NEW DELHI: Prolonged and accentuated inflationary pressure, rise in unemployment, and fall in disposable incomes could lead to a demand shock, FMCG major Hindustan Unilever said on Monday. The company in its annual report said uncertain macro-economic outlook coupled with geopolitical uncertainties may impact consumer demand for its products, disrupt sales operations and/or impact the profitability of operations.
“In the near future, with geopolitical tensions and commodity price inflation, the business environment will continue to be challenging,” Sanjiv Mehta Chief Executive Officer and Managing Director, HUL, said in the report.
In the backdrop of a challenging operating environment in this fiscal, we dynamically managed our business to deliver strong bottom-line performance whilst growing our consumer franchise and made significant progress on our strategic priorities, said the report. “We will continue to take this approach in the financial year 2022-23 where the operating environment is expected to remain challenging with further input cost inflation and soft FMCG market growth.”
High inflation in recent times has led to a marked slowdown in the growth rates of FMCG companies in the country. As global supply chains were disrupted, firstly, due to the pandemic and then later due to the geopolitical crisis, inflation in many commodities like crude oil derivatives, vegetable oils, packaging, etc. rose to historic highs resulting in significant input cost pressures.
High inflation also resulted in a marked moderation in FMCG market growth with volumes declining in the second half of the year, said the report. This year, the company faced unprecedented inflation in commodities, packaging as well as transport costs, Mehta said.