everyday FMCG companies expect their sales to continue to grow in the coming quarters on the back of improving demand in rural markets and a good monsoon, despite concerns over rising food inflation. June quarter earnings of leading FMCG companies such as HUL, ITC, Dabur, Britannia, Nestle and Emami were driven by ‘good news’ from rural markets and strong growth driven by e-commerce platforms. The industry volume growth stood at around 6.6 per cent in the April-June period of the current fiscal.
demand will increase
However, companies are worried about rising food inflation, as coffee and cocoa prices have risen unexpectedly. Some companies have also indicated a price hike amid the possibility of a rise in grain prices. Dabur Chief Executive Officer Mohit Malhotra said, “Going forward, our sales will increase in rural areas. So I hope the next quarters will be better. ” He expressed hope that FMCG demand will gradually increase with a good monsoon, improving macroeconomic indicators and rural-focused government spending.
Volume growth will continue
Marico Managing Director (MD) and Chief Executive Officer (CEO) Saugata Gupta said that the FMCG sector continued to see a sequential improvement in demand trends in the June quarter, with rural growth outpacing urban growth. “It is expected that volume trends will continue to improve due to stable retail inflation, a healthy monsoon season and the government’s budget allocations to boost the rural economy,” he said. However, Gupta added, “High food inflation and the spatial distribution of rainfall will be important factors to watch.”
Coffee and cocoa prices rise
“Coffee and cocoa prices are witnessing an unprecedented surge as they have hit an all-time high and prices are continuing to rise. Cereals and pulses prices are seeing structural cost increases supported by MSP,” Nestle said in its first quarter results. However, the maker of Maggi and KitKat said there was relative stability in milk prices, packaging and edible oils. In the June quarter, FMCG companies also reported big gains from the e-commerce segment, with the segment reporting high growth. However, some of them reported softness in traditional channels such as kirana stores in urban markets. “We have seen rapid share gains in modern trade, e-commerce and rural, but share in urban general trade has declined,” said Sudhir Sitapati, managing director and CEO, Godrej Consumer Products Ltd (GCPL). For Dabur, emerging channels such as e-commerce and modern trade posted strong double-digit growth and now contribute to nearly 20 per cent of its domestic business.
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