NEW DELHI: Even as economists have expressed varied opinions about how soon the moribund economy can rebound from the deepening slowdown, fast-moving consumer goods (FMCG) majors have indicated green shoots of revival appear to have sprung up and demand recovery is likely by the middle of next year.
Companies such as Nestle, Hindustan Unilever, Wipro Consumer Care, ITC, Parle and Britannia are also pinning hopes on a policy stimulus in the upcoming Budget.
“We are seeing early signs of revival on the back of measures taken by the government to improve rural consumption and we believe a positive upturn will be visible in the next couple of months,” said Vineet Agrawal, CEO of Wipro Consumer Care.
Companies with a strong rural portfolio have been hit hard in the backdrop of the rural growth dropping below urban growth for the first time in seven years. FMCG sales growth has halved to 7.3 per cent in July-September quarter from 16.2 per cent growth a year ago, finds Nielsen. It expects growth to be 6.5-7.5% during October-December.
Suresh Narayanan, chairman and managing director at Nestle India said, “the government has looked at areas like taxation and ease of doing business among other things. If the measures that the government is contemplating leads to more money in the hands of consumers, hopefully recovery should happen.”
When peers saw a dent in volumes as Indians consumed less in a slowing economy, the Maggi-maker came out as an outlier among FMCG firms registering double-digit growth. Calling the slackening faced by the industry a “patch”, he said, “we have not gone underground.”
Meanwhile, Unilever, the parent company of HUL -- has cut its sales guidance for the first half of 2020 due to slowdown concerns in South Asia and West Africa. “The company doesn’t see a sharp demand turnaround for another two quarters,” HUL told analysts, adding rural demand has further seen a slight sequential slowdown.
ITC chairman and managing director, Sanjiv Puri, noted that the whole growth on the economy has to come on a virtuous cycle of investments, growth, employment, export. “Notwithstanding the recent slowdown in consumer uptake, structural drivers of growth are in place. Demand is expected to pick up over time given the government’s strong policy direction.”
Parle Products, makers of Parle-G biscuits, said a full-fledged recovery should come by the third quarter of next calendar year. “We are seeing some green shoots post Diwali such as improvement in sales from low single-digit to mid-single-digit,” said Mayank Shah, category head at Parle Products, hoping it should reach normal level in another 4-6 months. Shah, however, cautioned that food inflation could be a dampener.