Amid slowdown, Unilever foresees ‘soft’ India sales

Mumbai: Unilever said India business growth will be “soft” because of the rural slump amid a broader economic slowdown. India, which accounts for 9% of Unilever’s overall sales, has been regularly outperforming several key emerging markets for the conglomerate.But Brazil and Indonesia, which contribute 6% and 5% each, respectively, will be stronger in 2020, it said. For the Anglo-Dutch consumer giant, emerging markets generate about 60% of total turnover but average growth in these markets has fallen to 5-6% in past five years from 8-10% earlier. It operates through local unit Hindustan Unilever in India.“Economic and market growth in India has accelerated, and has been particularly strong over the past three years,” Unilever chief financial officer Graeme Pitkethly said at the Consumer Analyst Group of New York (CAGNY) conference in Florida. 74365244 ‘Demand Likely to Stabilise in 2020’India’s fast-moving consumer goods market grew 6.6% in the December quarter compared with 15.7% growth a year ago, according to Nielsen, which said the rural slowdown has bottomed out and demand will stabilise in 2020.Over the past decade, sales of branded daily needs in the nation of 1.3 billion people have increasingly relied on the rural hinterland, home to more than 800 million people, whose purchase behaviour is largely linked to farm output.In the past two years, rural demand, which accounts for about a third of the market and had been outpacing urban sales, was hit by lower farm incomes and liquidity constraints. Rural markets grew 5.2% in the December quarter compared with 7.4% for urban centres, according to Nielsen.Consumption lacks meaningful catalysts to spark a revival in calendar 2020, BNP Paribas said in a report based on the analysis of December quarter performance at a wide sample of consumer companies and post-earnings commentary by their managements.“The timing of recovery in consumption demand remains uncertain,” wrote Kunal Vora of BNP Paribas. “The indication by some companies that a recovery may be seen in second half of FY2021 relies largely on the fact that the base will become much favourable by then.”PRICE HIKES LIKELYSome companies might be forced to raise prices despite a weak consumer demand environment because of very high raw material inflation in certain agricultural commodities.HUL’s skin cleansing or soaps segment has also been a drag on the overall business amid contrasting growth trend in its largest business — laundry. The maker of Surf and Dove said the laundry business has seen double-digit growth, but market share and penetration in the soaps segment declined, especially for Lux and Lifebuoy.“In the skin-cleansing business, penetration for the top two brands has been down, and as a result we have seen declining sales and share losses in 2019,” Pitkethly said. “We have made specific interventions on price and product quality and we are becoming sharper on our brand messaging and, believe me, this will make all the difference.”For HUL, the category was impacted by both declining market and pricing actions that it took in order to increase competitiveness. The company, during its earnings announcement last month, said it could increase price tags on soaps by 5-6% during the March quarter due to rising commodity costs.

from Economic Times https://ift.tt/2PyhR1w