Covid woes still hitting rural demand: HUL

Hindustan Uniliver Limited has said that compared to Q1 FY22, the rural volume growth of FMCG products was still negative in India. At the hindsight of HUL’s June quarter results of financial year 2023-24, the company’s CEO & MD, Rohit Jawa, has said that compared to Q1 FY22, rural volume growth of FMCG products in India was still negative in Q1 FY24 . Jawa said rural market volume had declined two years ago in Q1 FY22. Whatever positive volume growth HUL has reported in Q1 FY24 has been urban led. In Q1 FY24, the FMCG major saw a total sales growth of 7% YoY to Rs 14,931 crore.

Although, according to Jawa, rural market volume growth of HUL’s FMCG products has turned positive for first time in Q1 FY24 after past 6-9 months. He said, the FMCG major is seeing slow demand recovery in rural India. Unprecedented rise in raw material prices and Covid-19 led slowdown has bottomed out in last few quarters.

Jawa said, “Inflation had reached its peak in September quarter, 2022. Due to rising cost of FMCG products in the past, people had cut on discretionary spends. There was 22% price increase in last two years of FMCG products of all companies.”

Factors behind rural demand recovery pullback:

Jawa attributed following factors behind rural demand recovery pullback:
. Government’s high amount of rural expenditure in recent past
. Centre and states’ increased capital expenditure in rural areas
. Increase in farm income
. Rural wages are flattish. Rural wages had declined in previous quarters

Will rural demand recovery persist?

Going forward, HUL’s CFO, Ritesh Tiwari said that rural demand recovery will depend substantially on impact of monsoon and weather related risk. Tiwari said, “El Nino has come earlier. History suggests when it comes earlier in season it grows more in the season. Floods have hit some parts of the country. MGNREGA has seen more enrollments. So, Tiwari thinks rain distribution and timing are equally important for sustenance of rural demand recovery. Monsoon will have to support overall agricultural growth in the hinterland.

Since, COVID-19 pandemic, one after the other global events rocked the world, leading to unprecedented rise in commodity prices. This hurt India’s rural demand impeccably. But off-late companies in India have thrown light on pullback in demand recovery. But still, rural demand has not reached pre-Covid levels, as, is evident from the results of one of the largest FMCG companies of the country. Whatever demand recovery has come, whether it will sustain or not it depends on how monsoon season plays up.