Stagnant FMCG volume growth in December quarter, say analysts

Analysts expect no significant volume growth trends in the FMCG (fast moving consumer goods) sector, with only marginal year-on-year (y-o-y) improvements for specific companies in the December quarter.

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26 Aug, 2025 12:21

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Analysts expect no significant volume growth trends in the FMCG (fast moving consumer goods) sector, with only marginal year-on-year (YoY) improvements for specific companies in the December quarter.

They said that volume growth for Dabur’s domestic FMCG business and Nestle’s domestic business are relatively better. Volume growth for FMCG refers to the percentage increase in the quantity or units sold over a specific period, reflecting the expansion or contraction of sales volume.

Read more: FMCG shares take a beating after Q3 business update points to flat sales

Yes Securities, in its FMCG coverage universe, projects a YoY revenue growth of 5.5 percent, with only Nestle expected to achieve double-digit growth at 11.8 percent. At the same time, Gillette India and Colgate are expected to experience high-single-digit revenue growth.

Due to prior price hikes and the implementation of pricing strategies in the last couple of quarters aimed at mitigating commodity inflation and staying competitive with smaller regional players, growth in pricing is anticipated to decrease, with some companies even witnessing negative pricing, the brokerage’s report added.

Yes Securities said that year-on-year inflation has reduced for the last three quarters, and FMCG companies are building back their gross margins. “There was a minor uptick in some commodities in the second quarter of FY24. We believe this higher-priced inventory will get consumed in the third quarter of FY24, putting some brakes on the gross margin recovery.

The firm’s internal Consumer Staples Raw Material Inflation Index has recorded a second consecutive month of YoY correction. Notably, YoY deflation rates in October and November 2023 stood at 1 percent and 0.8 percent, respectively, driven primarily by fluctuations in crude oil and its derivatives. The five-year compounded annual growth rate (CAGR) for inflation now stands at 5.4 percent as of November 2023.

Read more: Marico’s consolidated revenue declines in Q3; no sign of rural recovery, low input cost to support margins

Despite gross margins being at satisfactory levels and demand not meeting anticipated levels, companies will uphold a high intensity of advertising and sales promotion (A&SP) efforts in this quarter, the report added.

This leads us to anticipate a year-on-year improvement of approximately 70 basis points in Earnings before Interest, Taxes, Depreciation, and Amortisation (EBITDA) margins in the third quarter of FY24. “Consequently, we are incorporating an overall growth of 8.1 percent in EBITDA and 6.8 percent in Adjusted Profit after Tax (APAT) YoY for the firm's FMCG coverage,” the brokerage added.

In the third quarter of FY24, Yes Securities anticipates robust operating profit growth for Colgate with +21.5 percent, potentially influenced by a lower base and for Nestle around +20.1 percent. According to the firm, Nestle is set to exhibit the most substantial earnings growth from FY23 to FY25E.

Despite a favorable view of Britannia from a fundamental standpoint, short-term valuations constrain the firm’s investment in these stocks. Given the current valuations and a focus on rural recovery, the brokerage prefers Dabur, Marico, and HUL based on FY25E earnings.

“We estimate Britannia’s base business volumes to grow by ~3 percent in the third quarter of FY24 (4-yr CAGR: ~4 percent). As realisations tail-off further led by anniversarisation of earlier price hikes (yearly price hikes) as well as grammage additions done recently, consolidated revenue should grow by just 2.3 percent YoY. There is no significant risk on the commodity front; we thus expect the gross margin to improve QoQ by ~60bps (-20bps YoY), leading to an EBITDA margin of 19.5 percent (flat YoY). EBITDA and APAT are thus estimated to grow by 2.4 percent YoY and -1.4 percent YoY respectively,” it added.

With growing momentum and the potential for robust growth, the firm assigned an add rating to Gillette India. “We expect GILL's revenue to grow by 8.5 percent YoY owing to growth momentum seen in the grooming segment seen in previous quarters and a lower base for oral care. With inflation in essential domestic commodities and imported finished goods, we expect gross margins to come down by 210bps QoQ but up 40bps YoY. Due to the combination of prudent pricing earlier taken combined with the productivity programme, we built an EBITDA margin contraction of 60bps YoY to 19.8 percent. EBITDA and Adj PAT are thus expected to grow by 5.4 percent and 14.8 percent YoY, respectively,” the brokerage said.