Nestle, Unilever India business weathers GST storm in Q3

The two firms said they had successfully managed the transition to GST and that local operations had improved in the Sept quarter

Consumer goods majors Nestle SA and Unilever Plc said on Thursday that they had successfully managed the transition to the goods and services tax (GST) in India, among their biggest markets in the Asian region, for the July-September period.

The two firms, while reporting their results for the September quarter, said that Indian operations were showing signs of improvement after destocking challenges seen in the June quarter.

Nestle is headquartered in Vevey, Switzerland, and Unilever in Rotterdam and London.

Unilever's emerging markets region, which includes countries such as India and China, reported a sales growth rate of 6.3% for the September quarter, while its developed markets belt declined 2.3% in terms of sales growth for the quarter.

Nestle too saw its Asia, Oceania and sub-Saharan African region, which includes markets such as India and China, report 5.3% organic sales growth for the September quarter, the highest of its three key zones. The other two regions include Europe, West Asia and North Africa; and the Americas, which reported an organic sales growth rate of 1.9% and 1.3%, respectively, for the quarter under review.

Paul Polman, chief executive officer, Unilever, said India volume growth had improved after GST implementation and that price growth lowered in Q3 as the benefits of the tax change were passed on to consumers.

“While conditions in our developed markets remain challenging, we are starting to see signs of improvement in some of our biggest emerging markets including India and China,” Polman said.

Mark Schneider, chief executive officer, Nestle, said the Asia, Oceania and Sub-Saharan African region saw improvement in organic (sales) growth and that India had a negative impact on pricing due to the GST.

The statements by Unilever and Nestle, incidentally, come a day after British consumer goods major Reckitt Benckiser Plc, best-known for brands such as Dettol, Lizol, and Harpic, said its India operations suffered a loss in sales on account of the GST, introduced in July.

“India-reported revenue was flat,” Rakesh Kapoor, who took over as Reckitt's global CEO six years ago, said.

“Customer stock levels were low due to GST regulation coming into force in July. And supply of inventory was also delayed due to the cyber-attack, which resulted in lost sales,” he said.

On Monday, Colgate-Palmolive India, which is the country's largest oral care player, also said reported net sales in the September quarter declined 10% due to changes in the treatment of indirect taxes following GST implementation.