FMCG Firms Expect To See A Decline In Gross Margins In Oct-Dec Quarter

Sharing the update for Q3FY25, Dabur said that growth in the quarter is expected to be in low single-digits as the firm faced inflationary headwinds in some segments.

Many FMCG firms opted for a price hike in the quarter under review as input items became costlier such as vegetable oil, copra, and palm oil.

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Fast-moving consumer goods (FMCG) companies are projected to see a slump in their gross margin and clock a muted operating profit in the third quarter of the current financial year 2024-25.

Multiple FMCG makers are expected to clock a slight increase of single-digit in their revenue in the October-December quarter. This impact on the margins is being attributed to inflation, elevated input costs, and pricing measures, reported PTI.

Many FMCG firms opted for a price hike in the quarter under review as input items became costlier such as vegetable oil, copra, and palm oil. These price rises came when the urban market suffered the impact of lower consumption which was caused by the spike in food inflation.

Sharing the update for Q3FY25, Dabur said that growth in the quarter is expected to be in low single-digits as the firm faced inflationary headwinds in some segments. In the quarter under review, inflationary pressures were seen in certain sectors which were partially managed via tactical price increases and cost-efficiency measures.

“We anticipate flattish operating profit growth in Q3. Besides, in the December quarter, rural consumption for FMCG was resilient and continued to grow faster than urban,” the firm said. Notably, the company operates brands including Dabur Amla, Real, Vatika, Dabur Red Paste, and Dabur Honey.

Marico echoed the sentiment and said that the FMCG sector clocked steady demand trends during the third quarter as rural consumption improved. In terms of domestic volume growth, the company said it expected an improvement in the December quarter, and a ‘higher-than-expected’ contraction in gross margin in the period.

Anand Ramanathan, Partner, Consumer Products and Retail Sector Leader, Deloitte India, noted, “The challenge from D2C brands and the growth in quick commerce will continue to put pressure on margins. Harvest season from January to April will ease some of the pressure on margins in agricultural commodities which will help ease the pressure on commodity prices.”