Though FMCG companies missed out on the pre-Diwali boom in the recent past due to sluggish economy and considerable dip in demand, this year seems quite promising as companies are helped by lower cost of ingredients.
According to Dinesh Shahra, MD of Ruchi Soya,"This Diwali will be a good one for consumers as oil prices are at a historical low. What was Rs 75 per kg a couple of months ago will cost Rs 55-58 in the coming months. In fact, after Diwali, prices may head further south, perhaps by 5%, due to good domestic harvest and low demand after the festival."
As per the industry experts, low prices will help increase the demand more in festive season and sales growth may increase by 5% points more that the usual 15%-20% growth in the season.
Likewise, food companies across the board expect higher sales without actually having to reduce prices of products because of low edible oil and sugar costs even as the economy gets back on track. The good news is that the bearish trend in edible oils and sugar is likely to continue for a while.
Cheaper oil seed and sugar prices will help the food processing and FMCG companies improve their margins, which have been under pressure for the past few years as sustained commodity price fluctuations caused supply not being able to keep pace with demand across most categories, remarks Anand Ramanathan, management consulting, associate director, at KPMG