Demand concerns, monsoon forecast weigh on FY20 outlook for FMCG companies

Rising crude oil prices, promotional spends and limited pricing power to impact earnings

The downgrade cycle for fast-moving consumer goods (FMCG) seems to have started with CLSA assigning ‘sell’ rating to Asian Paints from ‘outperform’ earlier, due to initial signs of demand distress. The firm highlighted its concerns over the demand situation for discretionary space which are non-essential commodities such as watches, perfumes, house painting as well as for staples. Analysts at the firm believe that muted automobile sales, HUL and Dabur indicating growth moderation in staples and lower airline traffic growth raise concerns over broader consumption. Though some analysts expect demand to revive post the general election, Skymet’s prediction of deficit monsoon