As the people in villages become aware of the advantages of using branded foods, more of them will become our consumers, says Angshu Mallick, CEO & MD, Adani Wilmar
Fast-moving consumer goods (FMCG) company Adani Wilmar Ltd has seen demand recovering gradually after the second wave of the coronavirus pandemic; however, many consumers are trading down as well. In an interview, chief executive officer (CEO) and managing director (MD) Angshu Mallick spoke of the impact of inflation on consumer goods companies like Adani Wilmar which sells Fortune edible oil and other packaged foods and personal care products, at a time the buzz around a potential initial public offering for the company gets louder. Edited excerpts:
What is your assessment of the consumer sentiment after the second and more severe wave of covid-19 in the country? Did you see demand contract? Is it a long-lasting contraction?
Consumer sentiment has certainly been hit after the second wave of the pandemic, and demand was also impacted adversely. However, we are seeing a gradual pick-up in demand across categories in recent weeks, and I believe the worst is behind us.
What was its impact in the rural markets?
Unlike the first wave, when covid-19 was largely restricted to cities, cases were reported in large numbers from rural areas in the second wave. We had seen a lot of migration to villages in the first wave, which had a positive impact on rural demand. The spike in covid-19 cases in rural areas in the second wave has impacted demand and resulted in a slowdown.
What percentage of your foods business comes from rural? Are you planning to grow that business?
The share of the rural market is fairly decent— the rural contribution is around 30% for food and oil put together and is growing rapidly. As the rural consumers become more aspirational and more aware of the advantages of using branded foods, such as health and quality, we expect more of them will become our consumers. We are increasing our reach in rural markets. We are also launching smaller consumers packs keeping in mind the rural markets. Our communication campaign is being tailored to appeal to rural consumers.
Is the consumer trading up or trading down both in terms of brands and pack sizes post-pandemic?
As many people have suffered from loss of income, we are seeing consumers trading down as far as brands are concerned. We are also seeing a growing number of consumers preferring smaller/consumer packs so as to not spend a large sum at one go.
All smaller stock keeping units (SKUs)— 200 ml, 500 ml and 1 litre are showing a double-digit growth. Similar is the story in foods.
We had seen a similar change during the first wave of the pandemic too, but consumers had shifted back to the original shopping habits once the situation eased. We can expect something similar in the coming days.
How much of a price hike have you taken on your products because of the rise in commodity/raw material prices? Will there be more price increases?
There has been a steep rise in agri-commodities’ prices across the board. We avoided any price hike as long as it was manageable. We have taken care to pass on the minimum hike to consumers and tried to absorb the rest. Future price movements will depend on input costs. If commodity prices keep going higher, we will have no option but to pass on the hikes.
What can the government do to help companies tide over inflationary pressures? Has reduction in import duty on oil helped at all?
Suppliers can increase their prices, so you don’t get the full benefit of the duty cut. If the objective of duty cut was to arrest inflation as the edible oil prices were going up, the consumer will not get relief because of this.
Why is unrestricted import of refined oil allowed till December bad for the domestic edible oil manufacturers?
Domestic edible oil manufacturers will be adversely affected by the decision to allow unrestricted import of refined palm oil and palmolein till December. It could lead to imports of refined palm oil from Saarc (South Asian Association for Regional Cooperation) nations at zero duty and should be reversed. Moreover, oil refineries are already working at lower capacities and margins, and unrestricted imports will only hurt them more.
Most large FMCG companies are focusing a lot on direct-to-consumer (D2C) brands or Internet-first brands. Are you eyeing that space?
At present, we have Fortune Online app and the company’s retail franchise called Fortune Mart. We are focusing on expanding the reach through these platforms.
What can the government do to speed up recovery?
The economy has been hit hard by the pandemic, as evidenced by the gross domestic product (GDP) numbers. But going by the decline in covid-19 numbers in the last month or so, and the improving vaccination coverage, we have good reasons to believe the worst is behind us. Most of the states have either unlocked fully or are in the process to do so. We can expect demand to gradually improve over the coming weeks and months, especially as the festival season approaches. The government has announced several measures to support businesses tide through this difficult period. However, I believe some steps to put more money in the hands of people can help in speeding up recovery.
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