Muted Volume Growth Expected for FMCG Sector in Q4 FY24
India’s fast-moving consumer goods (FMCG) sector is poised for a mixed performance in the fourth quarter of FY24, as subdued rural demand and persistent inflationary pressures weigh on volume growth. Industry analysts forecast low single-digit volume growth for most companies, with premium categories faring better due to resilient urban consumption.
While the sector benefited from softening input costs over the past year, key players are expected to see margin expansion rather than a significant lift in topline performance. Rural recovery remains slower than anticipated, curbing the potential for broad-based category growth.
According to Emkay Global, overall volume growth is expected to remain modest. “We project low single-digit volume growth year-on-year. Discretionary and premium categories should outperform staples, with profitability improving across most players driven by benign raw material prices,” the brokerage noted.
Premiumisation and Urban Demand Sustain Growth
Categories such as beauty, personal care, and health & wellness continue to benefit from premiumisation trends, particularly in urban markets. Companies with a higher urban mix and stronger presence in discretionary products, including Hindustan Unilever and Marico, are expected to see steady performance.
Marico, for instance, is projected to report 3-5% volume growth aided by sustained traction in its premium personal care portfolio and recovery in Parachute coconut oil volumes. Nestlé India is also likely to post strong growth on the back of sustained momentum in prepared dishes, coffee, and confectionery segments.
Rural Markets Remain Under Pressure
Despite signs of stabilisation, rural demand has yet to fully rebound. Analysts cite below-average monsoons and uneven income recovery as contributing factors. ITC is expected to remain relatively insulated due to its diversified presence, while companies heavily reliant on rural distribution may continue to face headwinds.
Gross Margin Expansion Across the Board
FMCG firms are set to benefit from continued gross margin expansion, with input prices for key commodities like palm oil, crude derivatives, and packaging materials staying favorable. Kotak Institutional Equities notes that sequential gross margin improvement will be a key highlight in Q4 earnings, although topline growth may remain subdued.
Overall, the Q4