Improving Macro-Indicators, Good Monsoon To Drive Consumer Demand For FMCG Products

Leading industry players expect improving macro-indicators and expectations of good monsoon and rabi crops to drive consumer demand for FMCG in the current fiscal.

Consumer demand for FMCG (fast-moving consumer goods) remained sluggish amid a subdued operating condition in the March quarter.

The industry expects a mid-to-high-single-digit growth in value/volume in the January-March period, along with a continuation of the gross margins expansion trend, helped by deflation in input cost.

The rural demand, which was sluggish in the last few quarters, has picked up pace from the January-March period, and some FMCG makers have reported a narrowing down of the gap with the urban market.

Rural India contributes nearly 35 to 38 per cent of the FMCG sales in the country.

Besides, further expansion of margins will help the companies to amplify their A&P (advertising & promotional) spending behind their brands, leading listed FMCG firms like Dabur, Marico and Godrej Consumer Products said in their quarter updates.

"We expect strong gross margin expansion on a year-on-year basis," said Marico, adding that "we expect low double-digit operating profit growth on the back of a healthy expansion in operating margin".

In the March quarter, Marico -- which owns popular brands like Saffola, Parachute, and Livon -- posted a slight uptick in volume growth on a sequential basis in its domestic business owing to steadying trends in the majority of the portfolios.

"During the quarter, FMCG demand sentiment stayed consistent vis-a-vis the preceding quarters with trends in urban and rural consumption largely converging," Marico said.

Moreover, FMCG makers like GCP, Marico and Dabur expect double-digit growth from their international business on a constant currency basis.

However, Dabur will have an impact on currency depreciation in Turkey and Egypt. GCPL expects an impact on revenue of Rs 70 crore due to the re-organisation of its East Africa business.

Over the outlook, Marico said it maintains its aspiration of delivering sustainable and profitable volume-led growth over the medium term.

Dabur said the past year was challenging in terms of consumer demand.

"We expect improvement in consumption going forward as macro-economic indicators continue to be robust. Our focus on investing behind our brands, distribution expansion, manufacturing capabilities and organisation will keep us in good stead to capture the opportunities in the marketplace," it added.