Mumbai/New Delhi: What slowdown?
It’s a fair question to ask based on results for the consumer-product sector in the quarter ended 30 September. Unlike the companies in the benchmark Sensex and Nifty, which saw their worst performance in more than two years, the makers of items such as soap, snacks, colas, toothpaste and even durables such as televisions and washing machines recorded one of their most spectacular periods.
Sustained growth: FMCG companies have performed well despite the hike in prices. Harikrishna Katragadda / Mint
The country’s largest consumer products company by turnover, Hindustan Unilever Ltd, or HUL, reported net profit growth of 34% at Rs546.61 crore, compared with Rs408.06 crore in the corresponding quarter a year ago. Sales grew 20% to Rs4,027.87 crore. That came on the heels of results posted by the company in the previous quarter ended 30 June, being the best in the past two years (eight quarters).
The results stand in contrast to anecdotal evidence and fears of a crisis in retail demand. Of course, the effects of more recent news—from hiring freezes to a downward spiralling stock market—will not be known until after the end of the current quarter in December.
But the behaviour of companies in the fast-moving consumer goods (FMCG) sector indicates that they believe good times might keep rolling. Many plan to go ahead with price hikes and new product launches.
Buoyed by such confidence that consumers will not hold back, soft-drinks maker Coca-Cola India increased prices of its various brands by about 10% just before Diwali. By tradition, companies offer various freebies to spur demand during the festive season. According to analysts who track the sector, companies such as Dabur India Ltd, Godrej Consumer Products Ltd, or GCPL, and Britannia Industries Ltd are contemplating another round of 5-8% price hikes to counter increasing input costs—up by 30%, by some estimates. “We had to take a price hike because of increase in direct and indirect input costs,” said a Coca-Cola India spokesperson. On whether the price hike will impact sales, he said: “Coca-Cola India has grown in the past nine quarters and we hope the momentum to continue going forward.”
At HUL, chairman Harish Manwani says growth didn’t come from price increases alone; volumes, which are a reflection on consumer demand, grew 7%. “Consumer spending remains robust in the FMCG sector... We have sustained volume growth in a high inflationary environment and have offset the cost impact through aggressive cost management and judicious pricing,” he said, announcing the results.
Volume growth was seen across the premium and mass categories in the September quarter, he added.