India’s FMCG giants are facing challenges in an increasingly competitive market with weak consumer sentiment and rural demand. Smaller, unorganized players are growing at a faster rate, affecting the mass-segments of soaps, detergents, and tea. Hindustan Unilever (HUL), the major FMCG player, experienced a 4% growth in profit and revenues, but its volumes only grew by 2%. The rural volumes fell by 1% in the second quarter, and its food business saw a 7% decline in volumes.
HUL’s performance in the operating market has become tougher. Centrum Broking suggests that in order to remain relevant and retain consumer confidence, HUL may need to provide superior value and increase its investments in consumer promotions and advertising. Additionally, smaller players within the tea and detergent bars segments are increasing their market value significantly, causing a decline in revenues for HUL.
Skin cleansing portfolio performance also suffered due to price cuts, and Nuvama Institutional Equities reports that consumers are downgrading their choices within the tea category. However, HUL’s Managing Director and CEO, Rohit Jawa, remains cautiously optimistic. He believes that FMCG demand will gradually recover, driven by the upcoming festive season, sustained services, and government thrust on capital expenditure.
ITC, another FMCG player, faced rising competition in key segments such as biscuits, snacks, noodles, and soaps. However, its revenues growth was driven by staples, notebooks, pens, personal wash, and agarbatti. Despite relatively subdued consumer demand, ITC launched new products in atta and biscuits. The company stated that margin expansion was driven by premiumization, supply chain agility, pricing actions, digital initiatives, and cost management.
Nestle, known for its popular brands like Maggi and Nescafe, experienced little disruption compared to its competitors. The company reported strong growth across all segments and is working on its ‘Rurban’ strategy to improve penetration in small towns and large villages. However, Nestle is concerned about the impact of uneven rainfall on commodity prices.
Analysts believe there is little change in estimates based on the Q2 earnings reports. They highlight Nestle’s strong position in the domestic food market and its innovative product portfolio, ensuring promising long-term revenue and earnings prospects.
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