In buisness segments, challenges are faced by ITC in cigarettes, and by Marico and HUL in their consumer segments because of already tough competition from unlisted companies like Patanjali and Sri Sri.
After a few challenging quarters, the fast moving consumer goods (FMCG) business is back on track with both sales and margin-driven growth in Q3.
One of the key highlights of the third quarter has been the double-digit volume growth reported by FMCG majors. Volume growth of top listed companies hit a multi-year high of 12 percent year-on-year (YoY) in the quarter.
In the consumption sector, net sales and profits grew an average 10 percent each. Volume growth surprised positively as the impact of the increase in the distribution channel and shift from unorganised to organised has been felt in the quarter. The rural segment continued to grow at a better pace than the urban segment.
After GST implementation, the disruption in the supply chain of the sector is sorted. The enhanced outreach is showing in consumption growth across urban and rural areas and across the business segments of consumption and health care for HUL, ITC and Marico.
The rural segment contributes 30 percent for Marico, 40 percent for HUL and nearly 26 percent for ITC. The key to faster growth in the rural segment has been enhanced farm income from government support in MSP and loan waivers and rural welfare schemes in health and household energy leaving more disposable income in hands of the rural populace.
Rural wage inflation has started rising. Supported by an increase in the MSP and good monsoon and subsequently the volume growth. The urban segment with a vast distribution network and new consumer preferences relies both on margins and volumes.
Marico net revenues grew 15 percent with volume growth of 6 percent. The company benefited from softening copra prices (- 23 percent YoY, -12 percent QoQ) but wasn’t able to expand GM owing to volatile prices of other commodities. EBITDA/APAT grew by 16/12 percent.
ITC revenue grew 15 percent and net profit by 13.9 percent. For HUL sales grew 13 percent and net profit at 9 percent. Robust net profit growth for all three led by sales growth point to a new level of rise in margins despite volume led growth.
In business segments, challenges are faced by ITC in cigarettes, and by Marico and HUL in their consumer segments because of already tough competition from unlisted companies like Patanjali and Sri Sri Tattva.To stay ahead of the competition, these three have attempted additional product portfolio in healthcare and hospitality. HUL expects to benefit from GSK acquisition, Marico has added True roots hair tonic and ITC has added ITC hotels at Kolkata and Goa and Welcome group Hotels.