Rural Recovery To Lead 7-9% Revenue Growth For FMCG In FY25: Crisil

The fast-moving consumer goods sector is expected to see a revenue increase of 7-9% in the current fiscal, fueled by higher sales volume, particularly in rural areas experiencing a resurgence, according to Crisil Ratings.

Urban consumer demand is also robust, with anticipated volume growth of 7-8%, supported by increasing disposable income and a focus on premium products in categories like personal care and home care.

Additionally, the report forecasts a 50-75 basis point expansion in operating margin to 20-21%, driven by the trend towards premiumisation and volume growth.

However, rising selling and marketing expenses, intensified by competition from both organised and unorganised sectors, temper potential margin gains, the report said.

The product realisations in FY25 are "expected to grow in low single digits with a marginal rise in prices of key raw materials for the food and beverages (F&B) segment", however, key raw material prices for personal care (PC) and home care (HC) segments are seen to be stable, it said.

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

Over the revenue growth, the report added the FMCG sector will also be supported by modest realisation growth of 1-2% 'primarily due to marginal rise in prices' of some key F&B raw materials, including sugar, wheat, edible oil and milk.

However, prices for most of the crude-based products like linear alkylbenzene and high-density polyethylene packaging remain range-bound. "Focus on enhancing premium product offerings, especially in F&B and PC segments will also support realisations," it said.

Crisil Ratings Associate Director Rabindra Verma said revenue growth will vary across product segments and firms.

"The F&B segment is expected to grow 8-9% this fiscal, aided by improving rural demand, while the personal care segment will grow 6-7%. The home care segment, which outpaced the other two segments last fiscal, is expected to grow 8-9% this fiscal, led by continued premiumisation push and steady urban demand,” he said.

Crisil has estimated the FMCG growth for fiscal 2024 to be around 5 to 7%.

(With inputs from PTI)