This has prompted some buyers of fast-moving consumer goods to temporarily cut back on purchases through a period of price-stickiness, which was described ‘rare’ by the company.
“India is going through probably the most difficult economic situation. Inflation is high. We are probably getting to a situation where we have now seen 14 consecutive months of double-digit wholesale price inflation,” Paranjpe told shareholders virtually during his annual address on Thursday. “I don’t know when we have last seen something like that. FMCG markets, which have generally been strong for a long period of time, have started seeing the effects of this.”
Test of FMCG Mkt’s Resilience
Last month, wholesale prices rose to a record when referenced to the new reporting benchmark, with the gauge climbing to just shy of 16%.
Inflation is testing the resilience of the fast-moving consumer goods (FMCG) market, Paranjpe told delegates at the annual general meeting of the country’s biggest consumer company.
“And, more recently, we have seen market rates moderate and volume growth rates have actually become negative in the short term,” he said.
Consumer goods volumes fell about 1% during FY22, according to global consumer research firm Kantar Worldpanel (formerly IMRB). HUL’s performance is considered a proxy for the broader consumer sentiment in India.
HUL expanded value sales by 11% last fiscal, largely driven by price increases as it tried to offset energy, packaging and transport costs that rose about 50% from the past year.
“The immediate future is challenging, and it will require some astute handling and a balancing act to be able to make sure that growth does not stall and we are able to contain inflation,” added Paranjpe, chief people and transformation officer at Unilever in his first AGM as HUL’s chairman.
The company said it will try to mitigate some of the impacts of inflation by driving savings instead of passing price increases to consumers. The company saved nearly 7% of its annual turnover after it cut costs, tightened supply chain operations, tweaked manufacturing lines, and shed its dependence on imported raw materials.
In the medium to longer term, HUL said it remained confident of FMCG demand and its growth rates due to low per capita consumption, a large and young population, a growing middle class, rising affluence and the adoption of technology.
HUL is investing in technology and distribution, resulting in a 15% expansion in reach. About a fifth of the demand serviced by the company is now captured digitally.