Don’t see recession in India; RBI, govt doing a good job despite challenges: Sanjiv Mehta, HUL MD

Sanjiv Mehta, general manager of Hindustan Unilever Ltd (HUL), said India is unlikely to experience a recession and the country remains a bright spot.

“I don’t see a recession in India. At this stage, I am optimistic that our economy could grow in the region of 6-7%, which would be a great achievement under the circumstances. Despite the challenging context, the Reserve Bank and the government have do a good job,” Mehta told ET in an interview.

“There are two requirements for the government: one is to tame inflation and the second is to grow the economy. By the middle of the year, few major economies can say with a reasonable degree of confidence that they have near-growth growth. of 7%,” he said.

About 66% of CEOs in India expect a recession in the next 12 months, compared to 86% CEOs worldwide, according to a KPMG 2022 India CEO Outlook survey released last week.

Citing data from market research firm Nielsen, HUL said the FMCG market grew 7% in value and declined 6% in volumes in the September quarter.

HUL, the maker of Rin detergent and Dove soap, posted 16% sales growth, fueled by price increases and not demand as volumes — or the products consumers actually buy — increased by 4%.

The country’s largest consumer goods company — its presence in a range of everyday consumer items such as soap, shampoo and food makes it a measure of consumer confidence — said the FMCG industry is naturally recession-proof, but never recession-proof — proof.

The company said net material inflation was 22% and it is difficult to predict where this will go in the coming quarters, even if there has been some moderation in palm oil prices.

“Most commodities remain at high levels. We also need to understand that the depreciation of the rupee is driving costs up. Oil prices are fluctuating, but when geopolitical tensions end, they could start to decline. cooling, which in turn, could start the process of phasing out the prices of other commodities,” Mehta said. “The government has maneuvered well to ensure that some of our oil imports come at lower prices.”

Consumer inflation reached an all-time high in April in the wake of the Russia-Ukraine war, as companies increased product prices by 15-20% or reduced package sizes over the past year. In September, it peaked more than expected to a five-month high. The decline in the consumer goods segment is more pronounced in rural areas, where volumes fell by 9%. However, demand could recover in the second half of the fiscal year as a result of moderation in inflationary pressures and the normal monsoon, although this will depend on kharif output.

“Despite the challenging context, headlines continue to grow and have increased slightly, so these are green shoots,” Mehta says. “This is where our optimism comes in handy, but there are several variables that can change in headwinds, and this is where caution comes in.”

Innovation advantage:

In recent years, HUL has innovated across all value chains to enable greater agility, flexibility and efficiency. For example, it has set up three nano-factories that enable production in batches of kilograms instead of tons and help with faster product roll-out. This is being introduced in other Unilever markets to reduce innovation lead times and costs.

“We are definitely the thought leader when it comes to the entire digitization of the value chain,” says Mehta. “Many of our models, such as Livewire and Jarvis, which use our proprietary algorithms to optimize different FMCG variables, have now been adopted by other Unilever markets. Shikhar is also now being adopted by several developing countries.”

HUL’s digitized sales across platforms, including e-commerce channels and internal ordering app Shikhar, are over 20% of total revenue. More than a million kirana stores use the Shikhar app to order now, compared to about 300,000 outlets two years ago.

“We remain positive about HUL’s ability to outgrow the market, as well as its pricing power supported by distribution expansion, greater direct reach and product innovation initiatives,” said Abneesh Roy, executive director at Nuvama Institutional Equities.

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