With moderation in inflation, FMCG volume growth swung back into positive territory in the March quarter with emergence of some green shoots in rural demand. FMCG companies said that after commodity headwinds impacted consumption in the first nine months of the fiscal, they witnessed some early signs of recovery in the fourth quarter.
Quoting NielsenIQ’s data, Marico’s earnings presentation said that the overall FMCG industry’s volume growth in the March quarter was pegged at 3.1 per cent year-on-year. This comes after the industry’s volume growth had been on a decline for the past five quarters. Volume growth in urban regions was estimated at 5.3 per cent for the March quarter. At the same time, rural volume growth stood at 0.3 per cent after witnessing a decline through the past three quarters of the fiscal year.
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On an earnings call, Saugata Gupta, MD & CEO, Marico Ltd, said, “ FY23 started with escalating geopolitical tensions leading to steep inflation and interest rate hikes globally. In India, this led to climbing food and retail inflation which adversely affected the overall consumption sentiment. However, over the course of the last six -nine months, there has been moderation in key commodity prices and retail inflation levels, which has most likely brought about gradual recovery in FMCG consumption.”
Consumption
“Looking at FMCG volume trends in this period, we believe the prospects of a sustained recovery have strengthened. After five quarters of volume decline, the sector has posted volume growth. Urban consumption has been steady, while rural is also showing some convincing signs of having bottomed out,” he added.
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Industry players said the volume growth in the fourth quarter was led by the food segment, while home and personal care segment remained under stress.
Mohit Malhotra, CEO, Dabur India, said during an earnings call that the operating environment remained challenging but positive growth trends were visible in later part of Q4 FY23, “Rural markets continued to lag behind urban markets on account of inflation and downtrading. But having said that the silver lining for the year has been the performance of the new age channels and emergence of some green shoots in the rural markets towards the end of the quarter indicating early signs of revival in demand,” he added.