India’s leading consumer goods company, Marico, has reported a drop in its consolidated revenue for the June quarter due to sluggish sales in rural markets and a strategic decision to cut prices of its Saffola edible oil. The company stated that the anticipated improvement in rural demand did not materialize, leading to a low-single digits percentage decline in revenue. This marks the company’s first quarterly drop in three years.
Rural consumers typically account for two-thirds of sales for consumer goods manufacturers, making their purchasing power a key indicator of the country’s economic recovery. Marico’s sales volumes were specifically affected in its Parachute coconut oil business, while its Saffola cooking oil reported double-digit growth thanks to price cuts that made it nearly 30% cheaper compared to the previous year.
Despite the decline in revenue, Marico remains optimistic about its future prospects. The company expects its gross margin to expand materially and anticipates double-digit percentage growth in its bottom line due to reduced costs of raw materials. Consequently, Marico foresees a visible pickup in the coming quarter.
Meanwhile, competitor Godrej Consumer Products estimated strong sales growth in the double-digit percentage range for the June quarter, driven by high demand for its home care and personal care products.
Marico’s shares closed 2.3% higher on Wednesday, indicating some positivity among investors.
As the COVID-19 pandemic continues to impact economies worldwide, consumer goods companies are navigating through challenges posed by low demand and rising prices of essential products, particularly in rural areas. These factors will likely influence their performance in the coming quarters.
Marico’s performance in the next quarter will be closely watched as investors and analysts gauge the extent of recovery in rural demand, which will have broader implications for India’s overall economic recovery.
