Home / Industry / Manufacturing /  Moderate demand dampens Q4 results for FMCG firms

New Delhi: A consumption slowdown dampened sales in the March quarter at some of India’s largest consumer goods firms, as a slow offtake of goods in rural markets and an elongated winter forced companies to report moderate volume growth.

India’s largest FMCG firm Hindustan Unilever Ltd., biscuits maker Britannia Industries Ltd., along with Dabur India Ltd., Marico Ltd and Godrej Consumer Products Ltd., announced their fourth-quarter earnings earlier this month. After reporting strong volume growth over the past few quarters, the companies reported subdued numbers for January to March 2019.

Top executives at these firms acknowledged that a moderate rural demand, liquidity crisis in the market and the adverse impact of a delayed summer led to lower growth.

India’s largest consumer goods firm, Hindustan Unilever Ltd (HUL) on Friday reported 7% volume growth for the quarter ahead of its peers, but this was its slowest growth in six quarters. Revenues at the maker of Lux soaps and Surf Excel detergent were up 9.3% to 9,945 crore and its profit jumped by 13.8% to 1,538 crore.

The company’s managing director and chairman Sanjiv Mehta said the company witnessed moderation in the general trade and wholesale channels. "And if I look at it from the lens of geography, then moderation is more pronounced in rural markets," Mehta added. HUL, which has been seeing rural markets grow at a faster pace than urban markets, said “rural growth has come on the same level as urban," indicating a reversal of the trend.

Godrej Consumer Products Ltd (GCPL), which sells the popular Cinthol soap and Good Knight mosquito repellent, posted a mere 1% increase in domestic volumes; while its net profit was up 51% at 935.24 crore during the quarter. “It has been a relatively weak quarter for us," Vivek Gambhir, MD and CEO, GCPL, told investors over a post-earnings call. “Our India business remained soft on account of a general slowdown in staples consumption, on liquidity pressure that we saw in the channel, and the adverse impact of the delayed summer for much of our portfolio, particularly soaps and household insecticides."

These numbers come days after research and insights firm Nielsen had lowered its annual growth projection for India’s fast moving consumer goods market to 11-12% for 2019, a downward revision from its earlier projection of 13-14% after it observed a “significant softening of rural growth trends."

The trend was visible across categories.

Biscuit maker Britannia reported a 7% jump in domestic volumes, largely in line with street expectations, while its profit for the quarter was up 11.82% at 294.27 crore.

However, the maker of Good Day and NutriChoice biscuits said it had witnessed softening of consumer demand for its products over the last two quarters. “In the last two quarters, we've seen a certain slowdown in our overall growth… from September (ish) to this quarter, we are seeing a slowdown of about 5%, 500 basis points overall, in the categories that we operate in," the company's management said in an earnings call on 2 May. A large part of that slowdown is in rural markets, the management noted. Varun Berry, managing director, Britannia, added that while rural continues to outgrow urban, growth rates in both markets have come down from the levels that they were six months ago.

On Tuesday, Jyothy Laboratories, posted a 6.3% jump in volume for the fourth quarter. However, the company that sells Ujala fabric whitener and Margo soaps said that rural markets that contribute close to 35% of the company’s sales have decelerated in the last two quarters. As a result, consumers are downtrading to lower pack sizes, said Ullas Kamath, joint managing director, Jyothy Laboratories Ltd.

In the north, a delayed summer also hit sales at FMCG companies.

Dabur India Ltd, the maker of Real juices and Vatika hair oil, posted a 4.7% rise in consolidated revenue for the quarter at 2,128.19 crore, with a 4.3% growth in domestic volume—its lowest in seven quarters.

ABOUT THE AUTHOR

Suneera Tandon

Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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