FMCG Sector’s Steady Surge: 7-9% Revenue Growth Forecast

According to a Crisil Ratings Study, the fast-moving consumer goods (FMCG) sector is projected to achieve revenue growth in the range of 7-9% during this fiscal year. This growth rate is slightly slower than the 8-9% recorded in the past two fiscal years. Factors driving this growth include falling raw material costs, sustained demand recovery in rural and urban segments, and price cuts implemented by FMCG companies to stimulate demand. While revenue growth remains robust, monitoring volume expansion and cost management will be critical.

Let’s break down the key points:

1. Revenue Growth:
   • FMCG companies are projected to achieve a growth rate of 7-9% in the current fiscal.
   • This growth is slightly slower than the 8-9% recorded in the past two fiscal years.
   • The food and beverage segment is expected to lead this growth.
2. Volume Expansion:
   • After subdued volume growth in the last two fiscal years (1-3%), the sector is likely to experience a 4-6% volume expansion this fiscal.
   • Rural demand (constituting 35-40% of overall demand) is gradually recovering, while urban demand (60-65% of overall demand) remains steady.
   • The impact of El Niño conditions on monsoon patterns could affect rural demand.
3. Factors Driving Growth:
   • Falling raw material costs, especially for edible oil, crude derivatives, and chemicals, will help offset higher selling and marketing expenses.
   • Operating margins are expected to improve by 50-100 basis points to pre-pandemic levels (20-21%).
   • Demand recovery in the rural segment is sustained by moderation in inflation and increased minimum support prices for key crops.
   • Urban growth continues due to rising disposable incomes, e-commerce, and premiumization in home care and personal care.
4. Price Cuts and Stimulating Demand:
   • FMCG companies have implemented price cuts in categories like edible oil and soaps to boost demand.