A slowdown in urban demand and rising prices of key commodities such as tea, palm oil and coffee have once again weighed on top FMCG players such as Nestle and Hindustan Unilever (HUL), both of which reported a low single-digit sales growth for the financial year ended March 2025.

HUL reported just 2 per cent volume growth and 3 per cent revenue growth in the March quarter.

The company cited the continuing weakness in urban markets and pricing pressure across major categories, including food, personal care, and tea, as reasons behind the disappointing numbers.

Nestle also pointed to challenges from rising coffee prices, even though its beverages segment delivered double-digit growth — outpacing other categories — driven by a strong demand for cold coffee products popular with the Gen Z and millennials.

HUL’s consolidated net profit dipped 3.35 per cent to ₹2,475 crore against ₹2,561 crore in the January-March quarter a year ago.

Revenue from product sales stood at ₹15,416 crore against ₹15,013 crore in the year-ago period.

In a post-results call, HUL CFO Ritesh Tiwari said, “The gross margin at 49.8 per cent was lower by 160 bps (basis points) year-on-year. This contraction in gross margin was driven by commodity inflation across palm oil, tea and coffee that wasn’t fully priced for.”

HUL’s EBITDA margin, which was at 23.1 per cent, declined 30 bps year-on-year, he added.

Profit after tax, before exceptional items and profit after tax both grew at 4 per cent, including the benefit of interest income on prior period tax adjustment,” he said.

On a standlone basis, HUL’s profit in the March quarter was up 3.61 per cent to ₹2,493 crore and its revenue from sale of goods was at ₹15,000 crore, up 2.08 per cent.

On a consolidated basis, HUL’s total expenses in the March quarter was at ₹12,478 crore, up 3.12 per cent, and total income, which includes other revenues, was up 3.48 per cent to ₹15,979 crore.

Nestle net down 6.5%

Nestle India’s consolidated net profit declined 6.5 per cent to ₹873.46 crore from ₹934.17 crore a year ago.

Revenues from the sale of products rose to ₹5,447.64 crore in the quarter from ₹5,254.43 crore a year ago.

“Total sales and domestic sales for the quarter increased 3.7 per cent and 4.2 per cent, respectively.

“Domestic sales growth was broad-based. Domestic sales crossed ₹5,235 crore, the highest ever, surpassing that of the January–March 2024 quarter,” said Nestle India, which owns popular brands such as Maggi, Nescafe and Kit Kat.

However, exports were down 8.65 per cent to ₹212.66 crore in Q4 FY25 due to commodity headwinds in coffee.

Total expenses of Nestle India were at ₹4,307.76 crore.

Revenue from operations was at ₹5,503.88 crore in the quarter, up 4.48 per cent year-on-year.

Chairman and managing director Suresh Narayanan said: “This quarter we witnessed double-digit growth in beverages and confectionery, with 3 out of 4 product groups delivering a healthy growth.”