Saugata Gupta, MD and CEO of Marico says the entire FMCG sector is benefiting from, pricing actions and an additional positive would come if the sector â€˜ploughs it back to innovation and pricing‘.
Marico expects a volume growth of over 8 percent if urban consumption revives and rural demand stabilises, says Saugata Gupta, MD and CEO of the company.
Speaking to CNBC-TV18, Gupta says the entire fast-moving consumer goods (FMCG) sector is benefiting from lower commodity prices and ‘ploughing it back into innovation and pricing’ will be an additional positive.
On international sales, he says with stable macro situations for most of Marico’s markets abroad, it is only the internal factors impacting the sales.
Below is the transcript of Saugata Gupta’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: Yesterday we were speaking to the management of Godrej Consumers and they indicated that there is absolutely no growth in rural areas, in fact if anything, it is de-growing and that continues to be a concern. Is that your feedback as well?
A: We haven’t seen so much impact in the rural areas as of now if you look at either the January-March quarter, the April-June quarter or whatever is panning out. However, having said that, there are pockets of areas where there has been a deficient rainfall in some parts of Maharashtra, some parts of Karnataka, Andhra Pradesh (AP) and in North India.
We are waiting and watching. However, in terms of rural demand, we haven’t seen any significant impact especially in items which are much more mass items. The pressure could be on discretionary items and items which are low penetration items but as of now items of mass consumption, we haven’t seen any significant impact.
Latha: Can you put some kind of number to it, in Q1 when you reported numbers it was volume growth of 6 percent in your Indian market. Would that be a run rate we should expect for the rest of the year or do things pick up normally in Q2 and Q3?
A: My expectation is for the volume growth to pick up from a 6 percent to 8 percent or plus, we need an urban consumption kicking back. Now, the urban consumption is expected to get back into higher trajectory sometime in the second half. Have we seen green shoots? A little bit of it but they are not something which is a trend. Also, we need to ensure that rural doesn’t get back into a slightly lower run rate.
Rural as far as we are concerned, still we have visibility of say July-August. We are not seeing any significant impact. However, having said that, we need to wait and watch as I said of how does rural pan out. So, the growth of 6 percent which can move to 8 percent and the sector also can move up only when a combination of urban consumption getting back on track and rural not getting impacted, if those two factors pan out together.
Latha: You have got a lot of help from commodity price. Give us an estimate of how much they have fallen and will it not be the situation that you will therefore be able to cut product prices for especially lower denominations. Will not that improve volume? Is that factored in your 8 percent?
A: This entire sector is going to get a benefit of commodity prices and that perhaps gives me some kind of a hope that if we can drive some kind of a pricing action and also increase advertising and promotion (A&P), the entire sector, that should be able to kick-start some higher rates of growth in the second half.
In emerging markets what is important is volume growth in the immediate term because you always get margins with scale and it is important for the sector to plough it back towards both innovation and towards pricing. Currently in the last two years especially in urban there has been a kind of a sluggishness in urban consumption.
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First Published on Sep 2, 2015 10:53 am