What Q2 numbers say about FMCG health? Costs, quick commerce surge and climate hit

ET Intelligence Group: Consumer companies — HUL, ITC, Tata Consumer Products, Nestle India, Colgate Palmolive, Godrej Consumer Products and Varun Beverages — have announced their September quarter performance. Those such as Dabur and Marico have shared an update on their quarter performance. Others such as Zomato and Pidilite having large B2C business have also announced their latest quarter results.

SUBDUED CONSUMER DEMAND DID NOT IMPACT ALL

While the topline performance of companies such as Dabur, HUL and ITC was impacted by the moderation of consumer demand – especially in urban India, it was not so in case of others like Varun Beverages, Godrej Consumer Products (India business), Colgate Palmolive (India), Pidilite and Zomato. INPUT COST INFLATION ATE INTO THE PROFITABILITY
Raw material cost inflation was a common factor that impacted profitability across companies. Rising prices of agri items such as edible oil, palm oil, copra, tea, salt, leaf tobacco ate into the operating margins and could not be fully passed on to the consumer amidst a subdued demand environment. For instance, in the case of ITC, the raw material cost as a proportion of sales rose to 44.6% in the September quarter from the year ago level of 40.2%. This resulted in a 330 bps drop in the company’s operating profit margin.

QUICK COMMERCE CHANNEL CONTINUES TO GROW THE FASTEST
Quick commerce as a subset of ecommerce continued to gain ground as the channel of the future. For instance, Zomato-owned quick commerce delivery platform Blinkit reported doubling of its revenues for the quarter to September. Tata Consumer Products reported a 51% rise in revenues from the ecommerce channel.

Readers Also Like: Apple's new iPhones get faster chips, better cameras and new charging ports

CLIMATE CHANGE IMPACTED BUSINESS
Climate change characterised by extreme weather conditions such as heat waves, heavy rainfall and floods hit the demand and adversely impacted business. “These days we’re getting many more extreme weather events”, said Bharat Puri, managing director, Pidilite Industries, in the post earnings media call.

BANGLADESH TURMOIL
Marico, the Indian FMCG company with the highest exposure to Bangladesh, in its September quarter update shared that: ‘Bangladesh posted high-single digit growth, demonstrating the strong resilience of our business model amidst a challenging operating environment which has now largely stabilized’. Likewise, Bharat Puri of Pidilite Industries said in the earnings call, “this year, despite all of the issues and disturbance, we are still growing healthily in Bangladesh.”

READ SOURCE