FMCG to see faster growth in FY25

Chennai:The fast-moving consumer goods sector is expected to grow faster in FY25 with the anticipated revival of rural demand and steady urban demand.

In FY24, FMCG sector grew by an estimated 5-7 per cent and in FY25, Crisil expects the sector’s revenues to grow 7-9 per cent. Higher volume growth, supported by an expected revival in rural demand and steady urban demand will support this growth.

Rural market is expected to clock 6-7 per cent volume growth in FY25, while the volume growth among urban consumers will remain steady at 7-8 per cent.

Volume growth among rural consumers, who account for 40 per cent of overall revenue, will be 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 Awaas Yojana-Grameen (PMAY-G) for affordable houses, will aid higher savings in rural India, supporting their ability to spend more.

On the other hand, volume growth from urban consumers will be supported by rising disposable incomes and continued focus on premium offerings, especially in the personal care and home care segments.

The revenue growth will be supported by marginal rise in prices of some key raw materials including sugar, wheat, edible oil and milk. Prices for most of the crude based products like linear alkylbenzene and high-density polyethylene packaging are expected to remain rangebound. Focus on enhancing premium product offerings especially in food and beverages as well as personal care segments will also support revenue growth.

Revenue growth will vary across product segments and firms. The F&B segment is expected to grow 8-9 per cent, personal care by 6-7 per cent and home care by 8-9 per cent this fiscal.

Increasing premiumisation and growth in volume will expand operating margin by 50-75 basis points to 20-21 per cent. However, the margin expansion would be limited due to increasing selling and marketing expenses amid heightened competition among organised and unorganised players alike.