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Home >Industry >Retail >FMCG industry's revenue to rise 10-12% in FY22, urban markets to lead growth

New Delhi: The fast-moving consumer goods (FMCG) sector's revenue is expected to double from last year to 10-12% this fiscal, rating firm Crisil said in a research note released on Tuesday.

The growth, the highest in the last three fiscals, will be driven by a combination of price-led growth and a favourable base of last fiscal. It expects demand for discretionary products to improve too in the near term.

Meanwhile, demand in urban markets is set to grow marginally compared with rural markets, reversing a trend reported by most large FMCG companies last fiscal.

Crisil analysed 57 Crisil-rated FMCG companies. These companies represent close to one-third of the sectoral revenues of 4.2 lakh crore (FY21).

A reduction in covid-19 infections across the country and increasing pace of vaccinations will drive recovery in discretionary and out-of-home consumption categories in the near term, it added.

"Price hikes of 4-5% effected by the players across product categories over the past six months to pass on inflation in raw materials, together with volume growth of 5- 6% and a revival in demand for discretionary products, will support revenue growth of 10-12% this fiscal," Anuj Sethi, senior director, Crisil Ratings, said in a note.

Meanwhile, urban markets that account for over half of the sector revenue, will see an improvement in demand. This will be led by growth in discretionary categories on a low base of last fiscal, and phased resumption of offices, and educational institutions, it said.

Rural markets grew ahead of urban most of last fiscal. Crisil expects the trend to reverse this year as widespread covid-19 infections in the hinterland during the second wave moderated rural growth this fiscal. However, recovery in urban demand for FMCG products will offset this and outpace rural revenue growth, it said.

“In the rural segment, however, lower allocation to MNREGA in the union budget, slower sowing in current crop season, and widespread impact of the second wave of the pandemic will moderate rural growth for FMCG products. Rural demand had saved the day for the sector last fiscal, supported by two consecutive years of good monsoon, better farm output, and a higher proportion of essential products consumed. That said, healthy reservoir levels, higher minimum support prices and expected increase in non-agriculture rural employment will provide some respite to rural demand this fiscal," it added

Meanwhile, personal care products will report sharper growth rates, albeit on a lower base. The category is expected to grow between 11% and 13% this fiscal. Last year, the category clocked 4% growth as demand for skincare, hair oils, and hair colours dropped as consumers spent longer hours at home and mostly purchased essential items.

Growth in the food and beverages—accounting for 50% of FMCG revenues—and home care segments, which saw limited moderation in growth last fiscal, will grow 8-10% this fiscal.

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