After a subdued initial impact of the GST rate cut on demand for daily necessities and groceries as consumers were awaiting new lower-priced packs on shelves, consumer goods makers said they are seeing signs of a turnaround in crucial sales volume growth from December after many quarters.
New packs with either lower prices or higher grammage to reflect the new GST rates hit the shelves only by December, as kirana stores were busy clearing older inventory. Also, in most cases, kiranas did not pass on the benefit of new prices on older packs despite companies passing the GST gains from September 22. While this weighed on demand initially, top industry executives now expect a wider recovery in sales across rural and urban markets.
Lower prices & bigger packs likely to help grow volume sales as kiranas clear out old inventory
“With this reduction in GST rates, we are very hopeful that rural should get some momentum going forward. Brands which were growing at 4-5%, they should get to about 8-9% growth. That is the first target that we have,” an industry expert told ET. He said while all the focus of the manufacturer of BoroPlus and Zandu Balm in the past few quarters was on quick commerce, ecommerce, modern trade and new-age brands, with the GST cut it is now once again betting on rural markets as the next growth driver.
Godrej Consumer Products managing director recently told analysts that volume growth in the soap business would return with the GST rate cut and that sales were already on a positive trajectory since December. It took almost till half of November to clear inventory with the old price, he said.
Godrej’s volume growth in India, which was 7% in fiscal 2024 due to strong business in the soap segment but fell to 5% in FY25, will pick up to 6-7% in FY26, Sitapati said. The company that sells bathing soaps like Cinthol and Godrej No.1 expects further acceleration in FY27, again driven by soaps even as other categories are growing consistently.
The FMCG industry has been battling a slowdown in volume sales since 2023, when inflation shot up forcing most consumers to cut back on purchases by going for smaller pack sizes. While the rural market has been growing faster than urban for the past 3-4 quarters, the pace has mostly been in a single digit.
To be sure, all FMCG companies including Marico, Dabur and Bajaj Consumer Care have said there has been a gradual sequential improvement in sales in the December quarter. However, the full impact of the GST rejig will be felt from the current quarter as the full portfolio with reduced prices hit the market.
Parachute and Saffola oil maker Marico’s chief executive, said the GST rate cut is leading to a conversion from unbranded and unpackaged food to packaged due to increased affordability. In personal care as well, there is a shift from mass to aspirational brands. “It will definitely give added growth to all the brands, especially in categories which have seen a significant GST cut,” he told analysts.
Dabur India CEO told analysts recently that overall, FMCG industry numbers were down sequentially from 13% to around 7.8% in December quarter. “That depression is only optical because of GST rate cuts. The pricing and the value are down, and that is why you see (it). But even the volumes are down,” he said.
