Business News Desk – The margins of the country’s major FMCG companies manufacturing everyday goods have declined in the July-September quarter due to higher production costs and food inflation. This has affected consumption in urban areas. The prices of goods used by FMCG (Fast Moving Consumer Goods) companies such as palm oil, coffee and cocoa have increased. In such a situation, some companies have now indicated to increase the prices of products. Hindustan Unilever Limited (HUL), Godrej Consumer Products Limited (GCPL), Marico, ITC and Tata Consumer Products Limited (TCPL) have expressed concern over the decline in urban consumption. . According to industry experts, the share of urban consumption in the total sales of FMCG sector is 65-68 percent. The special thing is that compared to urban markets, rural markets have maintained their growth pace.
expected short-term shock
“We believe this is a short-term setback and we will recover margins through prudent price increases and cost stabilisation,” GCPL Managing Director and CEO Sudhir Sitapati said on the sidelines of second quarter results announcement. GCPL, which sells products like Cinthol, Godrej Number-One, Hit, reported stable quarterly performance despite fluctuating oil prices in India and weak consumer demand. Dabur India, another FMCG company, also said that in the September quarter The demand environment remained challenging, including high food inflation and subdued urban demand. The company has products like Dabur Chyawanprash, Pudin Hara and Real Juice. The company reported a 17.65 per cent decline in consolidated net profit during the July-September 2024 quarter at Rs 417.52 crore. During this period, the company’s revenue from operations declined by 5.46 percent to Rs 3,028.59 crore.
middle class under pressure
Recently, Nestle India Chairman and Managing Director Suresh Narayanan also expressed concern over the decline in the FMCG sector and said that the middle class is under pressure. This is because high food inflation has hit the household budget. Regarding the rise in food inflation, Narayanan said there has been a sharp increase in the prices of fruits, vegetables and oil. If it becomes difficult for companies to manage raw material costs, prices may rise. We find ourselves in a difficult situation as far as coffee and cocoa prices are concerned. Nestle India owns brands like Maggi, Kit Kat and Nescafe. The company’s domestic sales growth has been 1.2 percent.
Slow growth continues in rural areas
Sunil D’Souza, managing director and CEO of Tata Consumer Products Limited (TCPL), believes that consumer spending in urban areas has been affected. Food inflation is probably higher than we think and its impact is much greater. HUL CEO and Managing Director Rohit Java said the market volume growth has been sluggish in the quarter. Urban growth has been affected in recent quarters. Slow growth continues in rural areas. For the last few quarters it has been ahead of urban areas and this time too rural areas are ahead of urban areas.
HUL owns brands like Surf, Rin, Lux, Ponds, Lifebuoy, Lakme, Brooke Bond, Lipton and Horlicks. The company’s consolidated net profit declined by 2.33 percent in the September quarter. Marico has also recorded double the growth in demand in rural areas as compared to urban areas on an annual basis. ITC has reported a decline of 0.35 per cent in margins due to increase in costs. The company has brands like Ashirwad, Sunfeast, Bingo, Yippee.
