Rural India feeling inflation pressure, says Unilever’s Jope
Jope’s remarks come as Unilever’s Indian unit, Hindustan Unilever (HUL), delivered March quarter numbers below analysts’ expectations on Thursday, raising concerns that the domestic FMCG market would take time to recover, despite signs of moderating inflation.
India’s fast-moving consumer goods (FMCG) market has been largely driven by growth in urban areas than rural, Unilever’s CEO Alan Jope said during an earnings call on Thursday after announcing the company’s March quarter numbers. The company follows a January-December accounting year.
Jope’s remarks come as Unilever’s Indian unit, Hindustan Unilever (HUL), delivered March quarter numbers below analysts’ expectations on Thursday, raising concerns that the domestic FMCG market would take time to recover, despite signs of moderating inflation.
“One overaching phenonemon we are seeing in India is that Urban India remains buoyant, while Rural India is feeling the pressure of inflation. So, it is quite a big difference emerging in the performance of Urban India and Rural India,” Jope said on the call with investors.
HUL reported a 10.6% year-on-year revenue growth in the March quarter, led by price hikes. Volume growth was muted at 4% for the quarter, as rural consumers downtraded to deal with inflationary pressures, sector experts said.
“If you look at it, this is another quarter of positive volumes despite difficult trading conditions in India. We speak about winning in many Indias. It is a clear strength in India, the ability to disaggregate India geographically,” Jope said about a strategy that has seen Unilever’s Indian unit divide the country into smaller regions to address price, product and distribution needs.
US, India and China remain priority markets for Unilever, with the US contributing nearly 22% of its global sales of 60 billion euros (or $63.3 billion) in 2022. India contributed around 12% to global topline, data from its results showed.
Jope said HUL’s growth in the March quarter was “broad-based” and driven by strong competitiveness, led by a portfolio that had been built with brands competing across all price tiers. “India is one of Unilever’s powerhouses and we are confident in our ability to navigate the turbulence,” he said.
Analysts say Unilever’s dominance in India has helped it raise prices over the last few quarters, which may change now as volume growth begins to look up amid easing inflationary pressures.
On the call, Jope said the company was not “profiteering in any way, shape or form” from inflation and it was conscious that price hikes were hurting the consumer.
The financial performance of global consumer companies has come under scrutiny during the cost-of-living squeeze. Some central bankers across the world have cautioned that companies flexing pricing power could be fueling inflation.
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