FMCG firms underplay El Nino impact on sales

Purvita Chatterjee Mumbai | Updated on November 24, 2017 Published on May 14, 2014

See poor rains hitting mass consumption categories but not premium segments

India is expected to see below normal monsoon this year due to the El Nino factor which may have a bearing on the economy, but fast-moving consumer goods (FMCG) companies are not too perturbed about its impact on their sales.

“The El Nino may impact only some monsoon rains. The lack of rains will not impact mosquito breeding too much, but we will have to wait and see how the household insecticide category actually fares during the monsoons,” said Adi Godrej, Chairman of Godrej Group at an analyst meeting.

Godrej Consumer Products Ltd (GCPL), a group company, is the leader in the household insecticide category.

GCPL has been trying to create separate household insecticide for the rural and urban markets. While new products such as Godrej Express (liquid Vapouriser) are targeted at the urban markets, the rural markets have cheaper products such as odrej Fast card.

Other companies with a rural focus like Jyothy Labs, which has brands such as Ujala whitener and Maxo repellents, are also not expecting any immediate drop in sales.

“We do not think there will be any immediate impact. Monsoons always have a lag affect,” said S Raghunandan, CEO & Whole-time Director, Jyothy Labs.

For other players such as Marico, the contribution from the rural markets has only been going up and lack of monsoons is unlikely to have an impact. “We do not see an impact of the El Nino on sales from the rural markets. The contribution of rural markets to our sales turnover has only been increasing from 25 per cent to 32 per cent,” Saugata Gupta, MD & CEO of Marico, said during the last analyst meet.

However, analysts tracking the FMCG category are not convinced about the lack of impact on sales.

“Contrary to what some of the players claim, personal care categories would get impacted due to lack of rains. Demand for FMCG has already been affected and the El Nino effect will have a further impact,” said V Srinivasan, Research Analyst, Angel Broking.

Besides, the timing of rains will be more critical for FMCG companies as agricultural output and incomes are linked to rural demand.

Asitava Sen, Head of Food & Agri Business Research, Rabobank International, said: “It all depends on when the monsoon rains begin this year as crop sowing has to start early to generate rural output and incomes, the lack of which will impact mass consumption categories like soaps and detergents, but not the premium FMCG categories. Rural dependent companies like HUL and ITC are likely to get impacted more due to the lack of monsoons.”

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Published on May 14, 2014
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