A new report says FMCG firms in India, on aggregate, should end FY25 with low single-digit revenue as consumer staples stocks have recently benefited from the flight-to-safe trade. The report adds that the base will remain favourable in FY26.
A BNP Paribas India report expects FMCG revenue growth to increase slightly from 4% in Q3 FY25 to 5% in Q4 FY25.
“As trade concerns ease, we see a risk of reversal of recent outperformance. However, we do see some near-term positives, such as the drop in crude price and our economic heat map indicating positive rural growth trends,” the report mentioned.
Commentaries from Marico, Dabur and GCPL indicate that demand has been resilient while urban slowdown, led by weakness in general trade, persisted in Q4 FY25.
The report noted that jewellery companies are set to post strong sales growth year-on-year in Q4, helped by an increase in gold prices.
At the beginning of the year, the consumption sector’s revenue growth was weak due to weakness in rural demand.
Price cuts were also weighing on growth. In the subsequent quarters, rural growth recovered slightly, likely helped by the low base, a good monsoon, and high food prices.
“However, this was offset by weakness in urban demand. As a result, we expect most companies to end FY25 with low to mid-single digit revenue growth,” said the report.
The Indian monsoon in FY25 was 6 per cent above the long-term average, compared to a deficit last year (FY24). Consequently, reservoir levels have recovered. This, along with the favourable base and slowing core inflation, has likely helped drive the modest rural recovery.
Inflation in vegetables and pulses slightly eased towards the end of FY25. Telecom, another large mass consumption category, saw steep price hikes throughout FY25.
“Unlike rural, urban was coming off a relatively high base. Furthermore, quick commerce is changing consumers’ consumption patterns. We believe some of these factors could have contributed to slowing urban mass consumption,” the report mentioned.
In urban India, quick commerce (QC) has made rapid strides, which is creating challenges for FMCG companies.
As QC companies look to expand their store footprint rapidly and eventually aim to improve their profitability, “we see a potential margin headwind for FMCG companies,” said the report.
–IANS
