Some of these firms are investing more than ever before as they are hopeful of a demand revival in the new fiscal.
“We are investing 7-8% of our turnover on capex, which is much higher than it ever was,” Nestle chairman Suresh Narayanan said. “Despite stress points in demand, there’s a wealth effect phenomenon that is taking place… Stock markets have been booming and those at upper middle class and middle class, they feel good about what they are buying,” he said. “Food inflation is hurting but we are hopeful that once inflation abates, things will be better,” Narayanan said. The maker of Maggi noodles and Nescafe coffee has committed investments of ₹6,500 crore into the India market till 2025, over a five-year window.
Last fortnight, Dabur announced its second highest capacity expenditure in India, at ₹135 crore, for a greenfield plant in South India.
“We expect the demand situation to improve as we enter the new financial year; we are looking at both urban and rural markets to drive growth,” Dabur’s chief executive Mohit Malhotra said. He said the new plant will address rural distribution, innovation and premiumisation, and growing demand in the southern region, which accounts for 18-20% of the company’s annual domestic sales.
While demand for mainstream products has been tepid, that for premium categories, specially in urban markets, has held steady.
Research firm NielsenIQ said in a report last Tuesday that after two years of growth, the FMCG sector’s value growth could halve to 4.5-6.5% this year, down from 9.3% in 2023 and 8.4% in 2022, impacted by inconsistent rains, extended rural slowdown and food inflation, which have led to a slowdown in sales across consumer staples and daily essentials.
In the October-December 2023 quarter, the FMCG industry reported 6% year-on-year value growth and 6.4% increase in volumes. But sequentially, both value and volumes declined during the quarter, according to NielsenIQ.
The industry is pinning hopes on revival in the new fiscal, with infusion of incomes into the economy leading to likely uptick in mainstream volume and value growth, aided by the upcoming general elections, capex push and stabilising commodity prices.
Coca-Cola’s bottling partner Hindustan Coca-Cola Beverages (HCCB) has announced an investment of ₹3,000 crore in Gujarat to manufacture juices and aerated drinks, for capacity which should go on-stream by 2026.
Procter & Gamble and Mondelez’s investments of ₹2,000 crore and ₹4,000 crore, respectively, in new plants are on track and will be operational in the next few years.
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