FMCG sector poised for 9% growth in FY25 on rural demand boost: CRISIL

The fast-moving consumer goods (FMCG) sector is projected to achieve a 7-9% revenue increase this fiscal year, driven by expected volume growth due to a resurgence in rural demand and consistent urban demand, according to a report by CRISIL Ratings. This follows an estimated 5-7% growth in fiscal 2024.

“Product realisations are expected to grow in low single digits with marginal rise in prices of key raw materials for the food and beverages (F&B) segment. That said, key raw material prices for personal care (PC) and home care (HC) segments are seen to be stable,” the report states.

For FY 2025, CRISIL Ratings forecasts steady volume growth of 7-8% among urban consumers, bolstered by rising disposable incomes and a continued focus on premium offerings, particularly in the personal care and home care segments.

The sector's revenue growth will also be supported by modest realisation growth (1-2%), mainly due to slight increases in the prices of key raw materials in the food and beverages (F&B) segment, such as sugar, wheat, edible oil, and milk. Prices for most crude-based products like linear alkylbenzene and high-density polyethylene packaging are expected to remain stable.

The industry is also seeing a trend toward premiumisation, which, along with volume growth, will expand operating margins by 50-75 basis points to 20-21%. Nonetheless, higher selling and marketing expenses amid increased competition among unorganised players will have an impact.

Aditya Jhaver, director, CRISIL Ratings, “We expect volume growth of 6-7% in fiscal 2025 from the rural consumers (~40% of overall revenue), supported by expectation of better monsoon benefitting agricultural production, and hike in minimum support price supporting farm incomes. Higher government spending on rural infrastructure, primarily through Pradhan Mantri Awaas Yojana-Grameen (PMAY-G) for affordable houses, will aid higher savings in rural India, supporting their ability to spend more."

Rabindra Verma, associate director at CRISIL Ratings, added, "Revenue growth will vary across product segments and firms. The F&B segment is expected to grow 8-9% this fiscal, aided by improving rural demand, while the personal care segment will grow 6-7%. The home care segment, which outpaced the other two segments last fiscal, is expected to grow 8-9% this fiscal, led by continued premiumisation push and steady urban demand."

"In the milieu, sustained improvement in the rural economy, which depends on the monsoon and farm incomes and will be essential for steady and balanced demand, will bear watching. The extent of input price upswings and competitive intensity will also be monitorable,” the report added.