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Bengaluru: Shares of fast moving consumer goods (FMCG) giant Dabur fell more than 6 per cent on Thursday, two days after it posted its first quarterly revenue decline forecast in four years, citing heavy rain and floods impacting its home consumption. Nifty FMCG registered its fourth session of decline, majorly dragged by the home grown multinational company.
In an exchange filing on Tuesday, Dabur said that its beverage category saw a severe hit, adding that its organised channels of e-commerce, quick-commerce as well as modern trade (MT), saw a disproportionate growth, which led to an increase in its inventory levels. The company is working to manage the distributor inventory to help improve their return on investment.
Against this backdrop, the consumer goods maker is expected to post a mid-single-digit decline in its topline (consolidated revenue) for the quarter ended on September 30, 2024. Commenting on the forecast, brand strategist and FMCG analyst Harish Bijoor said, “In the case of Dabur, I do believe this has been a down quarter. An inventory pile-up in the system seems to be a reality that has bitten.”
Shedding light on the spending, analysts told DH that private consumption is under stress and that people are penny-pinching as well as delaying their expenditure. This cautionary spending is being witnessed across urban and rural areas.
“It is a trend which is impacting most FMCG players. Now, companies are taking steps. If, let's say, growth is a challenge, they are looking at different kinds of growth, different consumer baskets, different consumer spends which will pick up,” said Ankur Bisen, Senior Partner & Head - Consumer, Food & Retail, Technopak Advisors.
This comes amid reports of increase in private incomes especially, in tier 2,3 and 4 cities, boosting discretionary spending in these towns.
Festive season is also one of the growth levers for these FMCG companies. While the overall expectations are of a stellar season, not all analysts are convinced. “The festive season ahead is likely to be a subdued one for sure. There is caution in the air,” Bijoor observed.
According to LSEG data, the decline in revenue Dabur is witnessing in the September-ended quarter, is the first in four years, since the quarter ended June, 2020.
Further, Dabur has maintained its investment in brands, which will lead to a decline in its operating margin to the mid-to-high teen percentage, the company said on Tuesday.
Its peer Marico, on the other hand, has posted expectations of a better second quarter for the current fiscal year, with a forecast of high single-digit growth in its consolidated revenue.