New Delhi: Consumer goods company Wipro Consumer Care and Lighting said that rural markets grew at a slower pace than urban markets in the September quarter in a sign that a liquidity crunch in rural trade, and lower rural wages continued to dampen demand for the maker of Santoor and Chandrika soaps in India’s hinterland.
“In the last three months clearly rural (growth) has been slower than urban," Vineet Agrawal, chief executive officer, Wipro Consumer Care and Lighting told reporters on Monday. He further said that while the company started witnessing an overall demand slowdown post March, weak demand has been compounding in rural markets in the last two-three months.
Agrawal said that overall volume growth for the company grew in “mid-single digits" in the last six months with rural growth lagging urban largely on account of slow wage growth in those markets, as well as, retailers going easy on stocking inventory amid a cash crunch in the market. "Stock levels have gone down, farm prices have been depressed, and a lot of construction workers who used to send back money have been impacted (because of the slowdown)," Agrawal told reporters in Delhi. "I'm not sure from our industry how much the consumer demand has come down but I think it is also a lot of trade correction which is happening, so if trade was keeping three weeks worth of stock they have probably brought it down to two weeks and so it had a ripple effect happening across the market."
He, however, said that urban demand had continued to stay intact.
The company’s commentary on consumer demand comes amidst a slowdown in the market that is seeing companies spanning automobiles to biscuit makers complain of a weak demand. For makers of fast moving consumer goods the focus has especially been on reviving tepid demand rural markets that draw a large part of sales for some companies.
Rural markets have traditionally grown 3-5% points faster than urban for consumer goods companies on account of increasing affordability, availability, and demand, research firm Nielsen wrote in its quarterly update on the FMCG sector in the month of June. However, Nielsen then noted that rural growth was slowing down at double the rate of urban in recent quarters, narrowing the gap between urban and rural growth rates. The company's commentary on rural demand corroborates Nielsen's projections of a cooling off in demand.
India is also in the middle of the festive season when retailers and brands typically see an uptick in demand amid a shopping frenzy from consumers, but Agrawal added that so far the festive season that commenced with Onam in south had been soft for the company.
"From our perspective, Onam was not great neither was Ganpati, but a lot of government stimulus has happened post that. Let us see how it all moves," he said hinging hopes on Diwali that is scheduled for the end of October.
Wipro sells India's second-largest soap brand Santoor that is also the company’s largest-selling brand. A weak demand has also prompted the company to take price cut,s especially as raw material prices that of palm oil have remained low. Santoor took a price cut of 4% to 14% on two of its stock keeping units over the last few months according to an October report by brokerage firm Elara Capital. Competition, Hindustan Unilever Ltd, too slashed prices across its key Lux, Lifebuoy, and Dove soap brands in the last quarter to pass on benefits of lower commodity costs and shore up a weak consumer demand.
Agrawal said that he expects demand to bounce back on the back of a slew of government measures that have been taken. "One has to wait and watch as to what gets translated to demand," he added.