India Going Through Most Difficult Economic Situation, Says FMCG Giant HUL's Chairman

FMCG giant Hindustan Unilever (HUL)Ą¯s chairman Nitin Paranjpe has said that India is going through the most difficult economic situation and persistent inflationary pressures are beginning to weigh on demand, as per an ET report.

This has prompted some buyers of fast-moving consumer goods to temporarily cut back on purchases through a period of price-stickiness, which was described as 'rare' by the company.

"India is going through probably the most difficult economic situation. Inflation is high. We are probably getting to a situation where we have now seen 14 consecutive months of double-digit wholesale price inflation," HUL chairman Paranjpe told shareholders virtually during his annual address yesterday.

"I don't know when we have last seen something like that. FMCG markets, which have generally been strong for a long period of time, have started seeing the effects of this."

HUL

For the uninitiated, Nitin Paranjpe was appointed as Chief People and Transformation Officer of HUL in January 2022. He also became Chairman of HUL in March 2022.

Inflation is testing the resilience of the fast-moving consumer goods (FMCG) market, Chairman Paranjpe told delegates at the annual general meeting of the country's biggest consumer company.

"And, more recently, we have seen market rates moderate and volume growth rates have actually become negative in the short term," he said.

HUL reportedly expanded value sales by 11% last fiscal, largely driven by price increases as it tried to offset energy, packaging and transport costs that rose about 50% from the past year.

"The immediate future is challenging, and it will require some astute handling and a balancing act to be able to make sure that growth does not stall and we are able to contain inflation," added Paranjpe in his first AGM as HUL's chairman.

The company reportedly said it will try to mitigate some of the impacts of inflation by driving savings instead of passing price increases to consumers. The company saved nearly 7% of its annual turnover after it cut costs, tightened supply chain operations, tweaked manufacturing lines, and shed its dependence on imported raw materials.

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Confident In Medium To Long Term

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In the medium to longer-term, HUL said it remained confident of FMCG demand and its growth rates due to low per capita consumption, a large and young population, a growing middle class, rising affluence and the adoption of technology.

HUL is investing in technology and distribution, resulting in a 15% expansion in reach. About a fifth of the demand serviced by the company is now captured digitally, as per the ET report.

Consumer goods volumes fell about 1% during FY22, according to global consumer research firm Kantar Worldpanel (formerly IMRB). HUL's performance is considered a proxy for the broader consumer sentiment in India.

The report also stated that last month, wholesale prices rose to a record when referenced to the new reporting benchmark, with the gauge climbing to almost 16%.

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