Rising input costs, inflation and a weakening Indian currency are likely to cast a shadow on the consumer demand, thus, impacting sales and growth for consumer goods companies in the coming quarters, according to Hindustan Unilever.
However, the company said it’s not all gloom and doom as there is a broad-based improvement in demand both in the rural and urban market even as the trade channels, which were impacted by the GST implementation for the last few quarters, have normalised.
Sanjiv Mehta, MD and CEO, said that while there are concerns, the rural demand is picking up which is encouraging given that the rural market had witnessed a major distress in 2016.
HUL, the maker of brands like Ponds, Dove and Rin, posted a net profit of ₹1,351 crore during the quarter ending March 31, 2018, against ₹1,164 crore in the year-ago period on improved trade conditions, strong consumer demand and also through focus on cost savings.
For HUL, the cost saving this year was about 1.4 times of what it was in 2014.
The company's underlying volume growth was up 11 per cent during the quarter against a mere 4 per cent rise during the same period in the year-ago period.
The overall sales for the quarter stood at ₹9,003 crore during the March quarter compared with ₹8,773 crore during the year-ago period.
HUL's outgoing Chairman Harish Manwani said: “Despite a step-up in competitive intensity, we have delivered another strong performance for the quarter and the year. Growth and improvement in profitability have been sustained through a combination of winning innovations and a relentless focus on operational efficiencies. We are particularly pleased with our track record of sustained margin improvement for the seventh consecutive year."
Manwani added that the sales have also improved on back of the government's effort to boost rural economy through various incentive schemes, besides the move to reduce GST rates in several items and categories.
The GST rates on several consumers goods were decreased to 18 per cent from 28 per cent in November last year to boost demand.
The company also is focusing a lot on the 'natural' segment that has done fairly well and has grown 2.5 times of the company's overall growth of HUL.
The company said that it has a three-pronged strategy to expand its Natural portfolio wherein it will focus on its flagship brand Lever Ayush, focus on specialised brands such as Indulekha, an acquisition, and also extending the existing HUL brands by launching natural variants in those categories.
“We are not looking at launching a slew of natural brands every quarter but build the existing brands. We are not looking at just revenue generating brands," he added.