The fast-moving consumer goods (FMCG) sector is expected to report a revenue growth of 7-9 per cent this fiscal year, said a report by CRISIL Ratings. This, it added, will be supported by an expected revival in rural demand and steady urban demand. This follows an estimated 5-7 per cent growth in fiscal 2024.

Product realisations are expected to grow in low single digits with marginal rise in prices of key raw materials for the food and beverages (F&B) segment. That said, key raw material prices for personal care (PC) and home care (HC) segments are seen to be stable.

Operating margin will expand by 50-75 bps to 20-21 per cent on increasing premiumisation and growth in volume. The margin expansion would have been higher but for rising selling and marketing expenses amid heightened competition among organised and unorganised players alike, the report stated.

The F&B segment accounts for nearly half the sector revenue while PC and HC segments form a quarter each.

“We expect volume growth of 6-7 per cent in fiscal 2025 from the rural consumers (~40 per cent of overall revenue), supported by expectation of better monsoon benefitting agricultural production, and hike in minimum support price supporting farm incomes. Higher government spending on rural infrastructure, primarily through Pradhan Mantri Awas Yojana-Grameen (PMAY-G) for affordable houses, will aid higher savings in rural India, supporting their ability to spend more,” said Aditya Jhaver, Director, CRISIL Ratings.

On the other hand, volume growth from urban consumers will remain steady at around 7-8 per cent during fiscal 2025 supported by rising disposable incomes and continued focus on premium offerings by the players, especially in the personal care and home care segments.

Per CRISIL, the revenue growth for the sector will also be supported by modest realisation growth (1-2 per cent) primarily due to marginal rise in prices of some key F&B raw materials including sugar, wheat, edible oil and milk, even as with prices for most of the crude based products like linear alkylbenzene and high-density polyethylene packaging remaining rangebound. Focus on enhancing premium product offerings especially in F&B and PC segments will also support realisations, it added. 

“Revenue growth will vary across product segments and firms. The F&B segment is expected to grow 8-9 per cent this fiscal, aided by improving rural demand, while the personal care segment will grow 6-7 per cent. The home care segment, which outpaced the other two segments last fiscal, is expected to grow 8-9 per cent this fiscal, led by continued premiumisation push and steady urban demand,” said Rabindra Verma, Associate Director, CRISIL Ratings.

The credit profiles of CRISIL Ratings-rated FMCG companies will continue to be ‘Stable’, supported by their healthy cash generating ability, strong balance sheets, and sizeable liquid surpluses. In the milieu, CRISIL said that sustained improvement in the rural economy, which depends on the monsoon and farm incomes and will be essential for steady and balanced demand, will bear watching. The extent of input price upswings and competitive intensity will also be monitorable, it added. 

CRISIL Ratings studies 77 FMCG companies, which accounted for about a third of the estimated Rs 5.6 lakh crore sector revenue last fiscal, to reveal these findings.