‘Rural sales value positive; volumes have declined’
SANJIV MEHTA, chairman and MD of Hindustan Unilever (HUL), considers health, hygiene and wellbeing as the new areas of growth for the fast-moving consumer goods (FMCG) major over the next five years. In an exclusive interview with Sharleen D’souza and Vishal Chhabria, he shares his expectation of commodity prices cooling off in the second half of 2022 which should lead to the return of volume-led growth. Edited excerpts:
Rural growth was negative, indicating a contraction in demand for the second quarter in a row. What are the key reasons for this demand pressure?
Headline growth or value growth in rural areas is still positive, though it has progressively tapered. The negative growth (in rural) is volume growth. There are a couple of things which I would like to say — first is the fact that the economy is under recovery. At the end of this fiscal year, the economy will be more or less of the same size as it was two years back. In a country of $2,000 per capita, there is a large section of the population where absolute consumption is still very low. From a macro perspective, we must remember that the share of private consumption has gone down in the economy. The second is the unprecedented inflation, which has taken place in some of the big categories — most notably in skin-cleansing or toilet soaps where we have palm oil as a feedstock. Then in the tea category, where from the latter half of 2020 we saw a sharp and large increase in tea prices, and then in fabric cleaning, which is based on crude oil-based derivatives as raw materials. These are some of the big categories where the input cost increase has been exceptionally high.
In rural India, the per capita consumption of FMCG goods is one third that of urban India, and when there is stress on income and or when there is high inflation, consumers titrate the volumes they consume. This impacts the volume growth of categories.
ONCE COMMODITY PRICES START GOING DOWN, WE WILL ADJUST DOWN THE PRICES OR INCREASE THE QUANTUM OF VOLUME IN THE PACKS