Despite slower revenue growth trends, companies are relatively more sanguine on the margin front. Benign input cost inflation coupled with prudent pricing (particularly for food companies who are witnessing agri commodity/milk inflation), mix enhancement and significant cost optimization initiatives are leading to stable to improving margin outlook. A&P spends (as % of sales) are expected to be stable to moderating based on pace of new product launches and helped by moderating media ad rates. Much of the new product launches are margin accretive.
Distribution dynamics. Significant efforts are underway to scale up presence in modern trade (12-15% of revenue) and E-Commerce (1-4% of revenue) with dedicated support and ensuring relevant product/price packs for these fast growing distribution channels. Companies for now derive similar to higher margins on these channels (vs general trade) on account of margin accretive mix (larger packs, premium brands etc.). There is growing discussion around introducing Digital channel specific brands among corporates.
We sensed increased investments from domestic companies (GCPL, MRCO, DABUR, Emami) to tap into the opportunities here besides continued enhanced engagement by MNCs. Technology usage is rising across the value chain (customer engagement, distribution, marketing, and supply chain) to become more nimble.
Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.
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