Stable Demand in FMCG Sector for Q1; Companies Highlight El Nino Risks
MUMBAI: Demand for soaps, shampoos, packaged food, and other household supplies remained stable in the June quarter, despite price hikes amid a broader inflationary environment influenced by the West Asia war, according to companies’ quarterly updates. However, firms expressed concerns that El Nino conditions could impact rural consumption in the future. Godrej Consumer Products (GCPL) noted that heightened weather volatility could disrupt agricultural output and rural demand.
India has experienced a delayed monsoon this year, with rainfall deficits exceeding 40% by the end of June. The weather department has warned that rainfall may weaken across much of the country in the latter half of the month if current forecasts hold. Rural FMCG demand has been outpacing urban consumption for several quarters, playing a crucial role in driving volume growth. Following GST cuts in September last year, the consumer goods sector appeared poised for recovery after a period of sluggishness, but the war disrupted energy flows, leading to inflation. Although the geopolitical tensions have eased, the risk of deficient monsoons poses a threat to industry growth.
Price Hikes Cushion Impact of Inflation
Despite the challenging geopolitical landscape and inflationary pressures, consumer sentiment remained resilient, with Dabur reporting improved business performance quarter-on-quarter and double-digit growth. The company attributed its success to price hikes that helped mitigate the effects of elevated inflation, particularly in the hair-care segment, thereby supporting margins.
GCPL anticipates lower margins in Q1 due to “exceptional cost pressures,” although it noted that commodity costs began to ease towards the end of the quarter. Marico reported that declining copra prices helped offset the sharp rise in costs for crude-linked derivatives and vegetable oils during the same period. The India business achieved double-digit underlying volume growth, with firms implementing at least one round of price increases during the quarter. AWL Agri Business recorded mid-single-digit volume growth, although edible oil sales through general trade were adversely affected. The firm indicated that ongoing geopolitical events impacting commodity prices led to cautious inventory building in trade, which negatively impacted primary sales in the latter part of the quarter.
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