“Urban (markets) has been generally more resilient and has been leading growth.We expect to see rural come back as well in the quarters to come, especially with better Rabi sowing and stronger support from the government,” CEO and managing director Rohit Jawa said in a post earnings media briefing. Rural income growth and winter crop yields are key factors that will determine the pace of recovery, Jawa added.
Deficient monsoon rains in some key agricultural states stalled the recovery of rural demand, weighing on the growth of fast moving consumer goods (FMCG) companies. Rural regions account for a significant chunk of FMCG consumption and firms have been trying to spur volume growth in the markets. “The operating environment has remained challenging during the quarter… the effect of uneven monsoon was felt on the Kharif crop output, impacting agricultural yields and rural incomes. Winter this year has been delayed and less severe, and this has impacted the winter categories. Further, with rural consumer sentiment remaining subdued, the anticipated buoyancy from the festival season did not materialise,” said chief financial officer Ritesh Tiwari.
Underlying volume growth (UVG) for the quarter stood at 2%. Home care and beauty & personal care (BPC) – which constitute about 75% of HUL’s business – continue to see volume recovery and had mid-single digit UVG during the quarter, the firm said. “We start to see volumes coming back on the back of corrected pricing,” Jawa said. The company said that it took “meaningful” price cuts, particularly in the laundry and skin cleansing categories.