NEW DELHI: If the quarter-ended March has seen consumer staples’ volume growth fall steadily, the April-June quarter is set to be worse.
Analysts estimate the sector’s average volumes to hit historical lows: down 24.4 per cent year-on-year in Q1 FY21, compared to a fall of 7.7 per cent year-on-year in Q4 FY20.
To be sure, categories like liquor, cigarettes, skin care, hair care and ice creams have been the most impacted due to the Covid-led disruptions and weak macro recovery, while biscuits, noodles, branded essentials in food, health & nutrition, household insecticides and hygiene remain have benefitted.
“A shift from street food / canteens / restaurants accelerated the demand for packaged foods such as noodles and branded food essentials like atta and pulses. Personal care, however, remains under pressure because of its discretionary nature,” said Abneesh Roy, EVP (institutional equities) at Edelweiss Securities.
Company-wise, the likes of Marico, Bajaj Consumer Care are set to see a further decline in volumes, while there is likely to be a moderate impact for companies in the packaged food and hygiene sector such as HUL, Nestle, Britannia and Dabur. Marico’s first quarter update only underlined this trend.
The maker of Parachute hair oil expects Q1 domestic volumes to decline by low double-digits (11-14 per cent), against a three per cent fall in Q4FY20. Marico’s Saffola edible oil, which had seen 25 per cent volume growth in Q4, is expected to see strong traction in Q1.
Similarly, Nestle, Britannia and ITC’s FMCG segment, too, have been outliers, with over 20 per cent growth in April and May, said HDFC Securities.
June saw better performance than April and May as things began to normalise. Consumption growth in rural India has outpaced urban growth. But, an extended closure in metros, a rise in unemployment and wage reduction across the country has weakened consumer sentiments, said Shirish Pardeshi, analyst, Centrum.
In a recent analysts call, HUL also said that discretionary out-of-home categories would remain affected in the near-term, while Godrej Consumer Products expects mid-single digit sales growth led by hygiene segment and household insecticides while categories like hair colour and air freshener remain under pressure.