FMCG firms see slow demand revival as growth triggers remain weak

The heads of some of the cou­ntry’s top fast-moving consumer goods (FMCG) companies have said demand for their products will recover slowly as gro­wth triggers remain weak for now. Their statements are at variance, with what the heads of discretionary businesses are saying about the same. Companies such as Titan, Westlife Development and Jubilant FoodWorks remain upbeat about the future, saying the south and east regions are seeing a sales uptick.

Ajoy Chawla, chief executive officer, Titan’s jewellery division said in an investor call, “The outlook for Q4 (of FY20) continues to be good. We see opportunities for market share gains continuing in Q4. We are staying with the guidance that we gave. We are expecting to hit 11-13 per cent of (revenue) growth for the March quarter,” he said.

Titan derives 80 per cent of its overall revenue from the jewellery division. In Q3, the company saw a nearly 11 per cent year-
on-year (YoY) growth in jewellery sales, primarily led by festive season demand. In Q4, it is the marriage season that is expected to help growth despite go­ld prices shooting up 9 per cent so far in the calendar year 2020.

Westlife Development and Jub­ilant FoodWorks, who are the country’s top listed food service operators, said delivery sales had been good in comparison to dine-in sales over the past few months, pointing to the overall trend of ‘ordering-out’, that remains strong in urban areas. The two players reported a stronger set of same-store sales growth num­bers in Q3 and are expected to con­tinue the trend in Q4.

According to experts, discretio­nary businesses like food services and jewellery continue to have a greater presence in urban areas versus rural areas, where consumption slowdown has been pronounced.

FMCG firms, on the other hand, have a greater exposure to rural markets, getting a third of their sales from these areas. In the case of Hin­dustan Unilever and Dabur, rural sales contribution to overall sales is 40 per cent, said sector analysts.

Nielsen data shows while urban FMCG growth has halved in the Dec­ember quarter from a year ago, it is still higher than rural FMCG growth, which has fallen by over 70 per cent during the period. The trend is expected to stay for now. According to Suresh Narayanan, chairman and managing director, Nestlé India, a recovery in demand by the third quarter of FY21 is possible. “The rabi season harvest as well as the upcoming monsoon season will be the key factors,” he said. “The government has also focused its attention on rural areas with welfare measures. All of this should alleviate the stress in rural areas in a few quarters from now,” Naraya­nan added. Given that growth is expe­cted to come with a lag, FMCG firms are gearing up for the tough times ahead. Mohit Mal­hotra, CEO, Dabur India, said, “The strategy for us would be to stay the course and to invest behind our bra­nds. We will continue to expand our distribution footprint and enh­ance our competitiveness in the market.”

Sunil Kataria, chief executive officer, India and SAARC regions of Godrej Consumer, said, “We have a twofold strategy. One is that we will continue to focus on volume growth and will also look at value growth through premiumisation. We will drive the latter through innovations in our products, giving consumers a reason to shell out more money in these tough times. We are also tapping alternate trade channels in our effort to reach consumers quickly and efficiently.”

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