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<ul><li>Price cuts impacted sales of FMCG majors in Q3, even as they were able to stem market share losses.</li><li>Slow offtake of products have also led to liquidity constraints in the general trade channel.</li><li>General trade accounts for two-thirds of FMCG sales, and their troubles are another roadblock for volume recovery. </li></ul>For most of the ongoing financial year, i.e. FY24, fast moving consumer goods players have been waiting for an uptick in rural sales. That never came, even in the third quarter (Q3), despite the onset of the festive season. High competitive intensity continues to persist, leading brokerages to cut their earnings estimates, as they see general trade troubles to add to the pressures, for the next few quarters. The management commentaries have not been encouraging either. The recovery of rural markets, which contribute to 45% of total FMCG sales, is linked to many uncertainties. “Due to lower agriculture yields and uncertainty of future crop outputs, rural consumer sentiment remains subdued. Consequently, the anticipated buoyancy from the festive season did not materialize. The dualism we've seen in the recent past continues with certain parts of the market recovering faster than the rest,” said <keyword id="20038672" type="General" weightage="20" keywordseo="rohit-jawa" source="keywords">Rohit Jawa</keyword>, CEO of HUL in an earnings concall. Lowered estimates HUL’s volumes grew 2% in Q3, but its value growth fell marginally by 0.3%. This was due to price cuts they had to take, especially in home care and personal wash segments. Brokerages have been disappointed with its festive quarter performance, even as it was able to stem market share losses with pricing interventions. “We believe demand slowdown, competitive pressure, distribution stress, and rising royalty rates are likely to have an overhang on HUL’s valuations. Management commentary on demand setting remains unexciting, as demand recovery remains a hope on the emergence of tailwinds,” said a report by Emkay which cut its earnings estimates by 3% for FY24 to FY26. Marico also saw subdued growth in its core portfolio of Parachute and Saffola. They saw flat to slight decline in value growth, due to price cuts and heavy local competition. The company also said that there is ‘no visible buoyancy seen in consumer sentiment’. “We expect overall demand trends to be subdued with no visible improvement affecting volume trajectory in Q4FY24. We expect domestic business to witness muted volumes due to stock reduction undertaken across the portfolio,” Nuvama said. It cut Marico’s FY24 earnings per share estimates by 2.1%, and revised its price to earnings multiples to 38x from 42x earlier. In addition to price growth, most companies had to grow their advertising and marketing budgets in double digits to fight off competition. But their robust expansion in margins due to sharp reduction in input prices helped absorb the impact. Going forward, analysts see A&amp;P costs remain elevated, while there has been a sequential upward movement in commodities like wheat, sugar etc. General trade troubles Slow offtake of FMCG products has had a far reaching impact on the general trade channel as well. General trade channels account for 75-78% of FMCG sales in India, as per a report by Bizom. It has been facing problems of its own, as sluggish demand has led to slow movement of goods. Retailers have been unable to pay up distributors due to liquidity constraints, increasing the credit cycle. A weak trade channel can be another roadblock for FMCG majors who are planning to grow their volumes. <keyword id="20374430" type="General" weightage="20" keywordseo="saugata-gupta" source="keywords">Saugata Gupta</keyword>, CEO of Marico too pointed out problems with general trade, and that they’re working to rejuvenate it. “General trade channel is instrumental in restoring pace in volume growth. We are seeing how we can improve return on investment (RoI) for our partners, and facilitate higher credit. We are also looking to diversify our portfolio in general trade,” said Gupta in an earnings concall. Marico’s efforts are expected to bear fruit only in the next financial year. In the meanwhile, brokerages consider it an overhang on the business. “We expect general trade to continue to suffer liquidity and profitability constraints leading to ROI challenges faced by channel partners due to weak structural growth,” says Nuvama. HUL too has made changes in its approach to general trade. It has revamped its margins for distributors recently, cutting fixed margins and increasing variable margins in the top 100 cities. At its earnings call, the company said it has not seen any adverse impact of it as yet. It defended its decision saying that it’s a future-ready margin structure. “We have incentivized distributors in big cities to essentially sell more, of course, but importantly also to service more stores, service and deliver them the next day and to sell more lines, especially more on market development of premium lead lines or more assortment, or more width. We saw, therefore, a better served <keyword id="20401784" type="General" weightage="20" keywordseo="kirana-store" source="keywords">kirana store</keyword>,” <keyword id="20194350" type="General" weightage="20" keywordseo="jawa" source="keywords">Jawa</keyword> said. The company has also been reaching out to retailers directly via its <keyword id="20401783" type="General" weightage="20" keywordseo="shikar" source="keywords">Shikar</keyword> app, and has even deployed more feet on the street. As per media reports, it serves around three million outlets directly. Yet, analysts see general trade troubles as an added challenge for HUL. “Reinforcing the general trade moat is now an added pressure, with changes in distributor margin structure,” said Emkay. With added challenges and muted sentiment, the road to recovery has only become slower for FMCG players.

