What FMCG companies have to say about rural demand

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New Delhi: September quarter earnings from fast-moving consumer goods companies helped focus on the demand environment in rural markets, which remain tight due to high inflation.

Most companies reported sluggish rural demand in the September quarter, which impacted their quarterly volumes. However, most expect some recovery in demand in the second half of the fiscal year.

The parachute oil manufacturer Marico Ltd. Commenting on demand in rural and urban markets, said the divergence in rural and urban growth widened as the former teetered amid continued inflation and liquidity pressures during the quarter. For the September quarter, the company reported domestic volume growth of 3% year-over-year.

Late last month, domestic FMCG company Dabur said the economic environment remained “challenging”; this affected purchasing power. “The impact of inflationary pressures has been more pronounced in rural markets, with hinterland demand growth lagging urban markets for the first time. However, we are hopeful that rural demand will report a smart recovery in the quarters to come and we are investing early to ensure it Drive demand recovery by expanding our rural footprint by adding nearly 9,000 villages in Q2 2022-23 bringing our total coverage to over 100,000 villages,” said Mohit Malhotra, Chief Executive Officer of Dabur India.

Meanwhile, the country’s largest consumer packaged goods company said high inflation is hurting rural demand more than urban demand. “And that inflationary impact is reflected in a decline in volume in the rural areas market and therefore overall rural value growth remains subdued. So this turns out. As for Hindustan Unilever, we’ve of course gained market share extensively in both urban and rural areas, but overall growth will be driven by what’s happening in terms of the market,” said Ritesh Tiwari, the company’s CFO, during a post-earnings call on October 21st.

Overall, FMCG market volumes continue to decline in both urban and rural markets, with the decline in rural markets being even more pronounced, the company added. HUL reported 4% year-over-year volume growth in the September quarter.

Tiwari said cooling in the broader basket, as is the case with vegetable oil, should help prices fall. “And if that helps bring prices down, that will bode well for consumption,” Tiwari added.

Meanwhile, both Marico and HUL said they hope for a rebound in the coming quarter.

“The good news is that urban employment is increasing, which would mean that rural migration and non-farm income would increase, thus giving money back to the rural area and thus having more money in the pockets of the rural economy – bodes well ‘ Tiwari added.

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