Negative economic sentiment major cause of worry: FMCG cos
Major FMCG firms such as Dabur, Emami and Godrej are more concerned about the overall negative economic sentiment hurting demand than the late arrival of monsoon that can have an impact on rural sales.business Updated: Jul 01, 2012 12:53 IST
Major FMCG firms such as Dabur, Emami and Godrej are more concerned about the overall negative economic sentiment hurting demand than the late arrival of monsoon that can have an impact on rural sales.
"We have not seen any contraction in demand as yet and the rural market continues to grow," Dabur India chief financial officer S Raghunathan said when asked about the impact of late arrival of monsoon.
While the high-end super-premium segment does not get impacted by inflation or monsoon, demand in the mass-premium segment could get contracted in case the overall economic sentiment does not improve, he added.
"We are watching the situation and are cautiously optimistic," Raghunathan said.
Expressing similar sentiments, Kolkata-based Emami said a marginal shortfall in the monsoon may not significantly impact the consumption levels.
"..it is the macro-economic indices, like inflation, level of rural financing, high interest rates, low infrastructure investments, along-with shortfall of rainfall if so, that would impact the consumptions," Emami CEO Sales Krishna Mohan said.
Godrej Consumer Products Ltd (GCPL) managing director A Mahendran said, "Across FMCG sector monsoon delay or below average rains is never a concern. The delay won't affect consumption."
The south-west monsoon, the key to the agriculture driven trillion-dollar Indian economy, hit Kerala on June 5 but its progress so far in the rest of the country has been less than satisfactory.
Market analysts also pointed out that the impact on FMCG firms due to late rains would be nominal due to their enhanced penetration in the rural areas in the last few years.
"..FMCG companies derive 35 to 50% of their revenues form rural economies but with the depth of distribution this time the impact will be marginal in the worst scenario," Anand Rathi Securities executive director and Co-head research - Institutional Equities Shirish Pardeshi said.
India's economic growth rate slipped to nine-year low of 6.5% in 2011-12 and current account deficit (CAD) has touched a high of 4%.
Inflation, meanwhile, was high at 7.55% in May.