Some of the country’s top fast-moving consumer goods (FMCG) companies, including Marico, Dabur and Adani Wilmar, expect revenue growth to improve in the June quarter (Q1FY25) on the back of a revival in rural demand. Urban demand, they say, will be stable.
While Marico and Dabur expect mid to high single-digit topline growth, Adani Wilmar, which makes edible oils and food products, expects double-digit sales growth in Q1, indicate the quarterly updates released by the firms on Friday.
The volume growth for Marico and Dabur though will be modest, the two companies admitted, coming at a time when general trade, which constitutes 75-80% of FMCG sales, continues to be sluggish. Modern trade and e-commerce channels, which together constitute 20% of FMCG sales for these companies, are likely to report a strong double-digit growth during the period.
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“Volume growth (in Q1) was delivered post adjustments in distributor stock levels to enhance their return of investment (ROI) and a certain degree of wholesale channel destocking to ensure smoother direct reach expansion,” Marico said.
Adani Wilmar, on the other hand, is expected to buck the trend, with volume growth at 13% (versus last year) for the April-June period, it said on Friday, on a robust sales and distribution push. This, it said, was coming despite decreased out-of-home consumption and seasonal dips in summer demand for edible oils.
Volume trends from key FMCG firms are seen as important indicator of consumption in the country.
Marico gets more than a quarter of its sales from rural India, while Dabur’s sales from villages and small towns are around 40%. Adani Wilmar, too, gets a third of its overall sales from rural areas. These companies, say experts, are expected to be key beneficiaries of the recovery in rural demand, which is becoming visible now after months of a slowdown.
Both Kantar and Nielsen say that rural markets have been a “bright star” for the sector, with rural growth overtaking urban growth in the three months to March 2024 after five quarters of lag. The June quarter, they say, will see better rural growth levels compared to urban growth in continuation of this trend.
Both Marico and Dabur expect gross margins to expand on a year-on-year basis owing to a favourable portfolio mix. They also say that operating profit is expected to grow ahead of revenue leading to a marginal inching up of operating margin on a year-on-year basis.
Among key inputs, copra prices have stayed firm, in line with forecasts, while edible oil and crude oil derivatives have remained range-bound, Marico said. While Dabur said that commodity prices at an overall level were stable in the June quarter.
“We continue to adequately invest in brand building in line with our strategic intent to continually strengthen the long-term equity of both the core and new franchises,” Marico said. Dabur echoed this sentiment, saying it was investing behind its brands in a competitive market, aimed at increasing share across its portfolio.
In constant currency terms, Marico’s international business would likely deliver a double-digit growth, driven by resilient and broad-based growth across markets. Dabur too said that its international business would post strong growth in constant currency terms. However, currency depreciation in Turkey and Egypt would have an impact on translated growth, Dabur said.
From: financialexpress
Financial News
