Nestle: Consumer goods industry may rebound in fiscal second half
New Delhi: After witnessing a decline in the first half of the fiscal, Nestle India Ltd expects the fast moving consumer goods(FMCG) industry to fare better on the back of good monsoon and benefits trickling in from the 7th Pay Commission.
The company, however, is cautious that rising commodity prices could pose a challenge to the pricing strategy of various players in the industry. “The growth in the FMCG industry, at least in the first half of this year, has actually declined compared with the previous year,” Nestle India chairman and managing director Suresh Narayanan said.
Many FMCG companies have witnessed either low or middle single digit growth but not a single firm has clocked double digit growth. So, the first half has clearly seen a lower growth of the industry, he added.
Narayanan, however, said there was optimism in the industry for a better show in the second half of the year compared with the first. “Clearly, there are two or three expectations that seem to improve the sentiment for the period coming ahead of us,” he said, citing reports of near satisfactory monsoon that would boost rural market demand, as the primary reason.
“The number two (reason) is the benefits of 7th Pay Commission. Even if majority goes into consumer durables, as is the expectations, some of them would trickle to consumer good products, and the third is OROP (one rank, one pension) that is also likely to have some benefit in terms of consumer products,” Narayanan said.
“The overall climate for inflation seems to be reasonable at the moment. If this continues, it augurs well for the consumers industry going forward,” he added.
When asked about the decline in growth of FMCG industry during the first half of the fiscal, he said: “One of the reasons, which has been given, is overall levels of innovations have not been significant enough in the FMCG industry and that’s not giving a significant benefit in terms of consumer uptick.” The second one, he said, “in India, still the income redistribution is an issue. Rural market was badly impacted because of weaker monsoon resulting in more tepid income.” PTI