India’s FMCG industry saw double-digit value growth of ~10.2% in 1Q23, which exhibits a rise of ~2.6% in comparison to prior quarter. Value growth was supported by revival in consumption in rural markets and traditional trade channels, which were under pressure. Experts have seen stabilizing inflation arresting price growth, which declined from 7.9% in 4Q22 to 6.9% in 1Q23, supporting revival of this quarter’s growth in consumption. FMCG sector should see strong growth in FY24 as rural demand showed some improvement and inflation started to moderate. Urban demand remained steady. Growth was aided by large packs as because there was a distinct trend of consumers upgrading to medium and high-value packs for several critical FMCG categories. Collectively, all these factors are expected to support leading FMCG stocks in their revenues and profits.
Apart from numerous government initiatives, such as minimum support price (MSP), higher expenditure on rural infra, and increased credit to agriculture and other non-agricultural economic activities should increase employment and income levels in rural areas. Therefore, this should help demand for FMCG products. Since rural economy continues to exhibit signs of normalcy because of improved labour market and rising terms of trade for rural production, leading FMCG stocks are expected to see higher demand in 2023 and 2024.
With this in mind, let us now have a look at some leading FMCG stocks which investors should consider buying right now.
Top 3 FMCG Stocks to Buy Now
- Bajaj Consumer Care Ltd
- Britannia Industries
- Marico Ltd
1. Bajaj Consumer Care Ltd
The company is one of the leading FMCG brands in India which brings together high-quality hair care and skin care products to consumers throughout the world.
Its consolidated sales in FY23 grew by ~9.5% year-over-year touching INR949.1 crores, which was strong given the tough operating environment. The company saw fastest growth rates among all major hair oil players as a result of its improved execution, diversification, and a more premium mix of products. Profit before tax of the company came in at INR16,948.43 lakh against INR21,148.99 lakh in prior year. PAT was INR13,981.54 lakh in comparison to PAT of INR17,453.84 lakh in prior year.
Long-term outlook for hair oil industry is positive even though there are some short-term challenges and demand slowdown. This industry gives significant growth opportunities, stemming from increased population, urbanisation, premiumisation and higher demand for value-added products. The company plans to leverage such opportunities and it will launch innovative products which can help in meeting diverse consumer requirements and fast-track its future growth.
Bajaj Consumer Care Ltd should continue to invest in marketing and advertising which can help in reinforcing its brand name and new product launches.
2. Britannia Industries
The company has been categorised as one of leading food companies in India. Key businesses of the company include bakery, dairy, and adjacent snacking categories, etc. Its operations span across more than 80 countries in the world.
For the quarter ended 30th June 2023, the company’s consolidated sales saw an increase of 9% to INR3,970 crores, while operating profit was up by ~37% to INR618 crores. Net profit of the company went up by ~36% to INR458 crores.
The company led pricing actions so that inflationary pressures can be mitigated & profitability can be maintained. However, in this quarter, commodity prices were softened and local competition was intensified. Therefore, certain price corrections were done to remain competitive & to support revenues.
Britannia Industries delivered healthy revenue growth of ~9% as a result of strong distribution gains and requisite investments in Brands. The company’s new Greenfields in Tamil Nadu & UP were efficiently scaled up. It has capacity and capability enhancements planned in Ranjangaon Food Park which should support further extract productivity and enhance competitiveness in such growing markets.
3. Marico Ltd
The company is a leading consumer products organisation in global beauty and wellness space. During FY22, it saw turnover of ~ INR95 billion (USD 1.3 billion) with the help of its products sold in India and selected markets in Asia and Africa.
During the quarter (2Q24), demand trends were similar to the trends which were seen in preceding quarter. Situations of higher food prices and below-normal rainfall distribution in selected regions impeded the expected recovery in rural demand. Consumption trends, mainly in rural, should improve in 2H as a result of retail inflation levels staying within target range of RBI, rise in MSPs, healthy sowing season, easing of liquidity pressures and spending by Indian government.
In 2Q24, domestic volumes saw an increase in low-single digits on year-on-year basis as it saw low single digit volume growth in Parachute Coconut Oil and Saffola Edible Oils, and low single-digit growth in value in Value Added Hair Oils. It saw healthy trends in offtakes, market share and penetration throughout its key franchises. Newer portfolios, Foods and Premium Personal Care (which includes Digital-First) were on track to achieve full-year aspirations.
Consolidated revenue of the company was slightly lower on year-on-year basis, as a result of pricing corrections in critical domestic portfolios over previous 12 months. This should progressively come into base moving forward. Currency depreciation in selected overseas markets impacted reported INR growth in the company’s international business.
Regarding the main inputs, copra and edible oil prices were in favourable range. However, the latter exhibited some volatility. Crude derivatives were firm and there was an upward bias. Consequently, the company expects strong gross margin expansion on a year-on-year basis. Even though A&P spends were ramped up towards strategic brand building, the company expects healthy operating profit margin expansion which should help in achieving low double-digit operating profit growth.
Leading FMCG company’s stocks in India changed their approach to provide customers with ethical goods and which are more eco-friendly. Leading FMCG companies have seen increased demand for their products as a result of improved connectivity in urban and rural areas. This happens through e-commerce portals, which continues to support rising demand.
Furthermore, experts believe that e-commerce segment should make up for ~11% of FMCG sales by 2030. Higher disposable income among consumers in rural India should offer massive potential for organizations to grow their market share.