No evidence of downtrading; see 10% volume growth: Dabur

Duggal further adds that there is an uptick in crude prices and inflation. But, Dabur is optimistic about achieving volume growth of around 10% and believes volume offtake in the festive season will be key to growth. At present, the company is concentrating on the fruit juice segment and is not looking at inorganic growth due to economic uncertainties.

Moreover, Dabur is seeing good growth in its international business, particularly from the Gulf, added Duggal.

Here is the edited transcript of the interview on CNBC-TV18.

Q: First a check on the rural consumption pulse. You have your finger on that pulse, what is the sense you are getting? Is there consumer down trading? Is there a definite slowdown in consumption, first rural but urban as well?

A: I think the rural side remains fairly robust. There are pockets of softness in parts of South and West but by and large now with the monsoon having revived very strongly in parts of North and East, the demand side seems fairly steady and at the moment its early days. But, we are seeing no evidence of any downtrading or any slowdown in consumption.

Q: That’s the drought part of it but we are seeing a lot more expensive consumer durables struggling with lower demand, you can see definitely in the cars and two wheelers segment, does it percolate down to FMCG products as well?

A: It perhaps could but, I don't think so. I think the down trading if it happens will be of a comparatively minor nature. We are not too concerned about that aspect. I think what is concerning us a little more at this point in time is the revival of inflation. We are seeing a strong uptake in commodity prices, crude, edible oils and the whole agri basket.

That could put pressure on margins because I think the headroom in terms of price increase is a little limited because of the economic downturn. Last year everybody in the staples area took up prices by a pretty solid amount. I think this is something which is a matter of concern that there could be pressure on margins. That will beat the fact that the demand side remains fairly steady.

Q: Just wanted to concentrate on the volume expectations for FY13 then because you started Q1 FY13 on a strong note of around 10% volume growth. Just give us a sense on whether you would possibly maintain that, would it be better or are you expecting something less?

A: I think the pivotal quarter is the third because a lot of our sales come then. If you are able to hold the line at 10% in Q3, then we should have a reasonably good year in terms of volume growth. I am still pretty optimistic of having the volume growth in around 10% or so. But, it is not to be taken for granted.

I think a lot depends upon the festive season demand which will peak in October and November. That would I think determine the course of the year. But as I said, the bigger concern is margins and not perhaps so much the volume growth.

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