FMCG companies such as Emami, Dabur, Mario and GSK Consumer Healthcare were upbeat about growth expectations in rural areas. Good monsoon adds to the 'feel good factor' in an economy and creates favourable emotional base for consumption, they feel.
The early arrival and prospects of a good monsoon are making FMCG firms such as Emami , Dabur , Marico and GSK Consumer Healthcare upbeat with expectations of growth in uptake in rural areas that account for up to 50 percent of their sales.
According to the FMCG companies, good monsoon adds to the 'feel good factor' in an economy and creates favourable emotional base for consumption.
"Early and good monsoon specially means good news for the rural economy where dependence on agriculture is high and thus a good monsoon benefits rural consumers very much," Emami Ltd CEO (Sales, Supply Chain and Human Capital) N Krishna Mohan told PTI.
According to him, Emami which gets about 40-45 percent of total sales comes from rural India, expects increased consumption of FMCG products due to a good monsoon. Emami had posted a total turnover of Rs 1,627 crore in 2012-13.
"A buoyant economy especially in rural India would mean more disposable income and would be favourable to FMCG industry as well and there would be increased consumption of FMCG products," Mohan said.
Expressing similar views, Dabur India CFO Lalit Malik said: "Good monsoons are generally favourable for FMCG consumption, particularly rural markets. With a good monsoon, we expect improvement in rural consumption sentiment."
Nearly 50 percent of Dabur's domestic sales are from rural India. Last fiscal the firm had a total sales of Rs 6,146 Crore.
Terming the early arrival of monsoon as a good development, Marico Group CFO Milind Sarwate said: "It creates a favourable emotional base for increased consumption... The feel good factor generated by a good monsoon does help in improving buyer behaviour."
When asked how much of Marico's sales comes from rural market, he said: "The proportion has increased over time and is currently around 30 percent."
"Early monsoon lifts consumer sentiments and gives boost to agriculture and economy and therefore lifts consumer spending, especially in rural markets," GlaxoSmithKline Consumer Healthcare Executive Vice President Jayant Singh said.
The FMCG companies are, however, of the view that over the last few years monsoon is not playing as much role in pushing consumer demand as was the case a decade ago. "This is because of various other reasons which impact the consumer sentiment.
Also the non-farm incomes in rural India are increasing. Therefore, the reliance on monsoon is not what it used to be a decade ago, though the same is still significant," said Mohan of Emami.
Emami stock price
On July 23, 2014, Emami closed at Rs 540.30, up Rs 0.60, or 0.11 percent. The 52-week high of the share was Rs 575.90 and the 52-week low was Rs 393.40.
The company's trailing 12-month (TTM) EPS was at Rs 17.55 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 30.79. The latest book value of the company is Rs 40.92 per share. At current value, the price-to-book value of the company is 13.20.
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