FMCG companies expect sales to increase, income tax relief and interest rate cuts may increase demand

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.

Marico has increased its advertising expenditure by 19.1 percent to Rs 293 crore. Godrej Consumer Products and Emami have increased advertising expenditure by 6 to 7 percent. According to Motilal Oswal's report, IPL and many such events play a major role in increasing sales for FMCG companies. During this time companies also introduce new products. Also, companies already save a part of their advertising expenditure for big events, as was seen during Maha Kumbh, it is expected that companies have already made preparations for the upcoming IPL and Holi and its result will be seen in the results of the fourth quarter of FY 2025.

Industry experts say that companies also increased their expenditure on that side to increase their sales during Maha Kumbh, the effect of which will be seen in the January-March quarter, as well as due to improvement in demand and signs of improvement in urban areas, the problems of the companies are also likely to reduce. According to Motilala Oswal's report, there are signs of slight improvement in urban demand in the fourth quarter, on the other hand, income tax relief in the Union Budget 2025 and reduction in interest rates by the Reserve Bank of India will improve urban demand. The effect of which will be visible in the results of companies. Although there is improvement in sales in rural areas, demand in urban areas has slowed down.