Big FMCG sees no growth slowdown due to high inflation

By Samidha Sharma & Sagar Malviya, CNBC-TV18

The key consumer goods companies have put out results this week led by the biggest-Hindustan Unilever. Most of them have reported healthy topline growth and this is despite inflation.  

The next time you buy Dabur’s Vatika Shampoo you can pick up a conditioner too. This is one of the eight new products and variants that Dabur India has launched in the past three months. The Rs 2,200 crore company is not hitting the pause button because of macroeconomic concerns. Its optimism though is rooted in reality.

Jude Magima, ED-Supply Management, Dabur said, "Thanks to the high inflation and crude going where it is, there is a sense of tremendous urgency to look at all the categories all over again with a new relook. So, we found a cross functional team and looking at whatever we can do in terms of each category. One of the things we are looking at is substitutes and we are looking at substitutes very seriously. In some cases, we have found that the substitutes are even better than the original. That is one initiative and the other thing is we are looking at reengineering our products. But one thing which we are not doing is touching on the quality of the products

Meanwhile, during April to June this year Hindustan Unilever saw its home and personal care as well as food brands grow by 19%. Its presence across price points has cushioned it from downtrading. This strategy of continuous but almost imperceptible price hikes along with resizing packs has also worked.

In fact, the company upped A&M (advertising and marketing) spend by 30% largely to support the nationwide launch of Pureit and to step on the pedal for Ponds.

Nitin Paranjpe, MD and CEO, HUL, said, "We are seeing growth taking place across brands and all our categories. Premium brands like Surf Excel continues to grow strongly, which is the reflection of the fact that consumers are upgrading from conventional brands, which are offered out there to brands which offer better benefits."

Companies like Marico and Godrej follow the old adage of investing in brands in tough times. They say this move is showing results. While Marico posted a 15% growth in sales, Godrej grew by 26%.

Adi Godrej, Chairman, Godrej Group said, "We have decided that we are going to spend more on brand building. We have relaunched a lot of our brands. We are not going to save anything on advertising and marketing. In fact, we are going to spend much more in the first quarter. Our advertising expenditure has been 66% higher than the same quarter of last year."

Saugata Gupta, CEO, Consumer Products, Marico, said, "As far as the rural market is concerned, there has been a certain boom in agricultural production and the kind of prices the agricultural commodities are facing. Obviously, there is more money in the rural heartland. If you see the first two months, rural markets are growing faster than the urban markets. So, there are opportunities out there. Any well-distributed company needs to focus more on the rural areas because at the end of the day while the urban areas are growing the structure of the market is different and you need to have the right portfolio, right scheme and right pricing in the rural areas. So, rural is going to be another area of focus for us."

Market research companies however warn that continued price hikes in the long run will affect brand loyalty and the shift from unbranded to branded goods.