Sales of FMCG firms sig­nal de­mand re­vival

Earn­ings num­bers in­di­cate the im­pact of note ban and fall­out of move to a goods and ser­vices tax regime may be ta­per­ing off

Mint Asia ST - - News - BSY APNA A GARWAL

Asur­prise in­crease in sales vol­umes of con­sumer pack­aged goods com­pa­nies has boosted hopes of a re­cov­ery in con­sump­tion de­mand, in­di­cat­ing the pos­si­ble end of the lin­ger­ing ef­fects of last year’s de­mon­e­ti­za­tion and the fall­out of the move to a goods and ser­vices tax (GST) regime in July.

Hin­dus­tan Unilever Ltd, In­dia’s largest con­sumer pack­aged goods maker, re­ported a 4% vol­ume growth in the three months to Septem­ber com­pared with flat growth in the pre­vi­ous quar­ter.

Dabur In­dia re­ported a 7.2% vol­ume growth in the Septem­ber quar­ter for its do­mes­tic busi­ness as com­pared with a 4.4% de­cline the pre­vi­ous quar­ter. Marico saw vol­ume growth of 8% in the Septem­ber quar­ter, com­pared with a 9% de­cline the pre­vi­ous quar­ter.

While the re­vival has been led by growth in ur­ban mar­kets, even ru­ral mar­kets are show- ing the green shoots of a grad­ual re­cov­ery. In­deed, across the board, from con­sumer pack­aged goods to con­sumer durables, the state­ments of com­pa­nies re­flect a slightly more op­ti­mistic out­look than be­fore.

“Ur­ban de­mand has been steady; ru­ral has grown a shade faster than ur­ban,” said Vivek Gamb­hir, man­ag­ing direc­tor and chief ex­ec­u­tive of­fi­cer, Go­drej Con­sumer Prod­ucts Ltd, the maker of Cinthol soaps and Hit in­sec­ti­cides. Go­drej re­ported a sur­prise 10% growth in vol­umes.

In the last 12 months, the ru­ral busi­ness suf­fered more de­spite a sec­ond straight year of good rains.

The cash crunch was far more acute for the ru­ral con­sumer fol­low­ing the in­val­i­da­tion of high-value notes last Novem­ber. Then in the run-up to the im­ple­men­ta­tion of GST, the cash-de­pen­dent whole­sale chan­nel started to run down in­ven­tory im­pact­ing sup­plies to the in­te­ri­ors of the coun­try. Close to 70-80% of the ru­ral mar­ket is ser­viced by the whole­sale chan­nel.

Still, ru­ral con­sump­tion is also grad­u­ally re­cov­er­ing.

“Some sec­tors in con­sump­tion are do­ing well and some are not. Sta­ples is a mixed bag and con­sumer durables is still pick­ing up,” said Ashutosh Datar, vice-pres­i­dent at IIFL In­sti­tu­tional Equities.

“We are see­ing clear signs of re­vival,” said Anand Mour, a re­search an­a­lyst at ICICI Se­cu­ri­ties Ltd. Ac­cord­ing to Mour, the nor­mal mon­soon, in­creased gov­ern­ment spend­ing and in­crease in the min­i­mum sup­port prices of crops, be­sides whole­sale chan­nel sta­bi­liza­tion, will fur­ther aid in the pickup of de­mand in ru­ral In­dia in the com­ing quar­ters.

Ex­perts cite two rea­sons for the growth. One, firms had run down in­ven­tory in the run-up to GST. So, re­stock­ing has played a role. Sec­ond, Di­wali, which usu­ally sees a spike in sales, came al­most 15 days early this year. They add that growth in the De­cem­ber quar­ter will be high any­way be­cause of the low base of a year ago due to the in­val­i­da­tion of high-value notes.

It would be pru­dent to wait be­fore call­ing a full-fledged re­cov­ery, ac­cord­ing to Chan­dru Kalro, man­ag­ing direc­tor, TTK Pres­tige, the maker of cook­ware and stoves.

ROAD TO RE­COV­ERY

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.