FMCG Q1 demand stable; companies flag El Nino risk
MUMBAI: Demand for soaps, shampoos, packaged food and other household supplies remained stable in the June quarter despite hike in prices amid a broader inflationary environment driven by the West Asia war, companies said in their quarterly updates.El Nino conditions and its bearing on monsoon rains could, however, weigh on rural consumption going ahead, firms flagged in their outlook. “We remain mindful that El Nino conditions can heighten weather volatility across our key markets, with the potential to disrupt agricultural output and rural demand,” Godrej Consumer Products (GCPL) said. Saffola oils maker Marico said that it is closely monitoring the impact of El Nino on monsoons.India has seen a delayed arrival of monsoons this year with rains recording a deficit of over 40% at the end of June. The weather department has indicated that rainfall could weaken across most parts of the country in the second half of this month if the current extended-range forecasts hold. Rural FMCG demand has been outpacing urban India for the past several quarters and is key to driving volume growth. After GST cuts in Sept last year drove down prices of essentials, the consumer goods sector was well poised for growth after months of sluggishness but the war disrupted energy flow, triggering inflation. While the war clouds have now receded, the risk of deficient monsoons risks impacting industry growth.
Price hikes cushion impact of inflation
“Despite the challenging geopolitical background and inflationary pressure across our key markets, consumer sentiment remained resilient with business trajectory improving sequentially quarter-on-quarter,” said Dabur, factoring in a double-digit growth.The company said that price hikes helped mitigate the impact of elevated inflation, particularly in the hair-care segment, supporting margins. GCPL estimates margins to be lower in Q1 due to “exceptional cost pressures,” even as it said that commodity costs have begun to ease at the end of the quarter. For Marico, softening copra prices have somewhat helped balance out the sharp increase in cost of crude-linked derivatives and vegetable oils in Q1. The India business delivered double-digit underlying volume growth, the company said. Firms took at least one round of price increases during the quarter.AWL Agri Business posted a mid-single digit volume growth although edible oil sales through general trade took a hit. “Due to the ongoing geopolitical events impacting commodity prices, trade remained cautious in building inventories, which affected primary sales during the latter part of the quarter, particularly in general trade,” the firm said.
