FMCG: Despite better Q2 volume outlook, investors should tone down hopes

Down-trading and Covid impact on rural demand are downside risks

The overall performance of fast-moving consumer goods (FMCG) sector in the June quarter (Q1) was not as bad as expected. But, the trend in volumes was the worst ever. On an aggregate basis, the 7.5-per cent volume decline in the March quarter deteriorated to 12.4 per cent in Q1 (refer chart). The figures represent an average of nine FMCG majors. The fall was ma­inly because of disruptions caused by the nationwide lockdown.

Going ahead, volume growth might improve with the easing of lockdowns and many companies hinted at this in their Q1 earnings. However, there are some factors that could hurt