FMCG sector may see 7-9% revenue growth in FY25 on rural recovery: CRISIL

The fast-moving consumer goods (FMCG) sector is expected to see a revenue growth of 7 to 9 per cent this fiscal, helped by higher sales volume and a revival of rural markets, CRISIL Ratings said in a report.

Volume growth from urban consumers will also remain steady at 7 to 8 per cent supported by rising disposable incomes and continued focus on premium offerings by the industry players, especially in the personal care and home care segments, it said.

Moreover, the premiumisation trend and growth in volume will expand the operating margin of FMCG companies "by 50-75 basis points to 20-21 per cent", it said.

"The margin expansion would have been higher but for rising selling and marketing expenses amid heightened competition among organised and unorganised players alike," the report added.

The product realisations in FY25 are "expected to grow in low single digits with a marginal rise in prices of key raw materials for the food and beverages (F&B) segment", however, key raw material prices for personal care (PC) and home care (HC) segments are seen to be stable, it added.
 

The F&B segment accounts for nearly half of the sector's revenue while PC and HC segments form a quarter each.

Over the revenue growth, the report added the FMCG sector will also be supported by modest realisation growth of 1 to 2 per cent "primarily due to marginal rise in prices" of some key F&B raw materials, including sugar, wheat, edible oil and milk.

However, prices for most of the crude-based products like linear alkylbenzene and high-density polyethylene packaging remain range-bound.

"Focus on enhancing premium product offerings, especially in F&B and PC segments will also support realisations," it said.

CRISIL Ratings Associate Director Rabindra Verma said revenue growth will vary across product segments and firms.

"The F&B segment is expected to grow 8-9 per cent this fiscal, aided by improving rural demand, while the personal care segment will grow 6-7 per cent. The home care segment, which outpaced the other two segments last fiscal, is expected to grow 8-9 per cent this fiscal, led by continued premiumisation push and steady urban demand, he said.

CRISIL has estimated the FMCG growth for the fiscal 2024 to be around 5 to 7 per cent.