Inflation continued to hit FMCG industry ‘hard’ in June quarter: GCPL

The country’s FMCG industry continued to be ‘hit hard by inflation levels’ leading to successive price increases as well as to an impact on volumes during the three months ended June, according to Godrej Consumer Products Ltd (GCPL).

In its update for the first quarter of the current fiscal, the FMCG player also said rural markets witnessed slower growth compared with urban segments.

The company would have ‘mid-single-digit volumes drop on a high base, with a 3-year volume CAGR close to mid-single digits,’ in the domestic market, as per the update.

“The Indian FMCG industry continued to remain soft during the quarter. It continued to be hit hard by inflation levels aggravating due to geopolitical tensions, leading to successive price increases and impacting volumes,” GCPL said.

In recent months, inflation has been on the rise in most markets worldwide.

Among international markets, GCPL said that its Indonesian operations, which is the company’s second-largest market after India, also faced an impact on consumption and margins.

“In Indonesia, with hygiene performance waning after COVID-19 and a large hygiene comparator in base, we expect a high single-digit sales decline. The sales performance excluding hygiene was largely flat,” it said.

GCPL said it was putting building blocks in place to drive category development and general trade distribution to ensure gradual recovery in the medium term.

“In Godrej Africa, USA, and the Middle East, we continued our growth momentum across most of our key countries of operations. We expect to deliver double-digit sales growth, with a continued focus on driving sustainable, profitable sales growth,” it said.

Further, it expects a constant currency sales growth in the high teens in the Latin American business.

“At a consolidated level, we continue to leverage our category and geographic portfolio. We expect to deliver high single-digit sales growth and a 3-year CAGR in double digits,” the company said.

With respect to profitability in the June quarter, GCPL said it expected lower year-on-year EBITDA (Earnings Before Interest Tax Deprecoatopm amd Amortisation) margins.

“This is due to input inflation, upfront marketing investments to drive category development, and weak performance in Indonesia,” GCPL said.

The company’s quarterly update provides an overall summary of the operating performance and demand trends for the quarter ended June. This will be followed by a detailed update of financial results for the June quarter.

However, with inflationary pressures abating and significant correction in palm oil derivatives and crude oil, which are some of its key raw materials, GCPL said it expected a recovery in “consumption and gross margins” in the upcoming quarters.

In the domestic market, GCPL witnessed a mixed performance in its personal care and home care categories.

“Personal care sustained its strong double-digit growth trajectory with a 2-year CAGR also in double-digits, led by both personal wash and hair colours. Home care witnessed a low single-digit sales drop on a high base. However, the 2-year CAGR remained at a high single digit figure,” it said.