MUMBAI: FMCG major Dabur India said GST dented its sales, but was hopeful of a recovery in the next two-quarters.The good news is, demand is picking up, but its sustainability isn’t visible and could throw a spanner in sales growth. However, demand revival, and the central government’s anticipated stimulus considering the approaching election year, will have a material impact, according to Sunil Duggal, CEO, Dabur India Ltd.
The wholesale channel is the most affected due to GST, while enterprise channels, too, are witnessing slack in demand. “GST is definitely making a dent in our sales. But hopefully, we should be able to limit the damage as a part of the sales decline is being made up from rural distribution and service network,” Duggal told Express.In the second quarter, which is post-GST, Dabur’s volumes are expected to see 5-10 per cent growth in the domestic consumer business, from a negative base it saw during the first quarter. Dabur is expecting 5-10 per cent growth in the next two quarters, too.
“It’s early days. The sustainability of demand and the macro-economic factors, central government stimulus will all have a material impact on us,” he said, adding, “Any impact on sales is bound to affect margins. But, we contained the losses through higher sales in other channels like modern retail, and service network. Obviously, demand is better than the previous quarters. In the best case, normalcy should return in the third quarter,” he said.
Companies are used to demand-supply shocks or pricing pressures and learned ways to deal with them, but they are seeing trade destabilisation (via GST) for the first time. “This isn’t something we have seen before and we have to get new ways around it,” explained Duggal. He didn’t rule out ‘moderate’ price hikes, but not on products part of the bigger portfolio.
Meanwhile, Dabur’s international business has been in the slow lane due to currency devaluation, but Duggal hopes it to move up from the fourth quarter. Currently, it contributes around 30 per cent. “This quarter (second) could be a challenge, next quarter will be alittle bit better, but full growth picture will emerge in the fourth quarter. In Q4, we should see double-digit growth coming back. Overall, this may not be a great year for the international business, but we will be exiting on a high note and we can look forward to strong growth from the next fiscal,” he said.