Mumbai | Kolkata: Top consumer goods firms including Hindustan UnileverNSE 1.70 %, ITCNSE 0.18 %, NestleNSE -0.22 %, BritanniaNSE 0.54 % and Parle expect consumer demand to recover by the middle of next year, helped by government interventions and improved sentiments in rural areas.
Consumer product sales have been tapering off consistently over the past four quarters, and experts said the low base will also help sales revival.
“Fundamentally nothing has changed in the Indian economy,” said B Sumant, executive director for FMCG at ITC. “There is a growing consumer base.”
He said the current slowdown is “short term hiccups (that) should disappear by second quarter of next year” when the winter crop yield happens, improving rural sentiments. Credit flow from non-banking financial companies (NBFCs) will boost wholesalers, Sumant said.
Unilever, the British-Dutch parent of HUL, cut its sales guidance for the first half of 2020 on Tuesday, mainly due to slowdown concerns in South Asia and West Africa.
India is Unilever’s biggest market by volume and the second largest after the US in terms of revenues.
The maker of Dove shampoo and Lipton tea said it has seen slowdown particularly in rural India that, for the first time in a while, is growing at a slower rate than urban India.
“As we look forward into next year, we are tackling some of the fundamental drivers of growth around refocusing on penetration of our brands, ensuring that we have strong savings programmes into next year to fuel continued steps up in investment,” Unilever chief executive Alan Jope told analysts. “Some of the macro effects will take time to flow through. So generally, it looks as if India will start to come back in the second half of next year,” he said.
In the past decade, sales of branded daily needs in the nation of 1.3 billion people have increasingly relied on growth in the rural hinterland, home to more than 800 million people, whose purchase behaviour is largely linked to farm output. Rural consumption, which accounts for about a third of the market and has been outpacing urban sales, has come under stress due to lower farm incomes and liquidity constraints that have squeezed the wholesale channel.
“There are issues around overall economic growth, agrarian income, impact and outflow in banking
situation,” said Suresh Narayanan, chairman and managing director at Nestle India. “The government has looked at areas like taxation (and) ease of doing business among other things. If some of the measures that the government is contemplating also leads to more money in the hands of consumers, hopefully recovery should happen. For us to enjoy the 8-9% growth of the past, I hope it happens sooner than later,” he said at CII National FMCG Summit themed ‘Growth Wapsi: Revving up FMCG Growth’ in Mum ..
From 16.2% year-on-year growth during July-September 2018, growth in the overall fast-moving consumer goods market has fallen to 7.3% last quarter, according to market tracker Nielsen, which expects FMCG to growth to come down to 6.5-7.5% during October-December.
Parle Products, makers of Parle-G and Hide & Seek biscuits, said a fullfledged recovery should come by the second or third quarter of next calendar year, but inflation could be a dampener. “We have seen some green shoots post Diwali such as improvement in sales from low single digit to mid-single digit,” said Mayank Shah, category head at Parle Products. “It should reach normal level in another 4-6 months. I ..