Consumption weakness seen in rural India: Unilever CEO Alan Jope

Markets in India are growing in value but in volumes they are declining, Alan Jope, chief executive officer (CEO) of Unilever, told analysts on Tuesday after announcing his company’s June-quarter results.

He attributed the weakness in consumption to inflation, particularly in rural areas. “We are confident of Hindustan Unilever’s (HUL’s) ability to continue to grow ahead of the market and we see that reflected in very strong market share performance,” Jope said.

He said HUL’s growth was broad-based and driven by strong competitiveness and a portfolio that had been built with brands competing up and down price tiers. During the quarter, HUL reported 19.5 per cent growth and the company took a 12 per cent price increase across its portfolio.

The company’s chief financial officer, Graeme Pitkethly, said: “A key theme underpinning our capex is investment in digital, whether that be in our supply chain, our marketing or in a relationship with customers and platforms.

This digital investment is enabling us to (understand) consumer needs to better serve customers and to run an efficient supply chain. We are making significant investments in our supply chain networks in our priority markets with India and US network resets.”

The company’s volumes growth stood at 6 per cent in the April-June quarter (on a high base of last year) as against a contraction of 5 per cent for the industry. In the June quarter last year, the company saw its volumes growth at 9 per cent.

“With the dollar strengthening, we are seeing a currency-led inflation impact,” said Ritesh Tiwari, HUL’s chief financial officer.

Widespread inflation is affecting consumer demand, he said.

He further said: “Even though the correction in some commodities like palm (oil) happened in the last couple of weeks of June, we will have a higher cost inventory that was contracted earlier. The consumption of this inventory in the September quarter and many of the commodities like crude oil, caustic soda and plastics will remain elevated year-on-year, and the September quarter NMI (net material inflation) will be higher than in the June quarter.”

The company will increase prices in a calibrated manner.

On the firm’s outlook, Tiwari said: “In the near term growth will be price-led because inflation continues to impact consumption.”

Sanjiv Mehta, HUL CEO and managing director, said: “The markets, especially through the lens of volumes, still remain soft. Inflation is very much a concern. So, those factors haven’t gone.”