FMCG Sector Seeing Gradual Volume Growth In Q1: Hindustan Unilever CFO

FMCG industry is witnessing a gradual volume growth led by urban market with rural also turning positive in the first quarter of the fiscal after witnessing an over double-digit decline in the past, Hindustan Unilever Ltd. Chief Financial Officer Ritesh Tiwari said on Thursday.

Commodities prices have remained stable and inflation continues to moderate thereby leading to resurgence of small and regional players many of whom had vacated the market during peak of inflation, he said during an earnings call.

"With most commodities remaining stable in the quarter, inflation continues to moderate. Consequently, we are seeing a gradual recovery in market volume growth. FMCG market volumes grew in mid single digit led by urban," Tiwari said.

He further said, "Rural market volumes which at one point in time were declining in double digits have just been positive in this quarter. However, these growths have come on the back of decline in volumes in the past."

"If you look at market growth on a two-year CAGR basis, total volume growth is still marginally negative," Tiwari said.

With softening of inflation, he said competitive intensity in the market is increasing.

"Media deployment which saw a steep reduction during high inflationary period has started normalising and it's almost bound to 2019 levels. We are also witnessing resurgence of small and regional players, many of whom had vacated the market during the peak of inflation," Tiwari said.

On the outlook, he said the near term operating environment continues to be volatile with weather-related risk.

He said the progress of monsoon needs to be closely watched along with any impact of El Nino on agricultural activities and rural demand.

"We expect market volumes to recover gradually due to high levels of cumulative inflation and the fact that consumption habits typically recover with a lag," he added.

When asked about the impact of the floods in different parts of the country, Tiwari said, "This is more of a phenomenon of July and September quarter...Our operations are safe, our people are safe and that is always the first focus area." Further, he said that the impact of the floods or other things will be known in the next quarter.

In terms of product pricing, he said, "If commodities remain where they are, we expect our price growth to be near flat or marginally negative. With inflation moderating the competitive intensity is likely to go further."