The impact of small regional competitors on larger FMCG companies is increasing

In the fourth quarter of FY24, Elara Securities reported that the demand for FMCG products faced challenges, impacting volume growth. Factors such as low farm income and the rise of regional competitors are affecting larger companies, with delayed winter impacting seasonal categories like beverages.

The brokerage noted a decline in Chyawanprash sales in Q3 due to the delayed winter, which has not yet recovered in Q4. Food categories are outperforming home and personal care products, and the revival of rural demand is essential for the FMCG sector. Companies are hopeful that a favorable Monsoon will stimulate the rural economy.

Regional firms in sectors like biscuits and laundry are posing a challenge to larger competitors, benefiting from favorable commodity prices. Essential commodities like crude and palm oil have seen a sequential increase in Q4, but the impact on margins remains subdued. Companies are focusing on driving volume through higher schemes without incremental price cuts.

The FMCG coverage universe is projected to see a revenue and volume growth of 2.8% YoY and 3.6% YoY in Q4FY24, with a five-year CAGR of 8.8% compared to 9.0% in Q3FY24, according to Elara Securities. Continued efforts to address challenges and stimulate growth in the sector will be crucial for companies moving forward.