FMCG stocks Godrej Consumer, HUL, Dabur, Marico tank up to 10%

Shares of FMCG players dropped 3-10% in the early morning trade on Monday amid a weak quarterly update from one of the major FMCG players, Godrej Consumer Products Ltd.

Shares of Godrej Consumer opened a gap down and hit the day's low at ₹1,112.05, down 9.68% since the last closing session, and 27% lower than its 52-week high of ₹1,541.30 achieved on September 11, 2024. At the current share price of ₹1,119.10 (10 AM), the company's m-cap stands at ₹1.14 lakh crore.

In its update on business conditions and quarterly performance for Q3 FY25, Godrej Consumer said demand conditions in India have been subdued for the past few months, which is evident in FMCG market growth. The company attributed a 20-30% YoY surge in the prices of palm oil and derivatives to the impact on the soaps category, which represents one-third of its standalone revenue.

"Despite the demand conditions, GCPL has over the past six quarters consistently delivered an average organic UVG of ~7% on the back of category development supported by innovations and media investments," the company said.

Godrej Consumer says to partly offset the cost increases, it increased prices, reduced the grammage of key packs and reduced various trade schemes. "Such pricing actions typically have minimal impact on category consumption but do result in reduced inventory across wholesale and household pantry. Historical patterns indicate a normal volume growth following price stabilisation, which we anticipate occurring in the next few months," the company adds.

The company says the weather conditions have also not been supportive -- delayed winters in North and cyclones in South India -- to the home insecticides (HI) segment, which contributes 1/3rd to its standalone business. "These are exceptional situations in Standalone business that the management believes are transitionary and not structural. Hence the management remains focused on navigating these near-term challenges while maintaining strategic investments for long-term growth as these negative trends are likely to persist for a few months."

Amid the fall in the share price of Godrej Consumer following its Q3 business update, the stocks of other FMCG majors also saw a beating, with industry leader Hindustan Unilever dropping 4% to ₹2,391.45 on the BSE, 21% down from its 52-week high of ₹3,034.50 achieved on September 23, 2024.

Shares of Dabur India Ltd also fell 3.57% to ₹504.85 on the BSE, 25% lower than its one-year high of ₹672 hit on September 17, 2024.

Similarly, Marico Ltd saw its shares fall 4.34%, Tata Consumer Products shares slipped 3.90%, Britannia Industries scrip posted a 2% decline and Colgate-Palmolive (India) shares dropped 3%.

The Nifty FMCG Index, overall, dropped 2.27% in the morning trade, making it the worst-performing sectoral index during the early trading hours on Monday. The broader benchmarks Sensex and Nifty were also down 0.24% and 0.28%, respectively.

Analysts at brokerage Antique Stock Broking Ltd in their November 25 commentary said there has been a sluggish demand in the FMCG sector despite the festive season. "From our latest on-ground interactions, we believe that for Oct'24 a) The demand sentiment remained weak as the festive season failed to drive recovery in offtake. b) With the delay in the winter season, offtake/ preloading of winter products has been below expectations."