Retail in Asia

In Sectors

India’s consumer sentiment contradicts macro fear

Hindustan Unilever, India’s largest fast-moving consumer goods (FMCG) company, has reported 20.4 percent growth in its consolidated sales for the quarter ended 31 March. Of this, 9.6 percent came from volume growth, and the rest from price increases. For Dabur, which gets 70 percent of its business from India and the rest from exports, consolidated sales for the quarter were up 23 percent; more than half of that, 12.4 percent, came from higher volumes. A further 7 percent came from price increases and the rest from foreign currency gains. Out of the 30 percent growth in Godrej Consumer Products’ soaps business, 17 percent was contributed by volumes; out of the 13 percent growth in hair colour, the share of volume growth was 7 percent.

This means two things: one, the market is buoyant; and two, as a result, pricing power has returned to companies. FMCG companies were faced with higher commodity input costs in the last quarter; they have been able to pass these on to the consumers. Most of them have, thus, seen an improvement in their operating profit margin. Hindustan Unilever Chief Executive Nitin Paranjpe has said that there is no evidence of large-scale down-trading  – consumers settling for lesser-priced options. In fact, a large number of them are up-trading. This is crucial. At the first sign of a slowdown, which is accompanied by fears of lower disposable incomes and joblessness, consumers first cut down their FMCG budgets by down-trading. The absence of down-trading means customer sentiment is not weak.