Consumer Cos Expect Better Monsoon to Prop Up Rural Demand
Firms also bet on the govt’s rural assistance programme to boost sales in the hinterland
Mumbai: Consumer companies expect rural demand to bounce back after the weather office predicted an above-normal monsoon this year, although not all of them are revising their sales growth projections. “The monsoon prediction is a very strong indicator to end the uncertainty we had in terms of estimating growth projections,” said Mayank Shah, marketing head at Parle Products, which gets almost half its sales from the rural markets, the biggest for the country’s consumer products companies.
“If the rains are good and inflation remains under control, then we expect to see a positive impact on consumption but not before the second half of the year,” said Saugata Gupta, chief executive officer at Saffola edible oils maker Marico, which is not changing its sales outlook.
Marketers said consumption in the hinterland could get a boost from the government’s rural assistance programme, besides the above-normal rainfall expected.
“While a substantial part of the growth will still be volume led, we do expect some price-led growth to return in the sector in the latter half of the year, given some of the recent trends in commodity prices,” said Vivek Gambhir, managing director at Godrej Consumer Products.
While sales volumes in urban centres have improved gradually, they remain under stress in rural areas. “We believe it will take two good crops — kharif and rabi — for rural demand to see a reasonable recovery. This is based on the elongated stress that farmers have gone through in the past couple of years, along with the fact that water table levels are at historical lows,” said Anjali Verma, an analyst at PhillipCapital.
Companies are trying to increase their reach in the rural areas to benefit from an improvement in consumer confidence. “The fiscal incentives announced in the budget and predictions of a good monsoon after a gap of two years should see an upward swing in consumption, though we are not revising targets as of now,” said Lalit Malik, CFO at Dabur.
Consumer electronics makers are more upbeat. The white goods and consumer electronic companies are hopeful that the met department’s prediction will revive rural demand, which has been subdued since last Diwali. Low rural demand has further impacted the growth of the industry already battling poor sales. Sales growth of appliances and television has been flat in the past few months.
“After a long time, there has been prediction of excess monsoon, which will ensure good harvest whose full impact we would feel during the upcoming Diwali season,” said Videocon chief operating officer CM Singh.
Singh said the industry is hopeful of double-digit growth in sales and confident that a good monsoon will compensate for poor sales all these months. Videocon plans to revamp its product portfolio, expecting demand for mid-to-high-end products such as bigger screen televisions and large capacity appliances in rural India, said Singh.
LG India’s marketing head Niladri Dutta said a good monsoon would mean a good festive season and increased demand for premium products in rural and semiurban areas. “Already, 10% of the population in rural India can afford premium products, which should go up. We would increase our play through the more than 600 exclusive shops in rural India,” said Dutta.
Sagar Malviya, Ratna Bhushan and Writankar Mukherjee