FMCG players pin hope on gradual sectoral recovery for positive results in FY24

As high commodity inflation, geopolitical uncertainty, tepid market growth, etc. impacted the businesses of FMCG brands in the year ended March 31, 2023, various industry players have expressed high hopes to deliver good performance in the ongoing fiscal

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FMCG players pin hope on gradual sectoral recovery for positive results in FY24

With FMCG majors such as Dabur, Marico, Colgate Palmolive, Hindustan Unilever (HUL), Godrej Consumer Products, Tata Consumer Products etc. releasing the financial updates for the quarter and year ended 31 March, 2023, it is evident that business growth was impacted by factors such as high commodity inflation, geopolitical uncertainty, challenging operating environment, and tepid market growth, etc in the past financial year. 

Since the beginning of Q1FY23, industry players like Emami and Marico had reported a decline of 2.24% and 2.51%, respectively, in their ad spends on a YoY basis, however, it was GCPL, HUL, Colgate Palmolive and Dabur that reported a 36.82%, 29.69%, 11.04% and 4.57% rise in their spending on ads during the same period on a YoY basis.

Cut to the fourth quarter of FY23, GCPL, HUL and Dabur recorded an increase of 21.31%, 1.16% and 0.86% increase in ad spends while Colgate Palmolive and Marico both recorded a decline of 2.65%, and 4.54% during the quarter on a YoY basis, respectively. Emami’s results are yet to be released. 

Moreover, if one takes into consideration the yearly adex growth of various FMCG majors, it is evident that there has been a mixed sentiment in terms of the yearly spending of brands on advertising- GCPL, Marico and HUL increase their spending on ads by 31.26%, 5.78% and 3.4% YoY, respectively, as opposed to Dabur and Colgate Palmolive whose yearly ad spends declined by 17.38% and 1.34%.

Commenting on the financial update and the outlook for the next fiscal, Prabha Narasimhan, Managing Director and CEO, Colgate-Palmolive (India), said, “We are happy with the sequential progress and outcomes of the quarter. The company has delivered domestic growth of 5.4%, with toothpaste delivering high single-digit growth despite continuing sluggish demand trends in the category, especially in rural.” 

“This has been driven by our strategy to increase consumption, innovation focussed on delivering high-quality science-led products and premiumisation. We remain fairly optimistic that the overall category growth will improve in the coming quarters,” she added.

As per Sudhir Sitapati, Managing Director and CEO, GCPL, the company had a strong end to the year with volume-led double-digit sales growth in Q4 of FY23. 

“Consolidated sales grew by 10% in INR terms and 14% in constant currency terms. We have continued to witness sequential improvement in volume growth with 6% year-on-year increase in Q4. The performance was broad based with India Branded business delivering stellar volume growth of 13%, led by double-digit volume growth in both Home Care and Personal Care,” he added.

He also went on to emphasise that GCPL expects to build on the current momentum and deliver volume-led growth along with upfront marketing investments and improvement in profitability. 

“We continue to have a strong balance sheet. We are on track in our journey to reduce wasted cost and are deploying this to drive profitable and sustainable volume growth across our portfolio through category development,” he stated.

Saugata Gupta, MD and CEO, Marico, said, “FY23 ended on a reassuring note with improving trends across all performance parameters, accompanied by indications of a gradual sectoral recovery. The domestic business delivered a far more broad-based growth with visibly positive results in the portfolio diversification journey, while the international business continued to reinforce its underlying strength amidst a challenging operating environment.” 

He added, “As we move into next year, we expect the pace of growth in volumes, revenues and earnings to move in the right direction, aided by an evolving portfolio of entrenched and budding franchises, distribution expansion and adequate investments in market development and brand building.”

Throwing light on the outlook for FY24, he also emphasised that the company will drive volume-led growth and market share gains across its product portfolios in the domestic business, aided by distribution expansion, aggressive cost controls and adequate investment in market development and brand-building. 

“We expect a gradual uptick in revenue growth as pricing interventions come into the base in the first half of FY24. The International business has consistently been delivering a resilient performance despite macroeconomic challenges in some of the geographies. We are confident of maintaining the double-digit growth momentum in FY24,” he stated.

According to Sanjiv Mehta, CEO and Managing Director, Hindustan Unilever, the company has delivered “yet another year of strong and resilient performance” in challenging geopolitical uncertainties, high commodity inflation and tepid market growth.

“We have added around Rs 8,000 crores to our topline in this fiscal with volume growth in mid-single digits despite a decline in FMCG market volumes,” he said.

In the earnings call, he also mentioned that due to unprecedented inflation, FMCG market value growth has significantly slowed down and volumes are declining in high single digit and the impact is more pronounced in rural, where even value growth has started declining, as consumers are tightening volumes and essentials are being prioritized over discretionary categories.

Mohit Malhotra, CEO, Dabur India, also said, “Our performance in a tough inflationary environment aptly demonstrates the power and consistency of Dabur's strategic playbook, which helped us capitalise on our brand strength while continuing to innovate and deepen our engagement with our consumers. In an environment where high inflation continued to impact consumption, we are happy to have progressed well with broad-based growth in our key categories and report market share gains across our product portfolio.”

“Despite the near-term concerns around inflationary pressures, we plan to accelerate the growth momentum by continuing to invest in brand building, innovation, and capabilities that will drive future growth. Our journey to sustainable growth is well on track as we focus on building a stronger, more dynamic business, with a renewed sense of purpose,” he added.

Dabur Colgate Palmolive Godrej Consumer Products quarterly ad spends Marico Saugata Gupta Mohit Malhotra Sudhir Sitapati outlook FY24 Inflation Prabha Narasimhan geopolitical challenges yearly adex FMCG majors