Marico is paying the price for rising inflation because its buyers aren’t able to
- Consumer goods company Marico confesses that it is facing poor demand owing to inflation and weak consumption sentiment among consumers.
- Despite the poor demand outlook, Marico posted a double digit revenue growth in the December quarter due to a strong base.
- Reflecting the poor commentary from FMCG company, shares of several consumer companies were trading lower.
AdvertisementPretty much everything is getting more expensive in India and people seem to be cutting down their purchases, even for everyday essentials like edible oils, latest data from Marico showed.
Shareholders of the ₹6,450 crore ($865 million) consumer products maker — popular for its Parachute brand of hair oil — woke up to a sobering Tuesday when the company told the exchanges that the volume growth (think of it as units sold) was just about the same compared to the same period last year. The stock fell nearly 3% right after the market opened.
While Marico said that its revenue grew in double digits i.e. anything more than 10%, but it’s commentary on consumer sentiment was much less exciting.
The company blamed the “sluggish rural demand”. Rising inflation reduces people’s purchasing power and, on the other hand, it increases the cost of production too, which would shrink the profit. And it’s not Marico, its peer Emami is also reportedly facing a similar challenge.
And, one can expect this rising trend in inflation to continue for some more time, based on the projections given by none other than the Reserve Bank of India.
Here’s why the next three months are going to be costly
The same time last year, people were still reluctant to step out of their homes due to the fear of the pandemic. At the time, Marico saw a healthy growth in both revenue and volumes because people were still making more food at home, and so, spending more on edible oils like Saffola, which is a Marico brand.
However, in the last three months of 2021, more people were eating out, and more frequently — at least in urban India — which meant that some of the sales bump from last year was missing this time.
Following the weak commentary from Marico, from the consumer goods company, shares of several other peer companies traded lower.
|Fast moving consumer goods company||% returns on Jan 4, 10:10 a.m.|
|Godrej Consumer Products||2.07%|
|Tata Consumer Products||1.47%|
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