Teji Mandi Explains: FMCGs shine in Q4 despite the reduced profitability
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FMCG companies managed to stay resilient during the March-ending quarter. While the staples category maintained to gain healthy traction, the performance in discretionary space was better than expected.

Among the FMCG space, Q4 aggregate revenue growth was 29.5% YoY, led by 21.6% growth of the staples and 32.9% of the discretionary pack.

Gross margins contracted across the board, led by the higher inflationary pressure. EBITDA margins declined by ~200-300 bps YoY for Godrej Consumers, Marico, and Tata Consumers. They were majorly impacted by the inflated prices of edible oils, copra, and tea.

The Outperformers

Among the leading staple-based FMCG, Marico, Nestle, and Tata Consumers were the major outperformers. Marico was majorly helped by volume growth in its two prominent brands - Parachute and Saffola. The company registered 29% YoY volume growth in Parachute and 17% YoY volume growth in Saffola. Tata Consumers also registered 39% YoY standalone revenue growth. It was driven by 21-23% volume growth in domestic food and tea businesses.

The Laggards

Companies like Dabur and Britannia were the major beneficiaries during the first pandemic wave. While other companies struggle with putting their supply chains together, these companies benefited from their strong rural presence.

However, their volumes moderated as other companies improved their supply chains. Britannia also witnessed a declining trend in demand for biscuits from the elevated levels during the first COVID-19 wave.

Discretionaries - A Mixed Bag

For the full-year FY21, discretionary space remained under pressure, with revenue, EBITDA, and PAT declining 2%/11%/9%, respectively.

Among the discretionary category, weakness persisted among spirits/tobacco space. On the other hand, demand accelerated in paints and adhesives. Decorative paints continued to surprise positively with strong volume growth in Asian Paints, Berger, and Kansai Nerolac. Pidilite's volumes also grew by 45% YoY.

Among the spirits, United Beverages saw good volume recovery aided by reopening of trade channels and favourable shifts in excise policy. On the other hand, recovery remained muted for United Spirits. ITC’s cigarette volume grew by ~7% YoY, while Titan surprised positively with robust demand acceleration.

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