Nitin Paranjpe, chairman of Hindustan Unilever NSE 2.46%(HUL NSE 2.46%), claimed that India is going through its most challenging economic period and that ongoing NSE -2.23% inflationary pressures are starting to have an impact on demand.
Due to a time of price stickiness, which the business called “unusual,” certain consumers of fast-moving consumer items have temporarily reduced their purchases.
“India is perhaps experiencing the most challenging economic position right now. High inflation exists. We are likely approaching a point where double-digit wholesale price inflation has occurred for 14 consecutive months “During his annual address on Thursday, Paranjpe essentially informed the shareholders. “I’m not sure when we last saw something like. FMCG markets, which have historically been robust for a long time, are beginning to feel the effects of this.”
A Resistance Test for the FMCG Market
When compared to the new reporting benchmark, wholesale prices reached a record high last month, with the gauge rising to slightly under 16%.
At the annual general meeting of the largest consumer company in the nation, Paranjpe warned that inflation is putting the fast-moving consumer goods (FMCG) sector to the test.
Additionally, he added, “more lately, we have seen market rates moderate and volume growth rates actually turn negative in the near future.”
According to global consumer research firm Kantar Worldpanel, consumer goods volumes decreased by around 1% in FY22 (formerly IMRB). The performance of HUL is seen as a good indicator of Indian consumers’ overall attitude.
HUL increased value sales by 11% in the most recent fiscal year, primarily as a result of price hikes as it attempted to offset an increase in energy, packaging, and transportation expenses of roughly 50% from the previous year.
In his first AGM as HUL’s chairman, Paranjpe, chief people and transformation officer at Unilever, continued, “The near future is hard, and it will require some clever handling and a balancing act to be able to ensure that growth does not stall and we are able to contain inflation.”
The business announced that rather than raising prices and passing them on to customers, it would work to reduce some of the effects of inflation. After making cost reductions, supply chain optimizations, manufacturing line adjustments, and a reduction in its reliance on imported raw materials, the company was able to save close to 7% of its annual turnover.
Due to low per capita consumption, a sizable and youthful population, a growing middle class, increasing affluence, and the adoption of technology, HUL said it remained optimistic about FMCG demand and its growth rates in the medium to long term.
HUL is expanding its reach by 15% as a consequence of investments in distribution and technology. A fifth of the company’s current demand is now digitally documented.