FMCG majors apprehensive of inflation in festive times
Many FMCG companies have suffered muted demand in the first half of the year and are depending on Q3 (October-December) for revival in demand.
Despite India remaining one of the brightest spots of growth in a gloomy global slowdown, inflation concerns have dominated the economic discourse. Sanjay Sharma, CEO of MTR Foods owner Orkla India has told The Economic Times that inflation might even impact the demand for some FMCG items even during festive season with the heat of rising prices weighing down on the wallet of the common man.
“Inflation is impacting demand in some daily essentials foods categories. I am cautiously optimistic about demand in the festive quarter, since volume demand has softened and consumers are downtrading, buying more discount brands, in select FMCG categories,” Sharma said.
Many FMCG companies have suffered muted demand in the first half of the year and are depending on Q3 (October-December) for revival in demand. Erratic rainfall and higher prices of food items have already somewhat affected the demand in the rural segment. That’s what quarterly updates by Marico, Dabur and Godrej Consumer Products stated last week.
MTR Foods’ portfolio is critically dependent on food raw material prices. Its spread incudes breakfast mixes, ready-to-eat and ready-to-cook foods apart from spices, meal mixes and sweets. The company is a formidable player in the Indian breakfast mix product category.
Sharma felt that Gen Z – the generation of people who were born between 1996 and 2010 – is the main consumer of the ready-to-eat and ready- to-cook packaged foods.
In fact, all expert bodies from IMF to the Reserve Bank of India have sounded caution against a possible rise in inflation in this financial year. While all multilateral institutions such as IMF, World Bank and Asian Development Bank have said that India’s growth figures will be considerably above 6% in FY24, they have warned against elevated inflation levels, with a possible focus on food inflation.
When retail inflation rose to 7.44% in July, the main driver was food prices, with tomato being identified as the key villain.
The Norwegian group Orkla ASA is the promoter of the MTR Foods. In order to get a better grip on the market, it is restructuring its business in this country into three units MTR, Eastern and International Business while it is putting all Indian operations under Orkla India, the company said.
Sharma, who has been the CEO of MTR Foods, will lead the business as Orkla India CEO. CEOs of the three SBUs will be reporting to him.