FMCG makers expect low to mid-single-digit volume growth in third quarter, rural market continues to lag

New Delhi: Leading FMCG makers are expecting a low to mid-single-digit volume growth in the October-December quarter, with an improvement in consumer demand on a sequential basis.

Consumer demand from the rural market is lagging, though the urban markets stayed steady in the third quarter as exhibited in the September quarter, said leading listed FMCG firms such as Dabur, Marico and Godrej Consumer Products in their quarterly updates.

Companies are optimistic of a gradual uptick as early signs of revival in consumption are visible with improving trends in volumes.

Besides, the makers also expect expansion in the gross margins on a year-on-year basis helped by moderating inflation as prices of key inputs such as copra and edible oil prices remained at lower levels and crude derivatives also exhibited some downward bias.

This will help FMCG makers channelise more funds towards advertising and promotions.

“A significant portion of gross margin expansion will be channelled into enhancing advertising and promotion (A&P) spending. Consequently, operating profit is expected to grow slightly ahead of the revenue and post an improvement in Y-o-Y,” said Dabur India in its quarterly updates.

Marico, which owns brands such as Saffola, Parachute, Hair & Care, Nihar and Livon, said the rural market offered “little to cheer” in the December quarter.

However, it remains optimistic about a gradual uptick in consumption trends in 2024 on the back of improving macroeconomic indicators, continued government spending, conducive consumer pricing across segments and other factors.

Marico also mentioned that “constraints on liquidity and profitability in the general trade (GT) channel remained an overhang for the sector, while alternate channels continued to fare well”.

“In the given context, domestic volumes grew in low single digits on a year-on-year basis with a slight sequential improvement in our core portfolio,” said Marico.

Its brand Parachute Coconut Oil registered a low single-digit volume growth while Saffola Oils had an optically weak quarter owing to a high base and persistently cautious trade sentiment.

“Value added hair oils posted low single-digit value growth amidst sluggishness in the bottom of the pyramid segments of the portfolio. We stayed on course in our diversification journey as foods and premium personal care scaled up well in line with aspirations,” it said. Dabur India expects “to register mid to high single-digit growth during Q3 FY24” in its consolidated revenue.