An overall slowdown in demand growth, especially in the rural markets, affected the country’s largest pure-play fast moving consumer goods company Hindustan Unilever Ltd (HUL), which reported its lowest volume growth in seven quarters.
For the quarter ended June 30, HUL registered a 7% growth in volume with net profit rising 15% to ₹1,755 crore, compared with ₹1,529 crore in the corresponding quarter of the previous financial year.
The company, while terming its performance ‘resilient’, attributed the slowdown to factors such as moderated growth, with rural demand falling and being on par with urban, and said that going ahead, demand may be soft though better on account of government initiatives aimed at aiding consumption.
Rural market growth rates, which have historically been almost double that of the urban market, have been showing signs of moderation in the recent past.
“FMCG is not completely delinked from the state of the economy. But it is not a doomsday scenario,” said Sanjiv Mehta, chairman and MD, HUL, while addressing the media.
“There could be various factors — food inflation has been very tepid, rural wages over the last five years have been modest and those would have been primary contributing factors as to why there has been a slowdown in rural,” he added.
The firm reported net sales of ₹9,984 crore for the quarter ended June 30, as compared with ₹9,356 crore in the corresponding quarter of the previous fiscal.
Personal care drags
Subdued growth in beauty and personal care, which accounts for nearly half of HUL’s overall sales, was on account of slowdown in a few mass-market brands of the firm, said Mr. Mehta. HUL has brands such as Lux, Dove, Pond’s, Lifebuoy and Pears within the personal care segment.
The company expects the second half of the year to be better than the first, though the initial weeks of the current quarter have not shown significant signs of recovery.
“We believe our business is well positioned... in terms of navigating the short-term challenges arising from softening of growth,” Mr. Mehta said.
