FMCG companies ride the heatwave to make cool gains

Kolkata: Fast-moving consumer goods (FMCG) makers, white goods manufacturers and retailers reported double-digit year-on-year sales growth in the April-June quarter, driven by robust demand for summer products as an intense heatwave boosted consumption.

Companies' latest quarterly business updates and brokerage reports also indicated an improvement in operating profit as many firms implemented price hikes of 2-11% during the quarter amid rising input costs. However, they cautioned that evolving inflationary trends and the potential impact of El Nino on the monsoon remain key risks.

"Demand trends during the quarter remained steady, supported by resilient economic activity," FMCG firm Marico said in its quarterly update released on Thursday. "Looking ahead, we remain optimistic about consumption trends, while closely monitoring the evolving inflationary conditions and the impact of El Nino on the monsoon."

The maker of Parachute Coconut Oil and Saffola said its domestic business accelerated its growth trajectory, delivering double-digit underlying volume growth to a multi-quarter high. Sales of Parachute Coconut Oil were the strongest in several quarters. The company expects strong operating profit growth, supported by higher sales and easing copra prices.

Value fashion retailers V-Mart Retail and V2 Retail also reported robust momentum in the latest quarter. Revenue from operations rose 23% year-on-year at V-Mart and 58% at V2 Retail during the quarter, while same-store sales-a key performance metric-increased by up to 9%. Avenue Supermarts, which owns the D'Mart chain of grocery stores, on Thursday reported 15% surge in revenue from operations at ₹18,343 crore.

Nuvama Institutional Equities in a research report said summer categories, including beverages, ice-cream and beer, are likely to register high double-digit volume growth because of the heatwave. However, tea volumes were hit by extreme temperatures and LPG shortages at roadside tea stalls, which also weighed on biscuit sales, it said.

"The quarter is unlikely to face significant margin pressure as most companies had forward cover of a few months and took price hikes too. Most consumer staples companies have already implemented 2-3% price hikes, while paint companies and Pidilite have taken hikes of 11-12%," the brokerage said.

ET recently reported that sales of most consumer categories grew at double-digit rates in the April-June quarter, signalling a recovery in discretionary spending despite the geopolitical tension and higher inflation in daily lives. White goods makers said demand for cooling products rose 17-18% as the scorching summer boosted purchases.

India's largest AC manufacturer Voltas' chairman Noel Tata said earlier this week at the company's annual general meeting that the air-conditioner maker expects both volume growth and margin expansion in the June quarter after selling a record one million ACs in just 81 days.

The West Asia crisis had impacted input costs for most consumer companies due to sudden increase in prices of crude derivatives like packaging material, while supply chains were also impacted due to increase in shipping rates and lower vessel availability.

Equirus Securities said food and beverage companies are better placed, supported by stable cereal prices, lower coffee and cocoa costs, and softer copra prices, although elevated soymeal, edible oil and dairy costs remain key monitorables.

In contrast, home and personal care companies continue to face input cost pressures, though the recent correction in crude-linked derivatives could provide early signs of margin relief, it said.