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Marico domestic volume growth dips in Q3, says revival hopes belied

The company's stock fell 2.43 per cent to Rs 337.45 after it issued its business performance update for the quarter ended December 31, 2019

Avishek Rakshit  |  Kolkata 

Research agency Nielsen has already lowered its growth forecast for the FMCG market in the October-December period
Representative image

Fast-moving consumer goods major Marico said on Thursday overall consumption trends during the December quarter did not hold out hopes of a revival in sentiment.

“Category growth across personal care remained under pressure, while the foods and allied categories fared relatively well,” Marico said in a statement on the BSE.

The company’s stock fell 2.43 per cent to Rs 337.45 after it issued its business performance update for the quarter ended December 31, 2019.

Marico said weak performance in its coconut and hair oils portfolio marginally dragged down domestic volume growth during the third quarter, signalling that consumers continued to avoid discretionary spending.

Marico’s concerns reflect the mood in the sector, which was hoping for a turnaround in sentiment following a good and the announcement of government measures.

Hindustan Unilever (HUL), while declaring its results for the second quarter of the 2019-20 financial year, had said that the near-term outlook for demand, especially in rural India, remained challenging.

Marico domestic volume growth dips in Q3, says revival hopes belied
Emami, which has the largest exposure to rural India among its peers, said despite a good monsoon, the rural market was yet to pick up fully.

However, Mohan Goenka, director at Emami, said, “We can see that the wheels are slowly turning and it should pick up steam in the coming two to three quarters.

Rural India accounts for 45-50 per cent of Emami’s annual sales.

CARE Ratings has estimated overall growth may shrink to only 2 per cent in the current financial year and a revival, much to the disappointment of the industry, is expected as late as September this year. This compares poorly with the 5 per cent growth in the sector in 2018-19.

The ratings firm is of the view that expectations of a personal income tax reduction in the Union Budget 2020 may lead to improved consumer sentiment. Besides, increase in reach and the distribution network and targeting untapped rural markets may be another growth driver for the sector.

“The effects of a good and government initiatives to boost consumption may not reflect on the third-quarter results of major companies,” said Abneesh Roy, executive vice-president of institutional equities, research, Edelweiss Securities. In its note, Marico said even as the traditional channel stayed weak because channel partners continued to face liquidity challenges amid a soft demand environment, growth in modern trade and e-commerce channels also slowed partly due to specific price management measures in these channels.

CARE Ratings said the government came up with many initiatives to address the slowdown, especially after August, but they would take time to work out because typically policies had an impact after two-three quarters. Hence, a rebound in demand is expected in 2020-21.

“We are confident consumption demand will pick up over time, given the low levels of penetration and per capita consumption as well as the slew of recent measures announced by the government,” an ITC spokesperson said.


First Published: Thu, January 02 2020. 19:40 IST
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