Rise of Small Regional Competitors Adversely Affect Larger FMCG Companies: Report
In Q4FY23-24, demand for FMCG products faced ongoing challenges, dampening volume growth, Elara Securities said.
Factors such as low farm income and the rise of small regional competitors are adversely affecting larger companies. A delayed winter will likely impact seasonal categories such as beverages, the brokerage said.
“We note Chyawanprash sales lost steam in Q3, due to delayed winter and have not recovered in Q4,” it said. Food categories continue to outperform home and personal care products. Reviving rural demand is crucial for the FMCG sector, with companies pinning hopes on a favourable Monsoon, which could stimulate the rural economy.
Regional firms, particularly in sectors, such as biscuits and laundry, continue to challenge larger competitors due to favourable commodity prices, it said.
In Q4, essential commodities, such as crude and palm oil, have witnessed a sequential increase. However, it has not been significant to impact margin as YoY growth remains subdued. Companies' focus have been focused on offering higher schemes to drive volume and there have been no incremental price cuts.
The FMCG coverage universe is expected to report revenue and volume growth of 2.8% y-o-y and 3.6% y-o-y, respectively, in Q4FY23-24 with a five-year CAGR of 8.8% vs 9.0% in Q3FY23-24, the brokerage said.
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