Gradual Recovery In Consumer Staples, Indicates Citi — Check Key Buys And Sells
Commentary on consumer sentiment and urban demand recovery will be crucial, alongside early evidence of sustained demand improvement from GST rate cuts, as per the brokerage.
After several sluggish quarters, the outlook for India’s consumer staples sector appears to be slowly turning a corner. Global brokerage firm Citi expects a sequential improvement in growth momentum in the third quarter, helped by lower prices across categories following GST rate cuts, higher grammage in low-unit packs, and a partial recovery after the inventory destocking seen in September–October.
With signs of recovery still fragile, the brokerage prefers non-alcoholic food and beverages, and lists Dabur, Colgate India and United Breweries among its key sells.
At the same time, profitability pressures that have plagued the sector over the last year may finally be easing. Citi forecasts Ebitda margins for its coverage universe to remain flat year-on-year, marking a reversal from the declines seen over the past four to five quarters, as costs soften across multiple commodities.
The key question now, the brokerage says, is whether this recovery in demand will sustain beyond the near term, after GST rate cuts and other government initiatives. Citi remains selective, preferring companies backed by strong self-help initiatives.
Citi’s pecking order tilts toward food and beverages over home and personal care, with Britannia, Godrej Consumer and Varun Beverages as its top picks.
The brokerage flagged several indicators to watch this results season. Commentary on consumer sentiment and urban demand recovery will be crucial, alongside early evidence of sustained demand improvement from GST rate cuts. Citi will also track competitive intensity as companies push promotions to chase volumes and market share, and assess management initiatives such as route-to-market changes, portfolio expansion, innovation and higher brand spends.
On individual companies, Citi highlighted:
Britannia as the biggest beneficiary of GST rate cuts, with 65–70% of revenue from low-unit packs and benefits expected from higher grammage at Rs 5/Rs 10 price points. Citi also views concerns around the CEO transition as overdone.
Godrej Consumer is expected to post 11% India sales growth (9.5% UVG) and 20% annual growth in India Ebitda.
Varun Beverages is seen delivering 9% India volume growth, which could ease market-share concerns; investors will watch for new initiatives in India and Africa.
Marico is expected to post strong volume-led performance, with Parachute remaining robust despite steep price cuts. Citi estimates 10% consolidated Ebitda growth driven by lower copra prices.
Tata Consumer is likely to see continued strong volume growth in tea, salt and RTD beverages, with sequential margin improvement in both India tea and international businesses.
Overall, Citi believes the industry is witnessing a gradual improvement in the growth trajectory, but stresses that sustainability remains the key theme.
