“The market in India continues to grow in value, and volumes are also now recovering with rural volumes moderately positive over the last three months,” Pitkethly told analysts during first-quarter earnings call at the parent of Hindustan Unilever (HUL), India’s biggest consumer goods company. “We are seeing the return of smaller players in the Indian market and a tick up in media intensity, which are further signs of recovery.”
India, where sales grew 9.1% during the first half of the calendar year, is Unilever’s second biggest market after the US in terms of revenue.
Rural market volume, which had been in double-digit decline, turned positive in the June quarter compared with a contraction in the year earlier. Market growth on a two-year compounded annual growth rate (CAGR) basis, is still down marginally, with rural volume falling 4%, HUL said, citing Nielsen data.
Fabric cleaning and skin cleansing, which together account for 40% of Hindustan Unilever’s business, have seen moderating input costs over the past few months, led by falling palm and crude oil prices. That could see prices following.
“There is a lot of local competition in these segments and pricing is very directly connected to commodity price and as commodity falls, we expect pricing to have to adjust downwards. It may go flat and it may go negative,” Pitkethly said.During the quarter ended June, HUL saw volumes halve to 3% and said volume recovery could take at least two-three quarters after stocking of products with new prices stabilises at trade and consumer homes.Also, Unilever said India is seeing the resurgence of small and regional players, many of which had vacated the market during peak inflation. For instance, within tea, smaller players have grown 1.6 times more than larger rivals while in detergent bars, regional players have expanded three times faster in the March-May period.
“In the branded loose tea category, the consumer has moved because of pricing into the unbranded category,” said Pitkethly. “All evidence we have show that as soon as the consumer has a little bit more money to spend, they come back into the branded space. We are just not present nor do we want to be present in loose tea where the growth has gone.”
