New Delhi: Top fast-moving consumer goods (FMCG) companies in India have shifted their focus back to pursuing volume growth, benefiting from margin improvement and a recovery in rural sales. After a few quarters of subdued performance, these companies are witnessing a gradual pickup in consumption as they increase investments and ramp up advertising and marketing efforts.
The recent softening of inflationary pressures on key raw materials, spanning from soaps to food items, has allowed FMCG companies like Hindustan Unilever (HUL), Dabur, Marico, Godrej Consumer Products, ITC, Tata Consumer Products, and Nestle to offer higher grammage and price cuts to stimulate volume growth.
In the March quarter, several FMCG giants, including Marico, reported a recovery in volumes and expressed optimism for a gradual improvement in consumption in the fiscal year 2024. Marico’s consolidated net profit for the quarter increased by 18.7% to Rs 305 crore, driven by single-digit volume growth and moderation in commodity prices. HUL, the maker of renowned brands such as Rin, Lux, Surf Excel, and Pond’s, witnessed a reduction in the extent of volume decline compared to the previous quarter, indicating signs of bottoming out.
Foods continue to drive growth in the FMCG sector, with the home and personal care segment also entering positive territory after an extended slowdown. Companies like Godrej Consumer reported an 11% increase in volume growth, driven by robust performance in the home care segment.
Despite near-term concerns regarding inflationary pressures, FMCG companies are optimistic about the future. They anticipate a rebalance between price and volume growth, with prices likely to stabilize as raw material costs cool off. Volume growth is expected to improve, supported by cumulative inflation levels and the tendency of consumption habits to recover with a lag.
While the outlook for the FMCG industry remains positive, experts caution about potential challenges. The impact of global slowdown risks, weather phenomena like El Nino and heatwaves, and the aggressive market entry by Reliance Industries Ltd, led by billionaire Mukesh Ambani, could pose competitive threats.
FMCG companies like Britannia and Dabur have also reported significant growth in net profit and revenue from operations. ITC and Nestle witnessed revenue growth in the FMCG segment, while Tata Consumer recorded consolidated net profit and revenue growth, driven by volume and price increases.
In conclusion, FMCG companies in India are actively pursuing volume growth once again, capitalizing on the softening of inflationary pressures and recovery in rural sales. With a gradual pickup in consumption expected and the potential for stable pricing, these companies are optimistic about driving growth and improving margins in the future.