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Info 28 Oct 2022 | 12:38 pm

FMCG companies still reeling from slump in rural demand

Slowdown in rural demand is continuing to hurt packaged consumer goods companies Dabur Hindustan Unilever , Tata Consumer and ITC noted in their second quarter earnings calls. The union could help ready a drainage masterplan for city for climate-resilience, says Mayor The European Union (EU) will help ready a cluster to make available financial and technical help to modernise public transport in Kochi, it was decided here on Thursday at the conclusion of the two-day workshop on Smart Cities and Sustainable Urban Development.

Slowdown in rural demand is continuing to hurt packaged consumer goods companies Dabur Hindustan Unilever , Tata Consumer and ITC noted in their second quarter earnings calls. “For the first time in five quarters, demand in the hinterland is lagging behind urban markets for us. So far, we had bucked the overall trend. This is a setback for us; liquidity pressures, inflation and patchy monsoons have hit rural demand,” Mohit Malhotra, chief executive at Dabur, which makes Vatika shampoo and Real juice, said on Wednesday.Impacted by steep inflation of food, other daily essentials and fuel, along with lower wages and weak sentiment, rural markets started to slow down from last September onwards. India’s villages contribute around 35% to overall fast-moving consumer goods sector sales. HUL chairman Sanjiv Mehta said sales by volume on a moving annual total (MAT) basis declined 9% in rural areas and by 3% in urban markets in the second quarter, quoting data from research company NielsenIQ, after its quarterly results last week.”With retail inflation holding firm, downtrading in rural areas was still prevalent during the quarter. Value added hair oils grew in low single-digits in value terms, mainly dragged by the subdued rural sentiment,” Parachute hair oils maker Marico said in a management commentary.Executives said the impact of inflationary pressures was more pronounced in rural markets compared to urban, despite higher capital investments and additional spending in government programmes like the rural employment scheme. This, they said, was because of inflation and declining wages forced consumers in rural India to either buy cheaper products or postpone buying altogether.”The India tea business is witnessing softness primarily in rural and semi-urban areas, while the premium category is doing well,” said Sunil D’Souza, managing director of Tata Consumer. He added that the stress is at the bottom and in a very specific geography.Analysts said sluggish demand continues to weigh on volume growth of most large fast moving consumer goods companies, adding that stocking by small grocery stores too was slower.HUL’s gross margin declined to a multi-year low and the company resorted to lowering marketing spend, maintaining the share of voice, analyst firm Jefferies wrote in an industry update.Companies, however, said they were hopeful of rural demand recovering in the coming quarters in expectation of further easing of raw material inflation, good harvest, higher agri prices and government spending on capital expenditure.”We are hopeful of rural demand reporting a smart recovery in the coming quarters,” Dabur’s Malhotra said. He said the company is investing ahead of the curve on its rural footprint by adding nearly 9,000 villages in the second quarter of 2022-23 to take its overall coverage to over one lakh villages.D’Souza of Tata Consumer said the company was increasing the number of wholesalers and reach into rural areas. “We are focussing on the specific packs which go into rural areas. We aim to take that number up significantly.”

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