FMCG CEOs flag rural slowdown
- Top packaged consumer goods companies had also flagged slowing rural demand in the December quarter, citing inflationary pressures
NEW DELHI: Top honchos of large fast moving consumer goods companies have flagged slowdown in rural demand in the March quarter, citing high inflation across products and commodities.
Analysts Manoj Menon, Aniket Sethi, and Karan Bhuwania at brokerage ICICI Securities interviewed chief executive officers of companies such as Marico Ltd., Dabur India, and Tata Consumer Products Ltd.
Most executives highlighted the adverse impact of inflation on demand.
“If we look at volume growth, overall the industry is declining. Volume growth of shampoo is flattish, while toothpaste and hair oil are declining. This situation is likely to remain same for some time due to inflation. In terms of rural, we had better performance last quarter due to some good work, while rural is declining for us as well this quarter," Mohit Malhotra, CEO, Dabur India Ltd., told the analysts in a series titled Consumer—Consumption Conversations. “Consumers’ wallet is shrinking and at the same time opening up is also leading to increasing spends in out of home categories.”
Top packaged consumer goods companies had also flagged slowing rural demand in the December quarter, citing inflationary pressures, Mint had reported earlier. Most companies said the Russia-Ukraine conflict has pushed up commodity prices and exacerbated input cost pressures.
Saugata Gupta, managing director and CEO at Mumbai-based Marico, too, pointed to a slowing rural demand.
“There is some slowdown due to inflation. If Ukraine crisis would not have happened, rural would have recovered but with food inflation it will continue to be stressed. Direct distribution is a critical source of competitive advantage and barrier to entry in rural, and we will continue to invest in it. Rural can recover in the second half with sustained high inflation in wheat leading to higher realisations for farmers,” Gupta said.
Dabur’s Malhotra said inflation is a big issue and that things have become “really difficult”. He added that most growth for companies is coming from price increases with volumes remaining “flattish”.
Companies have been undertaking price hikes over the last several months. However, in several categories, price hikes remain ineffective to counter high inflation.
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First Published:4 Apr 2022, 06:18 PM IST
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