Unilever, P&G cite good signs after a year of disruption linked to Demonetisation, GST

Unilever, P&G cite good signs after a year of disruption linked to Demonetisation, GST

MUMBAI: Global consumer product companies UnileverNSE 0.34 %, Procter & Gamble and Reckitt Benckiser said demand is picking up in India, with growth partly helped by low base due to the demonetisation-induced dip last year. While the impact of the goods and services tax weighed down pricing growth, some said it will recover in the second half of the year.

Unilever, the parent of Hindustan Unilever, India’s largest consumer products company, said consumer demand is picking up after 12 months of disruption and off-take has been good. “India is off to a very strong start. All categories are growing ahead of the marketplace,” Graeme Pitkethly, chief financial officer at Unilever, said on a call with investors.

The revival in the January-March quarter comes on the comparatively low base of the yearago quarter due to the currency note ban of November 2016, which had curtailed the purchasing power of rural households using cash to buy shampoos, soaps and packaged cookies

“Growth has been very good. Clearly, from one period to the next, there are a number of things that happened in India – demonetisation, GST and all these changes,” Adrian Hennah, CFO at Reckitt Benckiser, told investors. “So to just look at the sales delta in one quarter and compare it with the other would never be the right way of looking at it, given the volatility of what is happening in India.”

After GST came into force on July 1 last year, several consumer goods companies cut product prices in categories where the rate was lowered. The lowering of GST to 18% from 28% in November for over 200 products, including chocolates, toothpaste, shampoo, washing powder and shaving creams prompted another round of price cuts by companies.

While this lowered value growth, it boosted demand due to promotions and offers

For most companies, pricing growth should pick up in the second half as they annualise the implementation of GST.

“Pricing was muted. This was driven by low commodity inflation due to the impact of GST in India. That depresses pricing by about 30 basis points a quarter, until we lap the impact of GST, which is in the Q3 and Q4 and that will drop away,” added Pitkethly of Unilever.

Growth in consumer product sales in rural areas was almost double that of the urban markets between 2008 and 2012, helping the overall segment expand about 18%. With bad monsoons in 2014 and 2015, rural consumption growth fell back. The trend reversed over the past two quarters, with sales of consumer products in rural markets outperforming urban India, largely on the back of a good monsoon, which resulted in better farm incomes.

Experts said a combination of the low-base effect, rising urban consumption and relatively stabilising rural demand ensured that growth for the consumer sector witnessed a significant pickup in the third quarter. And this trend should continue with the value growth trajectory holding up on a sequential basis. “While the growth trajectory has been recovering over the past few quarters, there remains a lack of consensus as far as the recovery in the wholesale trade channel is concerned, with many ..

“We are now double-digit this year,” Jon Moeller, P&G CFO told investors. “I have got a lot of evidence we can win in China and India, the two biggest markets who are now starting to grow and growing at an accelerating pace as we go through the fiscal year.”

Source : https://economictimes.indiatimes.com/industry/cons-products/fmcg/unilever-pg-cite-good-signs-after-a-year-of-disruption-linked-to-demonetisation-gst/articleshow/63875401.cms

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