July 14--MUMBAI -- Consumer packaged goods companies are expected to post muted earnings growth in the quarter ended 30 June as demand stagnates amid inflation and consumers continue to postpone purchases across both urban and rural India.
A Mint survey of six brokerages -- Edelweiss Securities Ltd, Kotak Institutional Equities, Prabhudas Lilladher Pvt. Ltd, Religare Capital Markets Ltd, ICICI Securities Ltd and Elara Securities (India) Pvt. Ltd -- shows that analysts estimate profit growth of 9.3-15.7% and sales growth of 10.8-13.1%.
Margins continue to remain under pressure as prices of key inputs increased during the quarter. This has been aggravated by a weaker rupee compared with the year-ago period in the first quarter of 2014-15.
"There is no significant improvement in the June quarter business as the demand environment continues to be stressed, similar to what it was in the fourth quarter of the last fiscal year," said S. Raghunandan, chief executive officer of
"Demand has stagnated in an inflationary environment as consumers are postponing purchases. Small pack sizes are preferred in essential items," said analysts Amnish Aggarwal and Gaurav Jogani of Prabhudas Lilladher in their 8 July report.
As seen in 2013-14, volume growth remained a challenge in rural and urban India in the June quarter.
Moreover, rural growth -- which has been driving overall growth in the past few years by outpacing urban growth -- is slowing down. "The gap between urban and rural growth continues to shrink," said a 4 July report by Edelweiss Securities.
Discretionary categories remain impacted the most with segments such as skin care, deodorants, grooming products and packaged foods facing the brunt of slowdown. Food chains like Domino's and
"We expect Bata's same-store-sales (SSS) growth to come in at 5-6% over the year-ago period and Titan to post a 12% revenue decline over the year-ago period as jewellery volumes slide 30% off a high base of the first quarter in FY14.
SSS is industry parlance for measuring comparable growth in stores that have been open for more than a year and does not take into account growth that comes from opening new stores.
In an attempt to drive sales, retailers like Shoppers Stop Ltd,
The trend continues from the past year.
Meanwhile, quick service restaurant chains like Domino's have introduced a "refreshed menu" of 10 new types of pizzas and a "Junior Joybox" packing a kids-only meal and a toy to increase footfalls. McDonald's is also expanding its range for adults and introducing an all-day menu.
Meanwhile, consumer packaged companies continue to launch new variants and enter new categories and markets.