The weakening of the rupee against the dollar has added to the woes of imported consumer staples like edible oils. Mallick said if the rupee weakens further, then the company will have to look into whether to pass on the increased cost on imported edible oil to customers.
Fast-moving consumer goods (FMCG) firms that reduced pack sizes last year in an attempt to absorb rising costs are putting back grammage as input prices fall. The price of refined sunflower oil, palmolien and soya bean oil have all dropped around 20%-25% over the past 12 months, while packaging costs have similarly declined. Brands that had shrunk packages without reducing prices are putting back weight, particularly for the most popular price points of ₹10, ₹20 and ₹25
Smaller local players in India, such as Parle, Britannia and Hindustan Unilever, have entered the biscuit, tea, detergent, oil and snacking sectors, nibbling away at larger companies' market shares as the price of raw materials has lowered. During deflationary times, regional rivals give more value to consumers by offering extra grammage and are more nimble with product launches.
Sales of daily groceries and essentials increased 8.5% YoY between April and June; the highest increase in a decade. FMCG sales was up 5.3% in rural markets and 12% in cities from a year earlier. However, consumption in villages only grew by 2%. Analysts believe the high increase in sales was largely due to the government offering free food grains, notably atta, which saw a growth of 8.5% during the quarter.
"There is no immediate impact of El Nino on rural demand," said Mohit Malhotra, chief executive of Dabur India. "Rural demand, for us, has already started showing a recovery, and with inflation softening, we expect rural recovery to gain momentum in the coming quarters."
This traction could spur sector recovery with margins being a little higher in the segment.
In the ongoing rabi season, farmers are expecting a fall in returns over the previous year due to lower yields arising from adverse climatic conditions as well as the possible decline in prices of some commodities such as wheat and mustard. Potato and onion prices have already crashed due to increased production.
Companies selling both essentials and non-essentials said they are completely prepared to replenish stock even if there is any pantry loading by consumers, and also ensure their back-end is not impacted, executives said.
The biscuit maker posted a 9% increase in net sales at Rs 16,202 crore while profit slipped 81% to Rs 256 crore during the year ended March. A year ago, it had sales of Rs 14,923 crore and profit of Rs 1,366 crore, according to the company's filing to the Registrar of Companies.
"We have seen credit pressure, liquidity pressure coming in rural business and more so in the rural heartland, which is more UP and Bihar. The problem actually got exacerbated by the monsoon also being a little patchy in those areas," Mohit Malhotra, CEO of Dabur, told investors.
The price of palm oil, which had come down by more than 50% from their peak earlier this year, has surged again, with Russia threatening to pull out of an agreement on Black Sea grain exports - palm oil also comes under the category - and heavy rains in Malaysia raising concerns over palm oil supplies.
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