The last time rainfall turned scanty, in 2009, fast-moving consumer goods companies did keep up sales growth. Rural demand didn’t buckle completely; Hindustan Unilever, Dabur, and Godrej Consumer saw rural demand outpacing urban. But high food inflation resulted in consumers buying cheaper products. As competition increased, companies also dropped price points in some segments. For instance, HUL dropped prices in its bread-and-butter laundry segment towards the end of 2009. Sales growth improved from five per cent in the September 2009 quarter to eight per cent by March 2010, helped also by a good personal care division.

Marico too cut entry-level prices of Parachute by around 15 per cent in the December 2009 quarter to keep up the shift from loose oils to branded oils, delivering a good boost to sales volume expansion. For listed FMCG companies, sales growth improved from 11 per cent in the June 2009 quarter to 15 per cent by the June 2010 quarter.

This apart, prices of inputs such as palm oil, milk, tea, barley and maize were up, sending costs higher for almost all companies. Besides this, increase in ad spends resulted in operating profit margins declining from 16.8 per cent in the June 2009 quarter to 14.8 per cent by March 2010.

This time around too FMCGs will benefit from a low share-of-wallet and their less discretionary nature. If agri-inputs turn pricey due to a poor monsoon, companies may scrimp on ad spend to maintain operating profits as they did when input costs rose in 2011.

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