InvestorQ : Are FMCG companies facing a slowdown in rural sales?
indhumathi Sayani made post

Are FMCG companies facing a slowdown in rural sales?

1 month ago

There is a new worry for the FMCG companies and it is about the weak Kharif output and erratic monsoons. These factors, included with persistently high inflation is likely to create a new kind of problem for fast moving consumer goods (FMCG) companies like Hindustan Unilever, ITC, Marico, Britannia, Nestle, Dabur etc. Most FMCG companies did compensate part of the spike in cost of various inputs through price hikes. While it did assist in growing their top line, the profits continue to be under pressure as seen in OPMs. It is in this context that the rural pinch may put FMCG companies in India in a tight spot.

FMCG companies rely heavily on rural markets to sustain growth. In fact, the likes of Hindustan Unilever and Dabur get over 50% of their revenues from the mofussil towns. The sluggish rural trend is likely to become a lot more palpable on volume growth in coming quarters. However, the good news is that there have also been cuts coming along the way to boost demand. Edible oil companies cut prices by Rs10-15 a litre in August with overall cuts at Rs25 per litre. In addition, companies like Hindustan Unilever and Godrej Consumer Products are cutting soap prices with falling palm oil prices.

According to Nielsen, volume pick up in the September quarter was more visible in urban centres with tepid demand from rural centres. The next quarter may give better hints.