Dabur says business resilient as 'unprecedented inflation' hits FMCG

Dabur's food and beverages vertical saw strong double-digit growth in the quarter on the back of improving out-of-home consumption, innovation, and intense summer season

Dabur India on Wednesday said consumption pressure continued across the fast-moving consumer goods (FMCG) sector on account of unprecedented inflation, which impacted the share of the income available for spending on consumer staples.

This trend was witnessed across urban and rural markets.

Dabur India expects its consolidated revenue to grow at mid to high single digits in the April-June quarter. 

“In this challenging macro environment, Dabur’s India business has been fairly resilient and is expected to report high single-digit revenue growth on a very high base of 35.4 per cent revenue growth in Q1 FY22,” Dabur said in its quarterly update on exchanges.

The company’s food and beverages vertical saw strong double-digit growth in the quarter on the back of improving out-of-home consumption, innovation, and intense summer season. Its home and personal care portfolio is expected to record high single-to-low double-digit growth despite a high base.

In health care, the maker of Dabur Chyawanprash expects to report a decline over the last year's high base as the business due to the surge of the Delta variant of Covid-19 in the base quarter.

Its international business is expected to register high single-digit revenue growth in constant currency. However, due to currency devaluation, particularly of Turkish Lira, the reported growth in rupees would be in the low single digit, the company said.

Dabur also said it continued to grow ahead of category growths and gain market share in most of its segments.

“On the profitability front, inflationary pressures continue to impact input costs, such as crude-led derivatives, vegetable oils, honey and other agri-based commodities. We are taking judicious price increases and have embarked on cost-saving initiatives to mitigate the impact on our margins.”

However, the input cost pressure, combined with portfolio mix changes, has led to a near-term impact on the operating margins that are expected to be lower by around 200 basis points as compared to Q1FY22, with margins normalising to pre-Covid levels for Q1 despite unprecedented inflation.”

In the preceding quarter, the operating margins were higher than normal due to Covid-led surge in the health care vertical.

It continues to target higher than the industry growth on a medium-to-long-term perspective with stable margins, although there are near-term inflationary pressures, the company said.

In spite of high inflation and near-term consumption pressure, the company said it would continue to invest in brands, innovation, advertising and promotion, distribution expansion, and back-end, which would help drive long-term sustainable growth of the business.