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FMCG sector Q1 preview — Caught between price cuts and volume growth

FMCG sector Q1 preview — Caught between price cuts and volume growth
  • FMCG companies are expected to register strong margins in Q1 as they will see the full effect of earlier-taken price hikes playing out. Cooling raw material prices will help.
  • Demand for staples have been stable, but the beauty and personal care category has not yet recovered fully.
  • The summer has seen a decline or low growth in ice creams and juices due to unseasonal rains.
With cooling raw material costs, the FMCG sector is expected to kick in the first quarter of FY24 with ‘good quality’ profits, backed by improvement in margins. Input costs have been cooling over the last few quarters and have either remained stable or seen mild moderation, and companies have not been passing them off very generously in the form of price cuts.

“We expect most of the companies to register stronger sequential gross profit margin (GPM) improvement in 1Q24F with input cost inflation cooling down further, high-priced inventory getting consumed and the full effect of earlier-taken price hikes playing out,” said a research report by Nomura.

Certain categories such as hair oils, edible oils and soaps had witnessed price cuts in earlier quarters, which will flow through in the first quarter, as per BNP Paribas. Also, new price cuts and promotions were seen in laundry, edible oils and other home care categories during the quarter but no major price cuts were seen in biscuits and salts.

Double digit revenue growth expected

Price cuts and volume growth for the sector are directly proportional for the sector, and as of now most of growth seen in the sector was pricing-led. But that’s changing, analysts say. Demand from urban areas has been stable, with slight sequential improvement in rural demand as well.

Also, the demand for staples have been stable, but the beauty and personal care category has not yet recovered though improving due to the price cuts. All in all, the sector should be able to present a good revenue growth for the quarter – notwithstanding the cooler summer this April-June with unseasonal rains that affected sales of juices and ice creams.

“We estimate staples/discretionary (ex-ITC) pack to register 10.2%/8.8% revenue growth. We expect a good quarter from Nestle, Godrej Consumers and ITC and a weak print from Marico,” says a report by Kotak.

Antique Stock Broking also expects the FMCG sector (not including ITC) to report early double digit revenue growth with moderation in pricing led growth. ITC is expected to see a fall in revenue as its agri business is expected to see a drop due to high-base effects.

Nomura expects Nestle, Tata Consumers and Dabur to report the highest revenue growth YoY, and with ITC and Marico to post lower value growth.

FMCG sector revenue growth projections YoY


Kotak Institutional Equities

Antique Stock Broking

















Godrej Consumer




Tata Consumer Products




Nestle India




Source: Research reports
*Kotak has considered standalone results for ITC

Price cuts & rising competition

The street will closely watch management commentary on pricing, as analysts believe that the sector is poised for a good show in the first half of FY24 with a raw material cost tailwind.

“However, in the second half of FY24 we expect revenue growth to moderate as pricing benefits should fade and growth would have to be volume-led,” said a report by BNP Paribas.

There has been no aggressive price war as of now in the sector as of now, but if price cuts are not taken by large players in the segment, it might lead to unorganized players gaining market share.

In the last one year, many consumers have ‘downtraded’ to unbranded products or local brands during periods of high inflation.

“Prices of most stock keeping units (SKUs) have increased sharply over the last two years. Soap and detergent prices have risen 40-50% over that period. So far the price cuts have been limited and largely confined to the value segment. We believe price cuts might be needed to drive volumes,” said BNP Paribas.

Without pricing strategies laid out, most FMCG players might see revenue growth challenges re-emerge this year, especially in the second half.


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