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Nestle, Unilever’s world winning formula is nemesis for Indian FMCG companies

The FMCG giant, which recently released the first quarter results, said that it delivered better than expected results, thanks to the boost in prices.

While Indian FMCG sector hasn’t seen a stellar growth because of inflation and slower demand growth from rural India, global FMCG giants — Nestle SA and Unilever — have registered higher global sales thanks to increased prices.

Indian FMCG has recorded a 2.3% percentage points slowdown in growth in the first quarter of 2019, from 15.9% growth seen in Oct-Dec 2018, says a recent Nielsen report. An acceleration in inflation was believed to be one reason for the same. But, this does not hold true for Nestle SA and Unilever. The FMCG giants, which recently released the first quarter results, said that they delivered better than expected results, thanks to the boost in prices.

“Unilever said sales were boosted by price increases, some of which were enacted to offset rising commodity costs tied to raw materials in food and petrochemicals used in detergents,” Bloomberg reported. This is in direct contrast with other consumer goods companies that have struggled to increase prices because the shopper trend is seen in cut-price and niche-labels, Bloomberg added.

Unilever’s winning formula, however, consisted of more than higher pricing. With a line-up of eco-conscious housekeeping products under its Seventh Generation and Omo brands, Unilever delivered strongly in the first quarter results as these were specially bought more. The company’s underlying sales grew 3.1%, Unilever said.

Back home, there has been a drop in the growth of packaged food category in rural India with the essentials such as packaged atta, spices, refined oils etc and impulse buys such as chocolates, confectionery and biscuits being lesser in demand. “While there is a slow down across various food categories in rural, the extent of drop is larger in essentials & impulse food categories,” Nielsen report says. However, the surprise here is in the fact that rural India is generally more proactive in buying FMCG products with “the rural growth 3-5% points faster than urban,” it added.

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Source: Financial Express