From Dabur to Britannia, FMCG firms begin to see volumes growth revival

Companies expect the trend of rural outpacing urban to continue

Fast-moving consumer goods (FMCG) companies have started seeing revival in growth in volumes with rural areas reporting better numbers and companies expect this trend to continue in the coming quarters.

Hindustan Unilever saw volumes reviving in April-June and reported a growth rate of 4 per cent.

FMCG companies have been at the receiving end of consumers turning tight-fisted for over a year in rural India.

Dabur India told investors during its post-earnings conference call there was a hint of revival in volumes growth in the quarter ended June.

“In the last three quarters, we saw volumes growth from 3 per cent to 4 per cent, and now to 5 per cent ... I’m talking about volumes growth sequentially. For Dabur it has been inching up and you’ve seen 5.2 per cent volumes growth in the current quarter. In July too we did not see growth slackening,” Mohit Malhotra, chief executive officer (CEO), told investors.

“Volumes are going up and sequentially they will pick up, but the ability to increase prices is going down … I expect the subsequent quarters to be better,” he added.

HUL Managing Director (MD) and CEO Rohit Jawa told investors in the last two years recovery in market volumes had been gradual and much lower than what the company would have liked due to sustained high inflation combined with erratic weather patterns. Consequently, rural growth, which used to surpass urban growth, had lagged its urban counterpart over the past year.

“In the last few months we are seeing some green shoots in rural demand recovery. We continue to monitor rural progress,” he said.

While talking about volumes in soaps, HUL Chief Financial Officer Ritesh Tiwari said the company was seeing early signs of the declining volumes reversing.

“We believe (our) actions continued over the next few more quarters will start making our business stronger …,” Tiwari added.

Britannia Industries Vice-Chairman and MD Varun Berry said in his June quarter earnings statement the biscuit major delivered a modest revenue growth rate of 4 per cent during the quarter, driven by high single-digit volumes growth and improved operating margins over last year.

Sachin Bobbed, vice-president at Dolat Capital, said for most FMCG companies rural areas had started performing better and indicated volumes growth would start improving in the coming months.

“In April-June growth was better than in January-March, showing green shoots of recovery.”