Fast-moving consumer goods (FMCG) companies have reported single-digit volume growth with improved margins in most segments during December quarter, helped by moderating commodity inflation, though operating environment remained challenging.

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Some of the companies also reported a decline in their topline numbers, as they extended the benefits of softening commodity prices to the consumer by lowering the prices, which had a bearing on their gross sales numbers.

Companies such as HUL, ITC, Marico, Dabur, and Godrej Consumer Products said urban markets continued their moderate growth, while consumer demand from rural India remained subdued even as they expect an improvement in coming quarters.

Moreover, the late arrival of winter also impacted the pickup of relevant products such as lotions, oils and creams. Hindustan Unilever (HUL) reported a muted growth in consolidated net profit at Rs 2,508 crore and its sales were marginally down to Rs 15,259 crore.

"Overall, FMCG demand trends have largely remained stable and similar to what we saw last quarter. While market volumes grew at high single digits year-on-year, this came on a base period where volumes declined in mid-single digit," said HUL CEO & MD Rohit Jawa in his latest earnings call.

Like past quarters, modern trade channels are doing well and continue to outpace general trade. Similarly, the volume growth of premium products is significantly ahead of mass products in the market.

Echoing the view, Marico said, "General trade continued to drag as it grappled with liquidity and profitability constraints, while alternate channels grew healthily." Marico's India business posted a volume growth of 2 per cent in the third quarter year on year though its turnover was down 3 per cent to Rs 1,793 crore.

"During the quarter, demand trends were stable with no visible improvement from the preceding quarter. Rural demand remained soft, while urban demand steadied its moderate growth trajectory," said the earnings statement from Marico which owns brands like Saffola, Parachute, and Livon, among others.

Within the sector, mass home and personal care categories aligned closely with the rural demand trajectory, while packaged foods led the sector owing to higher urban salience and penetration-led growth, it said.

ITC, which owns brands such as Aashirvaad, Sunfeast, Fiama etc, said it had a resilient performance in FMCG segment amidst subdued demand conditions. Its revenue in the FMCG business was up 7.6 per cent.

"While certain commodity prices declined on a YoY basis, the cost table remains elevated compared to pre-pandemic levels; commodities such as wheat, maida, sugar etc. Witnessed sequential uptick in prices," it said.

Godrej Consumer Products Ltd (GCPL)'s India sales in the December quarter grew by 9 per cent to Rs 2,160 crore, while the volume grew by 12 per cent.

"We continue to deliver steady performance in Q3FY24 despite challenging market conditions. Our quality of profit continues to improve consistently on the back of superior growth in higher margin countries and categories," said GCPL CEO and Managing Director Sudhir Sitapati.

However, Dabur India said its rural demand grew 200 basis points ahead of urban in the December quarter. Its India business ended the third quarter with a volume growth of 6 per cent.

"Moderating inflation coupled with buoyant consumer sentiments and our focussed investment in distribution footprint expansion in rural India helped demand from the hinterland bounce back for Dabur," said Dabur India CEO Mohit Malhotra.

The company, which owns brands such as Dabur Chyawanprash, Dabur Honey, Dabur PudinHara and Dabur Amla, reported a 6.2 per cent increase in consolidated net profit at Rs 506.44 crore and its revenue from operation went up 7 per cent to Rs 3,255.06 crore. Jyothy Labs which owns brands such as Ujala, Pril, Margo and Exo reported a a 35 per cent increase in its consolidated net profit.

"The input prices have normalised and have helped in sustaining the margins with a higher level of A&P spend to grow market share across our portfolio," the company said in an earnings statement.

As the general elections are approaching, the makers expect a gradual recovery of demand from rural markets aided by increased government spending, recovery in winter crop sowing and better crop realisation.

"With macro indicators signalling positivity, continued government spending and more favourable consumer pricing across FMCG categories, we remain optimistic of a gradual uptick in consumption trends over the course of the next 4-5 quarters," said Marico, adding, "Our consolidated revenue growth is expected to move into the positive territory in the last quarter of the year as the base catches up." Rural India contributes around 35 to 38 per cent of the total FMCG sales.

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