News Analysis

How FMCG players navigated the headwinds

Parvatha Vardhini C BL Research Bureau | Updated on January 27, 2018 Published on December 29, 2017

Demonetisation, GST rollout proved to be temporary hiccups

Macro-economic issues such as demonetisation and GST implementation turned out to be temporary hiccups for FMCG companies in 2017. Most players were quick to bounce back from the impact of both these moves.

For instance, headwinds from the note ban saw Hindustan Unilever (HUL) post zero per cent sales growth in the quarter ended December 2016. But the company shrugged off the impact with aplomb in the March 2017 quarter, reporting a domestic consumer sales growth of 8 per cent. This growth was supported almost equally by volumes as well as realisations.

Again, in the June 2017 quarter, poor volumes due to de-stocking by dealers ahead of the GST and rise in input prices proved to be key pressure points. Big FMCG companies such as HUL, Dabur and Marico were also hurt by CSD canteens halting their procurement in the period before the GST launch. For instance, apart from drop in volumes, Marico saw average market prices of copra (input for Parachute oil) move up by 69 per cent during the quarter-ended June 2017 over the June 2016 quarter. Thus, its profit for the quarter fell 15 per cent over the year-ago period.

However, a rebound was seen in the three months ended September 2017 among many players. Godrej Consumer Products, for instance, reported domestic volume growth (year-on-year) of 10 per cent in this quarter, after recording just 0.1 per cent growth in April-June 2017. For the same period, Dabur’s domestic volumes moved up by 7.2 per cent as against a slippage of 4.4 per cent in the June quarter.

Overall, for the six months ended September 2017, standalone net sales of about 50 companies in the personal care, soaps / detergents and food / dairy space moved up by 8.1 per cent and standalone adjusted net profits recorded 13.1 per cent growth (over April-September 2016).

Urban consumption

Strong urban consumption tilted towards preference for premium and ‘natural’ products as well as a pick-up in rural demand from increased budget spends for rural India and good monsoon, drove sales for FMCG players in 2017.

Thanks to tailwinds, stocks such as Britannia and HUL gained over 60 per cent this year. Others such as Marico, Dabur, Bajaj Corp and Godrej Consumer have gained between 20 and 30 per cent. At the same time, valuations too have expanded sharply.

Published on December 29, 2017

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.