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Leading FMCG makers are expecting a low to mid-single-digit volume growth in the October-December quarter, with an improvement in consumer demand on a sequential basis.

Consumer demand from the rural market is lagging, though the urban markets stayed steady in the third quarter as exhibited in the September quarter, said leading listed FMCG firms such as Dabur India, Marico, and GodrejConsumer Products in their quarterly updates.

Companies are optimistic of a gradual uptick as early signs of revival in consumption are visible with improving trends in volumes. Besides, the makers also expect expansion in the gross margins on a year-on-year basis helped by moderating inflation as prices of key inputs such as copra and edible oil prices remained at lower levels and crude derivatives also exhibited some downward bias.

This will help FMCG makers channelise more funds towards advertising and promotions.

“A significant portion of gross margin expansion will be channelled into enhancing advertising and promotion (A&P) spending. Consequently, operating profit is expected to grow slightly ahead of the revenue and post an improvement in Y-o-Y,” said Dabur India in its quarterly updates.

Marico, which owns brands such as Saffola, Parachute, Hair & Care, Nihar and Livon, said the rural market offered “little to cheer” in the December quarter. However, it remains optimistic about a gradual uptick in consumption trends in 2024 on the back of improving macroeconomic indicators, continued government spending, conducive consumer pricing across segments and other factors.

Marico also mentioned that “constraints on liquidity and profitability in the general trade (GT) channel remained an overhang for the sector, while alternate channels continued to fare well”.

“In the given context, domestic volumes grew in low single digits on a year-on-year basis with a slight sequential improvement in our core portfolio,” said Marico.

Its brand Parachute Coconut Oil registered a low single-digit volume growth while Saffola Oils had an optically weak quarter owing to a high base and persistently cautious trade sentiment.

“Value-added hair oils posted low single-digit value growth amidst sluggishness in the bottom of the pyramid segments of the portfolio. We stayed on course in our diversification journey as foods and premium personal care scaled up well in line with aspirations,” it said.

Dabur India expects “to register mid to high single-digit growth during Q3 FY24” in its consolidated revenue. “The quarter witnessed sequential improvement in demand trends although rural growth was still lagging urban growth,” said Dabur, adding, “early signs of revival in consumption are visible with improving trends in volumes.”

Rural India contributes nearly 35 to 38 per cent of the FMCG sales in the country. With pricing growth remaining subdued due to price increases in the base year, growth in the December quarter is large volume led, said the home-grown FMCG maker, which owns various brands, including Dabur Chyawanprash, Dabur Honey, Dabur Pudin Hara, Dabur Amla, Real and Vatika.

Its F&B segment is expected to grow in the high-single digits and HPC (Home & Personal Care) is expected to see record growth in the mid-single digit. However, due to the delay in the onset of the winter season, Dabur anticipates the healthcare business to grow in the low to mid-single digits.

Similarly, Godrej Consumer Products Ltd (GCPL) said it is expecting to deliver a “mid-single digit volume growth” on a consolidated basis in the December quarter. “In India, the operating environment continues to remain similar to Q2. Despite this, our organic business delivered steady underlying volume growth of mid-single digit,” said the Godrej group’s FMCG arm.

In the international market, Indian FMCG companies also expect mid-single-digit growth based on constant currency. GCPL expects a “compelling performance” with close to double-digit volume growth and high-single-digit constant currency sales growth from its Indonesia business — the second biggest market after India.

Though its business was flattish in GAUM (Godrej Africa, US, and Middle East), Latin America (LATAM) business has been severely impacted. Marico’s international business delivered mid-single-digit constant currency growth, while Dabur India said its international business is expected to register double-digit growth in constant currency terms, led by good momentum in the MENA (Middle East and North Africa) region.