By Express News Service

In what has proved to be a dampener of sorts for any expectations of revival in consumption, fast-moving consumer goods (FMCG) major Marico said its domestic volume growth during the third quarter continues to remain under pressure. In a regulatory filing, the maker of Saffola and Parachute oil said softness in its coconut and other hair oil portfolio has marginally dragged volume growth the quarter ended December. To put into perspective, volume grew just 5 per cent in Q3 FY19 and one per cent in Q2 FY20.

“… due to a decline in coconut oil, hair oils and other portfolios, the India business as a whole posted a marginal decline in volume growth,” Marico said in its quarterly update. Category growths across personal care also remained under pressure, even as food and allied categories fared relatively better delivering a double-digit growth. This clearly signals that consumers are still shying away from discretionary spending while limiting their purchases to essential items such as food. 

Among trade channels, the company said, “The traditional channel stayed weak, as channel partners continued to face liquidity challenges amidst a soft demand environment. The growth in modern trade and e-commerce also slowed down, partly due to specific price management measures to counter inter-channel conflict,” it noted. Marico, which is expected to announce its third quarter earnings over the next few weeks, indicated EBITDA margins should improve year-on-year given benign input costs, which should translate to reasonable growth in the bottomline. The firm, however, expects some green shoots of recovery in Q4.

Analysts say slower recovery in the economy, weak consumer sentiment could show up in weak revenues for most consumer goods companies. “… while urban demand is stable due to rising contribution from modern trade, e-commerce and cash and carry, rural markets continue to see lower revenue growth in the third quarter of FY20,” said Shirish Pardeshi, analyst (consumer staples and discretionary), Centrum Broking Ltd. 

With mounting promotions, the entire market is fighting for a limited share of consumer wallet leading them to push stocks in modern trade, he said. While, the general trade distributors are struggling to get an equal attention and promotion parity. Promotional activity was vibrant mostly in the highly penetrated categories such as detergents, toothpastes, soaps and hair oils. Centrum estimates domestic Q3 volume growth for Dabur at 6.5 per cent, Bajaj Consumer (5 per cent), Britannia (4 per cent) etc.

Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here