 "Skymet's prediction of good monsoon lifts FMCG sector's hope for FY25")
Skymet’s prediction of a good monsoon in India this year has given fast-moving consumer goods (FMCG) companies reason to cheer, as they expect a better 2024-25 (FY25) compared to the previous financial year (2023-24, or FY24).
The sector is already witnessing an uptick in rural demand, which lagged through most of last year due to rainfall impacts, affecting rural demand.
NielsenIQ stated that the industry had grown by 6.4 per cent in volume in the October-December quarter, driven by positive consumption nationwide.
The research firm noted that the value growth of the industry stood at 6 per cent in the quarter. However, there has been a moderation in consumption growth within the FMCG sector compared to sequential quarters across the country.
It added that in rural areas, there has been a sequential slowdown in volume growth, with consumption experiencing a slight decline during this quarter. The decline, however, is more pronounced in urban areas.
“While most of the rural demand was impacted in FY24, there has been a revival of late. The current financial year (FY25) looks better than last year. We are expecting double-digit growth from rural markets this year,” said Vimal Pande, chief executive officer, Vi-John, the largest shaving cream company.
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He added that a large part of the revival will be seen after the kharif harvest.
Godrej Consumer Products is also enthused by the expectations of a good monsoon.
“As the FMCG industry continues to adapt to shifting market dynamics, the prospect of a normal monsoon instils a sense of optimism. Anticipated favourable rainfall not only augurs well for agricultural output but also promises to bolster rural demand, a pivotal driver of our industry’s growth trajectory,” said Aasif Malbari, chief financial officer, Godrej Consumer Products.
He added, “Improving macro indicators and robust agricultural output growth would uplift consumer sentiments. Sectors like personal wash and home care would be potential beneficiaries.”
Another executive from an FMCG company said, on the condition of anonymity due to the company entering a silent period ahead of its results, that there have been some green shoots in demand and is hopeful of a revival in this financial year.
“Demand was lower, but it should catch up this year. The base was stagnant last year, and a lot has been talked about as a K-shaped recovery. The growth in mid-priced products needs to be watched closely, as there has been growth at the premium end and the mass end,” the executive said.
Analysts also expect FMCG demand to improve, provided there is no disruption in the crucial months of July and August.
“Last year, July and August witnessed abnormal rainfall, and this had an impact on rural demand. Revival will be seen from the October-December quarter if these two months witness stable rainfall,” said Sachin Bobade, vice-president at brokerage firm Dolat Capital.
looking ahead
> Vi-John expects double-digit growth in rural demand in FY25
> Godrej Consumer expects favourable rainfall to augur well for agricultural output
> FMCG industry had grown 6.4% in volume in Oct-Dec quarter, driven by positive consumption, states NielsenIQ
> Revival expected from Q3FY25 onwards after Kharif harvest