The Indian FMCG sector witnessed improvement in margins and slow growth in Q3FY23. However, the demand from rural markets continued to drag as retail inflation stayed at elevated levels, PTI reported, quoting industry players.
According to Godrej Consumer Products Ltd (GCPL) and Marico, despite softness in demand, there has been an improvement, owing in part to the lingering effects of festive sales, while urban and premium categories maintained a steady pace during the October-December period.
"During the third quarter, the Indian FMCG sector witnessed slow growth driven by poor rural consumption and a slowdown post the festive season," said the Godrej Group in its quarterly updates for Q3 FY23.
GCPL expects double-digit sales growth in the domestic market for the December 2022 quarter.
Marico stated that the FMCG sector saw some improvement in demand during the quarter, which was more visible in specific categories buoyed by the holiday season and the upcoming winter season.
"Urban and premium categories maintained their steady pace of growth. "However, recovery in rural demand was not as discernible as retail inflation stayed at elevated levels," the company said.
Meanwhile, in its latest report, Nuvama Wealth Management stated that rural areas continued to be under stress.
"Rural demand did not improve at all in Q3. General inflation and rainfall deficit in populous states, such as Uttar Pradesh, Bihar, Bengal, and Jharkhand, remain the key challenges, which have affected rural disposable income," said Nuvama Wealth Management.
In addition, it also said, added margins for most companies under its coverage universe will improve sequentially but are likely to face pressure on a year-on-year basis.
Motilal Oswal Financial Services also said that "rural continues to be a drag" for the FMCG companies for the December 2022 quarter.
"With no clear signs of recovery in the rural demand, MOFSL expects sales in Staples to be driven by price increases and some premiumisation," it added.
The brokerage further said that prices of most commodities have not declined at the expected rate, with the exception of palm oil, which benefits soaps and food players.
The FMCG industry witnessed an overall volume decline of 0.9 percent in the September quarter in comparison to the preceding three months. This was the fourth consecutive quarter with negative volume growth for the industry and is "attributed to the double-digit price growth for the past six consecutive quarters," according to data analytics firm NielsenIQ.
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