Procter & Gamble sees demand recovery on good monsoon and as inflation softens

New Delhi: Procter & Gamble Hygiene and Health Care Ltd (PGHH), which sells Whisper, Vicks and Old Spice brands, said it is seeing green shoots of demand on account of plentiful monsoon rains and a softening inflation, but flagged declining rural wages and rising unemployment as short-term consumption concerns.

“These are definitely green shoots that we see. Within the FMCG industry, positive trends are finally emerging on consumption, both rural and urban. Inflation has been consistently softening with July and August closing below RBI's medium-term target of 4%,” Mrinalini Srinivasan, chief financial officer, PGHH, said during the company’s analyst day held virtually on Wednesday.

Green shoots are also visible in rural markets, she said, primarily on account of good monsoons and softening inflation. "Category demand is growing healthily with category sales and users growing in double-digits," she added.

P&G India will concentrate on its "integrated growth strategy" which includes its focus on daily-use products and expanding the reach of its products.

Also read | Procter & Gamble commits ₹500 crore towards a rural growth fund

"The strategy includes a portfolio of daily use products, where performance drives brand choice...that's the core around which the company operates; superiority across product, package and communication, retail execution and value; productivity to fund the superiority along with disruption of the entire value chain to future proof of business and all of this enabled by an empowered, agile and accountable organization," said Kumar Venkatasubramanian, CEO, PGHH.

India's fast-moving consumer goods (FMCG) industry reported a sharp drop in volume growth in the June quarter, largely due to a slowdown in sales of packaged foods, according to data sourced from intelligence company NielsenIQ (NIQ) said.

Overall, the sector reported a 4% jump in value growth.

For the year ended 30 June 2024, PGHH's sales rose 7% to  ₹4,192 crore, while net profit was flat at ₹675 crore.

Procter & Gamble, the American multinational consumer goods maker, operates via multiple entities in India and sells a range of products including shampoo (Head & Shoulders), detergents (Ariel), baby care (Pampers) and home care (Ambi Pur).

Also read | Procter & Gamble to spend Rs50 crore towards vaccination drive for Indians

Its business in India also includes two large listed companies—Gillette India (male and female grooming) and Procter & Gamble Hygiene and Health Care (female hygiene and healthcare).

Srinivasan said monsoon across 75% of the country's districts have been either normal or above normal and rural demand is expected to keep up with these positive trends.

“The watch-out, though, is declining rural wages and rising unemployment, both of which should stabilize in the near term with the government's recently announced interventions. Collectively, this should augur well for consumption trends,” she added.

PGHH holds half the share of the market for branded women’s hygiene products in India that is currently valued at ₹3,400 crore. It sells sanitary napkins under the Whisper brand.

"We expect double-digit growth to continue over the next three years for the category,” she said. Growth across its female hygiene and healthcare categories has been “balanced” over the last year. For the company (PGHH), female hygiene accounts for about 70% of its sales in India.

Also read | Seeking value in ITC and Godfrey Phillips? Tobacco stocks gain in FMCG play

However, categories such as feminine hygiene are still underdeveloped in a market like India with low per capita usage. At the same time, competition has emerged in the female hygiene segment, too, with more brands in the fray, especially direct-to-consumer ones.

“At a national scale—these brands (small and direct-to-consumer brands) represent less than 10% of the market. Having said that, the competitive landscape has evolved and much competition has entered the category. Healthy competition can always help grow the category,” she added.

Last year, PGHH drove cost savings of ₹113 crore. “Productivity is now fully embedded in our operating model and it is embraced in every part of our operations. Last year through our productivity interventions, PGHH achieved savings of over ₹113 crore,” she added.

And read | Marico and Britannia cheer rural growth as FMCG cos pin hopes on monsoon