New Delhi [India], August 20 (ANI): A marked growth is visible in the consumer staple segment, and the trajectory in volume improvement is likely to continue in the coming quarters of 2024-25, says Motilal Oswal Financial Services.
The expected volume growth outlook as predicted by the financial advisory firm is because of stable retail inflation, a healthy progress of the monsoon, and the government’s budgetary allocation towards boosting the rural economy.
Consumer staples companies have struggled to maintain volume growth momentum during the last two years, largely due to external challenges such as erratic monsoons and high inflation, which severely dampened consumption in the mass segment.
“A modest upswing in volume growth is now visible after two years of subdued demand,” Motilal Oswal said in its consumer-segment-focused report on Tuesday.
That said, in the April-June quarter, harsh summer conditions and election-related restrictions have somewhat affected out-of-home consumption of beverages, alcoholic beverages, and paints, but it boosted demand for cooling products.
Paints segment has been experiencing a moderation in growth for the last 3-4 quarters.
Additionally, Motilal Oswal report said that a consistent entry of new players in the sector has been altering the competitive landscape.
“These companies are investing heavily in capex to enhance capacity…Though the new entrants are helping the category shift from unbranded to branded, they are also intensifying the competitive pressure.”
The report asserted that weak discretionary demand and the changing competitive landscape are adversely affecting paint industry growth.
Despite the consumption slowdown across various categories, jewellery companies have delivered healthy growth fuelled by an increase in footfalls and store additions, and healthy same-store sales growth (SSSG).
However, in the first quarter, revenue growth was hit by a rise in gold prices (15 per cent year-on-year), extreme heat waves, general elections, and fewer wedding days.
Motilal Oswal remains optimistic about the jewellery sector and anticipates a continued rapid transition in consumer buying habits from informal/local to formalized channels.
“Factors such as rising ticket prices, improved shopping experiences, a wider product range, and others are driving this significant trend. The recent reduction in customs duties will further accelerate the shift from unorganized to organized retail channels,” Motilal Oswal report said.
The brokerage holds a positive view of the jewellery companies. Various external and internal factors are contributing to robust earnings growth in the jewellery sector. (ANI)
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