New troubles pile on FMCG majors as they await consumption uptick

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<ul><li><keyword id="7412577" type="General" weightage="20" keywordseo="Dealshare" source="Orion">DealShare</keyword> is looking to hire upto 1,500 employees across tech and product side to increase its workforce to 3,500.</li><li>The four-year-old <keyword id="623994" type="General" weightage="20" keywordseo="social-commerce" source="Orion">social commerce</keyword> startup plans to expand its business 3x and enter another 100 cities in this fiscal year.</li><li>It serves more than 3 lakh orders per day across 1,000 pin codes spread over 150 cities in 10 states.</li></ul>Grocery-focused social commerce startup DealShare is looking to hire upto 1,500 employees across tech and product side to increase its workforce to 3,500 by the end of this fiscal year. The company has already doubled its workforce to 2000 since last year, Vineet Rao, founder and chief executive officer of DealShare, told Business Insider. The hiring outlook is a part of DealShare’s plans to further strengthen its business this quarter by focusing on filling the gaps in the business in order to build a stronger offering. Simultaneously, the company plans to expand its business 3x and enter another 100 cities in this fiscal year (FY 22-23). “Because we were growing up so fast there have been lots and lots of problems that have also creeped in. In some places my assortment is not perfect the way it should be, people are not finding all the things that they should find in DealShare, in some places pricing and promotions are not right, in some places the inventory is not available as much as it should be,” Rao told Business Insider. DealShare serves more than 3 lakh orders per day across 1,000 pin codes spread over 150 cities in 10 states. The company believes that even with the expansion to 250 cities, a large part of their traffic would come from their existing 150 cities instead of the newly added 100 cities. The company also claims to have crossed a billion dollars in gross revenue run rate last month. DealShare has raised $393 million to date since its inception in 2018. The company was founded by Vineet Rao, Sourjyendu Medda, Sankar Bora and Rajat Shikar. It primarily focuses on sale of groceries and household essentials through social media and messaging platforms like WhatsApp. The Jaipur-based company entered the unicorn club earlier this year, after being <a href="https://www.businessinsider.in/business/ecommerce/news/social-e-commerce-platform-dealshare-raises-45-million-from-adia/articleshow/89641250.cms">valued at $1.7 billion</a>. DealShare competes with other social commerce platforms like <a href="https://www.businessinsider.in/business/startups/news/citymall-a-startup-that-helps-budding-entrepreneurs-start-their-ventures-on-whatsapp-has-raised-over-22-million/articleshow/83741383.cms">CityMall and BulBul</a>, among others. Looking beyond hiring, Dealshare has plans for inorganic growth, too The company is also looking to strengthen its business by acquiring 5-10 small brands, with their own manufacturing units, in an attempt to expand its offerings. Rao emphasised that they would be looking to acquire fast moving consumer goods (FMCG) and staples companies majorly, but will also look at essential fashion. The four-year-old startup has not yet decided on an average ticket size yet as the deal size would depend on the acquired company. Rao noted that the transaction could go as low as ₹25 crore. The company is currently exploring options for debt to fund these acquisitions. Separately, DealShare also claims to always be on the lookout for acquiring companies that can further boost its operations like logistics or technology. The Jaipur-based startup claims to have over 1,000+ micro-entrepreneur partners registered on the platform, who help sell products online. The company targets to increase this figure to 5,000 by year end, DealShare’s chief operating officer and founder Sankar Bora previously said. SEE ALSO <a class="tout-title-link" href="https://www.businessinsider.in/tech/enterprise/news/cognizants-latest-earnings-have-a-silver-lining-for-indian-it-majors-tcs-infosys-and-wipro/articleshow/91334290.cms">Cognizant’s latest earnings have a silver lining for Indian IT majors TCS, Infosys and Wipro</a> <a href="https://www.businessinsider.in/business/corporates/news/google-india-appoints-former-modi-think-tank-official-as-policy-head/articleshow/91333970.cms" data-type="tilCustomLink">Google India appoints former Modi think-tank official as policy head</a> <a href="https://www.businessinsider.in/stock-market/news/these-domestic-mutual-funds-stepped-up-for-lic-ipo-anchor-book-as-foreign-investors-remain-cautious/articleshow/91306852.cms">LIC IPO anchor book — domestic mutual funds step up as most marquee foreign investors skip India’s biggest IPO yet</a>

Social commerce unicorn DealShare is now on a lookout to hire 1,500 employees, acquire 10 businesses this year

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New troubles pile on FMCG majors as they await consumption uptick

Katya Naidu

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Social commerce unicorn DealShare is now on a lookout to hire 1,500 employees, acquire 10 businesses this year

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