FMCG companies have witnessed growth in volumes across product categories. However, rise in raw material costs hit most companies' margins, with margins contracting by 200 bps to 500 bps. The increasing competition among players also resulted in greater Advertising and Promotion (A&P) expenses. The companies in this space have either already taken price hikes during the quarter or are planning to raise prices to protect margins from erosion.
In his Union Budget announcement today, Finance Minister, Pranab Mukherjee increased spending on critical rural infrastructure and social security to Rs 58,000 crore. This scheme has been driving the disposable incomes in rural areas which in turn would help rural consumption. Despite rising commodity inflation, FMCG companies continued to post strong volume growth in the past three quarters due to strong domestic demand, with rural markets outperforming the urban market. The rural sector accounts for about 33% of sectorDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
