FMCG Sector Likely To Experience Sluggish Growth In FY24: Report

The report suggested a potential recovery in demand from the second half of the financial year 2024-25 onwards

The corporate commentary on the Fast-Moving Consumer Goods (FMCG) sector has emphasised the subdued demand environment prevailing in the fourth quarter of the financial year 2023-24, reveals a report by Emkay Global Financial Services on Friday. This aligns with projections made by data agencies for the calendar year 2024 (CY24).

The report states, “Nielsen, which tracks retail data, is building a case of 4.5 per cent to 6.5 per cent value growth for the sector. Kantar, which tracks household consumption data, echoed the same muted outlook.”

The report noted that the El-Nino effect is expected to persist until May 2024, resulting in agricultural growth projected at 1.8 per cent in FY24, marking a seven-year low. Additionally, with no significant change anticipated in consumption patterns due to elections, the demand outlook remains subdued for the first half of the financial year 2024-25.

However, the report suggested a potential recovery in demand from the second half of the financial year 2024-25 onwards. Consensus estimates indicate that revenue growth for large and traditional listed companies is anticipated to range from high single to low double digits, factoring in the anticipated demand resurgence.

“We see an extended winter as unlikely to aid in primary sales, similarly, summer placement has been delayed, affecting Q4FY24 growth,” highlighted the report.

“Sector valuations have seen de-rating, amid distressed demand setting and surge in competitive intensity in the value segment; though it still maintains a premium to a broader market index, given the promising sector outlook and fundamentals,” it said.

The FMCG sector is anticipated to experience mid-single-digit growth in CY24, primarily fueled by volume, according to estimates provided by Nielsen IQ and Kantar. “Demand setting is likely to remain muted in 1HFY25 and expected to recover gradually in 2HFY25, as the effects of El Nino subsides,” the report added.