Indian FMCG Sector Recovers Sharply in Q3 with 7.5% Top-Line Growth

The Indian FMCG sector has shown a major recovery, with Q3 top-line growth hitting 7.5% YoY, driven by a 5.4% volume increase. Favourable factors like moderating inflation and government initiatives are boosting demand, with rural now outpacing urban.

The Indian Fast-Moving Consumer Goods (FMCG) sector is showing a significant recovery, with the consumer staples coverage universe of Centrum Broking reporting a sharp sequential pick-up in top-line growth from 2% year-on-year in Q2 to 7.5% in Q3. This growth was largely driven by a volume increase of 5.4% excluding ITC, signalling a "silver lining" for the industry after several years of growth and margin challenges.

Demand Drivers and Upbeat Outlook

According to the report the industry has seen early signs of a pick-up in demand due to favourable macros such as moderating inflation, a favourable monsoon, and a healthy crop outlook, alongside government initiatives like GST rationalisation and income tax cuts.

While the third quarter experienced some one-off impacts from GST-led disruptions, the report notes that "exit growth across companies has been healthy which makes up more upbeat on Q4 outlook."

Volume-Led Momentum and Margin Recovery

The report highlights that the sector is benefiting from a shift in momentum, stating, "Q3 has seen some benefit of restocking as well as pick-up in volumes due to grammage increases." Centrum believe that the coverage companies are set to "see sequential pick up in terms of top line and volumes," aided by the fact that the "RM basket has turned favourable which will aid in healthy margin trajectory."

Management commentary suggests that the challenges of the past few years "are largely behind us."

Rural Growth and Category Performance

Key takeaways from industry leaders indicate that rural markets are now growing ahead of urban markets, while quick commerce continues to lead the growth charge. The food category has shown a clear pick-up in volume momentum, specifically citing the performance of Nestle and Britannia. In the Home and Personal Care (HPC) segment, the hair oil category has also seen a notable recovery.

The positive trend is expected to carry into the final quarter of the fiscal year. The report anticipates that "Q4 will most likely see benefit of summer loading and pick-up in consumption," supported by a stable raw material basket. Despite minor disruptions in international pockets like Bangladesh, the overall sentiment remains optimistic as the industry transitions from a period of stagnation to volume-led growth. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)