Urban slowdown might continue to hamper volume growth for FMCG companies: Mayuresh Joshi
Rural India is expected to show improvement in Q4 and Q1 due to a good rabi harvest and increased MSP prices. However, urban areas may continue to experience a slowdown, affecting FMCG companies' volume growth. Dabur's performance across its busin...
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ETMarkets.com
Mayuresh Joshi, Head Equity, Marketsmith India, says rural India should show some element of improvement as we head into Q4 and Q1, primarily based on a good rabi harvest that we probably got and an increase in MSP prices as well. So, rural areas should make some sort of a comeback in a gradual way. But urban slowdown might still continue hampering the overall volume growth for FMCG companies..
What is your view on FMCG and do you have any thoughts to share on Dabur?
Mayuresh Joshi: For the pack as a whole, it is expected to be largely muted both in terms of discretionary spending patterns that you are probably seeing in urban areas, and semi-urban areas. Rural India should probably show some element of improvement as we head into Q4 and Q1, primarily based on a good rabi harvest that we probably got and an increase in MSP prices as well.
Therefore, rural areas should make some sort of a comeback in a gradual way. But urban slowdown might still continue hampering the overall volume growth. Because of that, the kind of value growth that will come through might also be a little bit on the side.
They are introducing a lot more SKUs with lower prices, specifically in urban and semi-urban areas, probably counter this. In some cases, they will be reducing grammage as well to maintain margins, but they will need accelerated spending coming through which will mean margins could remain rangebound or even soft as we head into quarter four as well.
For Dabur in particular, numbers are bang in line because when you are looking at the comparison that has happened not just on a year-on-year basis, but quarter on quarter as well, across their business divisions it seems to be a steady state at this juncture whether you talk about the consumer care business, the food business, or even the other segments which is a very minuscule part.
At least for the food business and consumer care business, the EBIT performance on both these time zones have probably been steady.
What is your view on FMCG and do you have any thoughts to share on Dabur?
Mayuresh Joshi: For the pack as a whole, it is expected to be largely muted both in terms of discretionary spending patterns that you are probably seeing in urban areas, and semi-urban areas. Rural India should probably show some element of improvement as we head into Q4 and Q1, primarily based on a good rabi harvest that we probably got and an increase in MSP prices as well.
Therefore, rural areas should make some sort of a comeback in a gradual way. But urban slowdown might still continue hampering the overall volume growth. Because of that, the kind of value growth that will come through might also be a little bit on the side.
They are introducing a lot more SKUs with lower prices, specifically in urban and semi-urban areas, probably counter this. In some cases, they will be reducing grammage as well to maintain margins, but they will need accelerated spending coming through which will mean margins could remain rangebound or even soft as we head into quarter four as well.
For Dabur in particular, numbers are bang in line because when you are looking at the comparison that has happened not just on a year-on-year basis, but quarter on quarter as well, across their business divisions it seems to be a steady state at this juncture whether you talk about the consumer care business, the food business, or even the other segments which is a very minuscule part.
At least for the food business and consumer care business, the EBIT performance on both these time zones have probably been steady.
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