Manufacturers Now Expect Demand Recovery Only by Q1 of FY2025

Companies are now expecting demand to recover only in the first quarter of FY2025, revising their earlier estimates of a steady demand situation by the second half of this fiscal.

“Large organised players have been squeezed a bit from both end sregional and unbranded players in rural and D2C (direct to consumer) and new-age players at the premium end.”

Experts feel that the market will definitely start showing good volume growth by the next two quarters, fuelled by rural recovery and pricing action by large players, which has already taken place. The economy is stable and inflation is getting under control.

Most companies are under pressure in the past two years to offset rising costs under heads such as raw materials, supply chain and energy. The cost inflation began with the pandemic but was exacerbated by Russia’s invasion of Ukraine and Israel war.

Prices of household care products, food and beverages more than double in the past 10 years, according to Boston Consulting Group. The price hike was steeper post Covid. There is an increased need to focus on supply side actions to regain consumer share of wallet.

Since a year ago, there has been a noticeable drop in rural volume due to inflation and erratic monsoons. While the demand in cities is leading the overall growth with urban incomes more resilient, companies expect rural volume to recover on the back of a decent monsoon, which generally translates into higher sales after a quarter lag.

While green shoots of recovery are visible, rural demand is still trailing urban markets. However there is still liquidity issues in rural areas, although everyone is hopeful of rural markets posting a strong recovery as the gap between rural and urban growth continuously shrinking.

There is an indication that things are improving more gradually for large listed companies but in terms of the overall market, which also has smaller, local and unbranded players, there is a clear growth.

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