Consumer goods companies bank on festivals for urban demand revival

Fast-moving consumer goods (FMCG) companies, retail firms, and producers of consumer durables are witnessing stable urban demand. 

 

However, people in the trade are waiting for clearer signs of revival closer to the festival season, starting in September. The first signs are expected in August. 

 

While FMCG companies say that demand remains steady for urban, Colgate Palmolive India said in its earnings release that urban demand remained subdued in April-June.    

 

An FMCG executive said demand in urban areas held steady. “Clarity would emerge only in mid-August.”

However, Anghsu Mallick, managing director and chief executive officer, AWL Agri Business (formerly Adani Wilmar), told Business Standard that demand for staples in urban areas had started improving. 

 

“The monsoon has kicked in and schools have started. Consumers aren’t stepping out much due to rain, so since June they are buying in larger quantities. Also, I expect demand to be better this month than in June.”

In its pre-quarterly update, Dabur India told investors: “During the quarter, the Indian FMCG sector witnessed a sequential recovery in demand with an uptick in growth in volumes, particularly in urban markets.” 

 

Marico also pointed out in the quarter gone by, the sector witnessed improving trends in rural markets and steady urban sentiment. 

 

In fashion and apparel retail there was demand in the market in April and May because the two months had a higher number of wedding dates than last year. But due to retailers having high inventories last year, many have chosen to be judicious. This has caused them to offer lower discounts this year. 

 

“Demand in urban areas looks stable compared to last quarter. We are seeing growth, but the discounts are lower than last year,” said Devarajan Iyer, chief executive officer (CEO), Lifestyle. 

He said the company had seen strong single-digit like-for-like growth, but the growth was not seen across the board in the industry.

“The industry could still be in the flattish range,” he said. 

 

Kumar Rajagopalan, CEO,  Retailers Association of India (RAI), said in a release on Tuesday:  “Retail sales grew 7 per cent in May and 8 per cent in June, following nearly a year of 4-5 per cent year-on-year growth. The festive season begins at the end of August, which may influence how demand evolves. Retailers have a sharp focus on the way consumers are buying non-discretionary goods. Non-discretionary spending creates hope for the consumption market.” Among consumer durables, demand for mobile and laptops in retail has picked up. 

 

Iyer also said the biggest barometer of consumer confidence was consumer spending around Diwali. “This will only be seen from September onwards as festivities begin across the country,” he said. 

 

The RAI also said in its release that the regional data showed western India recorded the highest year-on-year growth at 10 per cent.Northern India recorded a 9 per cent rise, followed by the south and east, showing a growth rate of 7 per cent and 4 per cent, respectively.  

 

Vijay Sales’ turnover has gone up 15 per cent in value after the end of summer. The rise has been driven largely by mobiles and laptop sales.In volumes, mobile and laptops have seen an 8-10 per cent increase over last year. 

 

“While summer was a washout, we are witnessing air conditioner sales slowly improving.” While mobile and laptops have witnessed strong demand, other categories are witnessing demand in the range of 3-4 per cent,” said Nilesh Gupta, managing director, Vijay Sales.

 

Retail rhythm 

• Demand for staples in urban areas has started to improve
• Fashion and apparel retail seeing growth but discounts lower this year
• In consumer durables, demand up for mobiles and laptops 
• FMCG witnessed improving trends in rural markets 
• Executives say clarity to emerge  mid-August