Challenges Ahead for FMCG Companies

Fast-moving consumer goods (FMCG) companies are facing a tough quarter, with expectations of a slowdown in growth due to inflation, higher input costs, and recent pricing strategies. The sector, which had been on a steady growth trajectory, is now bracing for a contraction in gross margins and a modest-to-flat operating profit in the December quarter.

Price Hikes and Market Dynamics

Several FMCG manufacturers have implemented price increases in response to the rising costs of essential inputs like copra, vegetable oil, and palm oil. This move comes at a time when urban markets are experiencing a downturn in consumption due to high food inflation. In contrast, the rural market, accounting for over a third of the total FMCG market, has shown resilience, staying ahead of the curve.

Company Updates and Analyst Expectations

Leading FMCG companies such as Dabur and Marico have shared their third-quarter updates for FY25, with analysts predicting either flat or low single-digit volume growth. Dabur, in particular, anticipates a "low single-digit growth" alongside a "flattish operating profit," citing inflationary pressures in certain segments as a significant challenge.