- Three of India’s FMCG giants — Nestle, Britannia, and HUL — could break the slump in the entire consumer goods sector.
Three of India’s FMCG giants — Nestle, Britannia, and HUL — could break the slump in the entire consumer goods sector. Even as the consumer goods sector is expected to report a 4-10 percent decline in revenues due to lockdown, Hindustan Unilever, Britannia, and Nestle are likely to record 6-10 percent growth in earnings as a result of reduced tax expenditure, according to an Emkay research survey.
In fact, while the stock markets have experienced the worst crash in recent years, the share prices of HUL and Nestle have not only remained stable but have reached new highs.
Although the consumer goods industry has been talking about a prolonged recession for more than a year now, the current situation does not bode for the companies any better. According to a survey, the coronavirus lockdown may result in the sector losing revenues to the tune of double digits. “In Q4, we expect a 4 percent -10 percent decrease in sales across the consumer goods sector (as opposed to a low mid-single-digit rise in Q3) due to the March lockout,” the study said. Although sales growth in January-February was already small, sales loss for around 10 days in March would further hurt revenues, the report added. The 19 more days lockout extension may also add to the suffering of consumer goods firms.
Several products may have seen higher revenue for the retail industry as consumers lined up in fear of running out of the goods. Because primary revenues were weak due to plant shutdowns and trade disturbances, however, this could have balanced the scales. Also recently, Unilever, one of the world’s largest FMCG firms, said that while sales have risen for categories such as home and hygiene products, the out-of-home use has totally plummeted.
“The effect of coronavirus and consequent lockdown and Janta Curfew on both the supply chain and the manufacture of consumer products has been witnessed. The outlook for FY21 is also low, with GDP possibly declining for the year, “Motilal Oswal said in another research study. Meanwhile, the government has extended the lockdown for 19 more days and has also issued an order to hold supply and output for companies dealing in critical goods. This has also allowed e-commerce firms to deliver critical products in its directive.
Fast-moving consumer goods (FMCG) companies, Godrej Consumer Products Ltd (GCPL) and Marico Ltd have warned of a decline in the March quarter as the nationwide shutdown disrupted the supply of critical goods.
In an update on its fourth-quarter earnings, GCPL, which manufactures soaps, home insecticides, and other personal care products, said it “would announce a decline in quarterly high adolescent sales” as demand fell due to the disruption of the back end and front end supply chain in the last 12 days of March.