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

The Economic Times - - Companies -

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

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