector, the mass home and personal care categories closely tracked the rural demand trend, whereas packaged foods led the sector due to stronger urban salience and penetration-based development, the report stated.
ITC, which owns brands like Aashirvaad, Sunfeast and Fiama, reported a solid performance in the FMCG category despite low demand circumstances. Its FMCG revenue increased by 7.6 per cent.
“While certain commodity prices declined on a YoY basis, the cost table remains elevated compared to pre-pandemic levels; commodities such as wheat, maida, sugar etc. witnessed sequential uptick in prices,” it said.
Godrej Consumer Products (GCPL)’s India sales in the December quarter rose by 9 per cent to Rs 2,160 crore, while the volume grew by 12 per cent.
“We continue to deliver steady performance in Q3FY24 despite challenging market conditions. Our quality of profit continues to improve consistently on the back of superior growth in higher margin countries and categories,” said GCPL CEO and Managing Director Sudhir Sitapati.
However, Dabur India said that rural demand increased by 200 basis points in the December quarter, outpacing urban demand. Its India business had a 6 per cent increase in volume during the third quarter.
“Moderating inflation coupled with buoyant consumer sentiments and our focussed investment in distribution footprint expansion in rural India helped demand from the hinterland bounce back for Dabur,” said Dabur India CEO Mohit Malhotra.
The business, which owns brands such as Dabur Chyawanprash, Dabur Honey, Dabur PudinHara, and Dabur Amla, recorded a 6.2 per cent growth in consolidated net profit to Rs 506.44 crore, while operating sales increased by 7 per cent to Rs 3,255.06 crore.
Jyothy Labs which owns brands such as Ujala, Pril, Margo and Exo reported a a 35 per cent increase in its consolidated net profit.
“The input prices have normalised and have helped in sustaining the margins with a higher level of A&P spend to grow market share across our portfolio,” the company said in an earnings statement.
As the general elections near, producers anticipate a gradual recovery in rural market demand, backed by greater government investment, a rebound in winter crop planting and improved crop realisation.
