FMCG companies expect sales to increase, income tax relief and interest rate cuts may increase demand
FMCG: The third quarter was quite mixed for fast-moving consumer goods (FMCG) companies. The income of the companies increased but due to rising raw material prices, there was pressure on the margin. Industry experts say that during the Maha Kumbh, the companies also increased their expenditures to increase their sales, the effect of which will be seen in the fourth quarter of FY 2025.
The third quarter was highly mixed for fast-moving consumer goods (FMCG) companies. The income of companies increased but due to a hike in raw material costs, pressure was on the margin. Industry experts believe that in Maha Kumbh, companies increased their outflows to increase their sales, the effect of which will be seen in the fourth quarter of FY 2025. Along with this, due to a pick-up in demand and improvement in urban areas, companies' issues will be reduced. According to a report from Motilal Oswal, there is a pick-up in urban demand in the fourth quarter of FY 2025, on the other hand, income tax relief in Union Budget 2025 and reduction in interest rates by the Reserve Bank of India will boost urban demand. The effect of this will be seen in companies' performance. Even with this, companies' demand has remained low for 10 quarters, although there is a pick-up in sales in villages, demand in urban areas is sluggish.
According to Anand Rathi's report, the cost of companies is increasing due to rising prices of coffee, tea, and cocoa along with other commodities. Palm oil prices and exports have also remained a challenge in the last few months. According to industry data, coffee prices have more than doubled in the last one year. Wheat and palm oil prices have increased by 20 to 30 percent. Due to all these reasons, most companies like Britannia and Nestle have also increased the prices of products in many categories, due to which demand remains sluggish. FMCG sector leaders Hindustan Unilever and Dabur have seen a decline in their sales in the third quarter of FY25.
FMCG companies have reduced their advertising expenditure in the third quarter of FY25. Even the companies are considering the budget for the upcoming IPL. The data from the recent third quarter results of FY25 by the companies shows that Hindustan Unilever's advertising expenditure has come down by 8 percent to Rs 1,466 crore compared to last year, while it was down by 15 percent in the previous quarter. Dabur India's advertising expenditure has come down by 7.3 percent to Rs 225.7 crore, while Colgate Palmolive's Indian operations declined by 2 percent to Rs 1,452 crore. The reduction in advertising expenditure is mainly due to inflationary pressure on essential commodities. Due to which the margins of the companies remain under pressure. While Godrej and Marico have increased their advertising expenditure.
