FMCG companies have been reeling under the rural slowdown since the past quarter, with the slowdown starting in February and March 2019.
The slowdown in consumer products demand has been one of the most talked about issues of late. With the latest quarterly results of major FMCG companies out, most of the firms attributed the slowdown to sluggish rural demand. This has raised concerns not only over the FMCG sector but also over the economic situation that the next government will inherit. However, several industry experts have put a rest to the speculation, as the slowdown is expected not to last very long, they believe. “We should stop being bullish and bearish about consumption,” said Rama Bijapurkar, a veteran FMCG expert, in an interview to CNBC TV-18.
The situation is not all gloom and doom, there are some winners and some losers, Rama Bijapurkar said. For instance, Pidilite, the maker of Fevicol, reported double-digit growth in the last few years but was limited to only 1% growth in the last quarter. On the other hand Amul, HUL, Nestle and ITC are among some brands who were not impacted by the ongoing stress and continued to report high volume growth.
Why it won’t last long
FMCG companies have been reeling under the rural slowdown since the past quarter, with the slowdown starting in February and March 2019. With the prevailing agrarian distress, the rural slowdown may not have been a surprise, said Vinita Bali, former MD of Britannia Ltd. She added that the sector needs structural reforms to revive.
However, the slowdown itself is temporary and will not be a significant long-term issue, Saugata Gupta, MD, Marico, told CNBC TV18. It is not just Marico which is hopeful of a revival in the coming months. Speaking to ET Now, Patanjali’s Acharya Balkrishna said that even though the company has witnessed a difference in sales, it is gradually coming out of the effects of the slowdown. He added that it is expected to ease in the coming months. FMCG products are consumed by everyone and since the interest in the products (herbal, natural) has peaked, the market will not be going down in the future, Balkrishna said.
The election connection
Previously, Amul MD RS Sodhi had also said that the FMCG sector will stay because whatever the income levels of a household, the first thing it spends on is food or other FMCG products. That way, Amul is quite secure of its customer base, RS Sodhi had told Financial Express Online. “India is a country of the lower middle class. If you are pricing it for lower-middle-class people, consumption is growing,” he added.
In fact, several FMCG brands, including Dabur and Britannia, believe that the slowdown will stabilize in the coming months. For one, with the results of Lok Sabha elections soon, it brings with it the hope of FMCG revival, in case there is a stable government. The expected healthy monsoon this year is also expected to turn the sluggish growth of FMCG sector in the next few months.