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Monsoon Rain Fosters Demand For P&G India But Rural Wage Decline A Concern

P&G India anticipates some challenges in the near term, but it remains confident of navigating the difficulties led by an integrated growth strategy.

<div class="paragraphs"><p>Procter &amp; Gamble Hygiene and Health Care Ltd., known for brands like Whisper and Vicks, is beginning to see positive trends in both rural and urban areas after several quarters of sluggish consumption, thanks to abundant monsoon rains and easing inflation.</p><p>(Image source: company)</p></div>
Procter & Gamble Hygiene and Health Care Ltd., known for brands like Whisper and Vicks, is beginning to see positive trends in both rural and urban areas after several quarters of sluggish consumption, thanks to abundant monsoon rains and easing inflation.

(Image source: company)

Procter & Gamble Hygiene and Health Care Ltd., known for brands like Whisper and Vicks, is beginning to see positive trends in both rural and urban areas after several quarters of sluggish consumption, thanks to abundant monsoon rains and easing inflation. However, concerns remain about falling rural wages and rising unemployment, which could limit consumer spending.

“We are definitely seeing green shoots," Mrinalini Srinivasan, chief financial officer at P&G India, said at an investor call on Wednesday.

Inflation has moderated, dropping to below 4% in July and August. Additionally, 75% of the country has experienced normal monsoon this year, further supporting agricultural output. "Rural demand is expected to keep up with these positive trends," she said.

Srinivasan, however, flagged declining rural wages and rising unemployment as key concerns, even as both the issues are expected to stabilise in the near term with the government's recently announced interventions. The rebound in employment will play a crucial role in sustaining rural consumption, as improved income stability in rural areas stimulates purchasing power and demand for everyday goods.

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P&G India anticipates some challenges in the near term, but it remains confident of navigating the difficulties led by an integrated growth strategy.

“Looking at the near term, we anticipate some challenges to continue. We, however, remain confident in the dynamic and integrated nature of our strategy to help us navigate the difficulties and continue to serve the underlying consumers and drive sustained business results,” she added.

India's fast-moving consumer goods sector reported a 4% jump in value growth in the June quarter, according to market tracker NielsenIQ. The volume growth, however, shrank largely due to a consumption slowdown. The industry is anticipated to deliver mid-single-digit growth in FY25.

P&G India commands more than 50% in the healthcare category. It is also a leader in the country's feminine care market, controlling half of the Rs 3,400 crore industry in which per-capita spending is currently only one-sixth of that in China. "We expect double-digit growth to continue over the next 3-4 years for the category,” said Srinivasan. It sells sanitary napkins under the Whisper brand which contribute 70% to its revenues.

The penetration of feminine care products stands at 60% in urban India but remains below 40% in rural areas, indicating significant growth potential. While competition in the sector is intense, P&G sees this as a positive force driving overall category growth.

The management of the consumer goods major has also indicated the possibility of accelerating revenue growth following 1.5 times increase in distribution reach compared to three years ago, with its healthcare distribution through the chemist channel growing 1.2 times. The company has developed an in-house AI and machine-learning algorithm that analyses consumer behavior to customise products at the store level.

The company is also betting big on quick commerce channel, like most other companies, to serve new towns and cities as consumers seek convenience. “While currently a small channel, quick commerce for us is more than doubling year-on-year,” she said.

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The American multinational is represented by four entities in India, two of which — Gillette India and Procter & Gamble Hygiene and Health Care — are listed. The two other firms are P&G Home Products and P&G Health.

In a separate investor call, the management of for Gillette India Ltd. said that growth in oral care segment, which consists of Oral B toothbrushes, has been “slow” due to stiff competition in the entry segment. But it has “maintained” its “business size in the category” despite these challenges.

Last year, P&G India drove cost savings of Rs 113 crore, which is 3% of sales. These savings are reinvested into the business to drive future growth. The company has shifted from a cluster-based planning approach to a store-based planning approach, allowing for more localised marketing efforts. It is investing significantly in supply chain for higher growth opportunities as part of its integrated growth strategy.

P&G India, which follows a July-June financial year, saw net sales rising 7.5% to Rs 4,192 crore, while net profit was flat at Rs 675 crore in FY24.

The company's advertisement and promotional expenses increased at a faster rate than revenue growth as it continues to drive brand awareness. The absolute ad spending increased by 81% to Rs 570 crore in FY24 from Rs 310 crore in FY19. In the fourth quarter of FY24, P&G's ad spends jumped 187% over the previous year, leading to a dip in margins.

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