FMCGs say Q1 growth to remain dull on subdued consumption, liquidity crunch

Some of the country’s leading consumer goods companies have indicated in the just-released quarterly updates that the demand environment remains sluggish in the April-June period.

The statements come after the sector saw its worst slowdown in two years in the March quarter. Many were hoping for a revival in sentiment following the general elections, but that isn’t the case as Godrej Consumer (GCPL) and Marico on Wednesday said demand conditions were challenging in Q1, impacted by a general consumption slowdown. 

Last week, Dabur had said it had not seen signs of the slowdown abate yet, as the liquidity crunch in the economy and other macro-economic factors persisted.

“During the quarter, we witnessed relatively softer demand across some of our geographies of operation including India,” GCPL said in its quarterly update, adding that volume growth for the period was close- to mid-single digits, tad better than the January-March quarter.  

Dabur, too, had said that its overall business was doing slightly better than the March quarter, with rural (sales) growth marginally ahead of the urban rate of growth. 

“We will wait for Budget announcements on July 5 to see if there is a fiscal stimulus announced by the government to give a push to the economy including rural,” Mohit Malhotra, chief executive officer, Dabur India, said. “If the monsoons are okay, rural recovery will happen, especially in the second half of the (financial) year,” he said.

Marico, too, had reiterated that announcements during the Budget would be keenly tracked by it. “With sluggishness in wholesale persisting, rural stayed ahead of urban in the traditional channel in Q1.  Modern trade and e-commerce continued to headline growth, while canteen stores department (CSD) had a normal quarter,” Marico said in its quarterly update. 

“The progress of the monsoons after a late onset, recovery in liquidity conditions and execution of the various government schemes announced will be keenly watched for signs of a revival in consumption trends,” the company said.

In Q4, rural sales growth, which was ahead of urban sales growth by at least 100-200 basis points for most firms in the previous quarters, had moderated, data by market research agency Nielsen showed. 

“Rural incomes have to rise, so that the consumption slowdown in these markets is addressed,” Kishore Biyani, founder and chief executive, Future group, said. “A revival package for rural areas will help and with a stable government in power, I think a lot can happen,” he said.
 

Suresh Narayanan, chairman and managing director, Nestlé India, said, “India has consistently posted stable growth in the last few years with low inflation. However, with inflationary pressures now growing and late onset of monsoons, farm incomes will be impacted. Giving an impetus to rural households is the need of the hour.”

Nielsen has already lowered its growth forecast for the 2019 calendar year by 200 basis points for the domestic consumer goods market, saying sentiment remains weak. 

The agency also says that the categories that have been impacted the most due to the slowdown include food and personal care. 
 

GCPL said that it was looking forward to an improvement in consumer demand in the quarters ahead, while Marico said that it continued to focus on profitable volume-led growth over the medium term.