FMCG companies saw rural demand recovery trends while urban consumption continued to be sluggish impacting revenue growth in the March quarter. Companies such as Dabur, Marico and AWL Agri Business Ltd (formerly Adani Wilmar Ltd) said rural demand continued to outpace urban demand in their Q4FY25 quarterly results previews. Analysts and industry observers expect urban demand may begin seeing some recovery in the second half of FY26 aided by stabilising food inflation and rebates in income tax.
A report by Motilal Oswal Financial Services on Monday noted that food inflation has remained stable sequentially in March quarter compared to December quarter, however, on a year-o-year basis it remains elevated. This is impacting FMCG companies such as Dabur, HUL, Nestlé, Britannia, Marico and Tata Consumer.
Talking about staples sector, the report added that “Demand trends in 4QFY25 are expected to remain similar to Q3, impacted by persistent weakness in urban consumption and margin pressures following RM inflation and negative operating leverage. Volume growth is likely to remain in the low- to mid-single digits, constrained by high palm oil and agri commodity prices, which have led to grammage reductions and an increasing mix of low-unit price (LUP) packs,” The combination of subdued urban demand and elevated palm oil prices is expected to weigh on multiple categories, particularly the personal wash segment.
“While companies have implemented pricing interventions during the quarter to counter RM inflation, revenue growth is likely to remain modest,” it added.
In its quarterly preview, Dabur India noted that rural demand continued to grow ahead of urban markets and was resilient in the March quarter. “In terms of channels, organised trade, including Modern trade, E-commerce and Quick commerce maintained their growth momentum, while General trade continued to be under pressure. Overall, FMCG volume trends continued to be subdued during the quarter,” it added.
Marico too said that while rural demand trends trajectory improved in the March quarter, it saw mixed demand trends in mass and premium urban segments. “We expect gradual improvement in overall consumption sentiment on the back of moderating retail and food inflation as well as forecasts of a normal monsoon,” Marico noted in its Q4FY25 quarterly results preview.
AWL (formerly known as Adani Wilmar Ltd) said it witnessed better growth in rural towns compared to urban markets, especially in the foods category, driven by expanded reach and market penetration.
Meanwhile, Abneesh Roy, Executive Director, Nuvama Institutional Equities in an analyst noted that “demand in rural areas continues to see a gradual recovery. Urban demand remains a challenge but we expect from the second half of FY26 slight recovery to start aided by rebates in income tax and falling food inflation.”
Published on April 7, 2025
