Business environment to be challenging due to geopolitical tensions and commodity inflation, says HUL
High inflation in recent times has led to a marked slowdown in growth rates of FMCG industry in India and the business environment in the near future will continue to be challenging due to the ongoing geopolitical tensions and commodity price inflation, according to top officials of Hindustan Unilever Ltd.
Yet, India remains one of the fastest growing FMCG markets and the company believes that on the back of its “compelling business strategy” built over the last few years holds it in good stead to overcome the challenges.
Addressing shareholders in the company’s annual report for 2021-22, HUL chairman Nitin Paranjpe said India remains one of the fastest growing FMCG markets.
“However, the high inflation in recent times has led to a marked slowdown in growth rates. The recent slowdown notwithstanding, the penetration of FMCG products both in urban and rural India, provides significant headroom for growth,” he said.
More people entering the middle class, a large working population, increasing nuclear family structures, urbanisation and rapid adoption of technology, all bode well for FMCG growth in the country.
Stating that the Indian consumer is evolving rapidly, Paranjpe said, “The pandemic has accelerated several trends that will continue to have far-reaching effects on the Indian consumer — an increased affinity towards holistic health and wellbeing, a massive shift in the adoption of digital technology and importantly, a heightened consciousness amongst consumers on sustainability and social equity.
Also, he added, “The Indian consumer is increasingly choosing superior products and brands that are also good for the people and the planet.” The last two years of the pandemic had a significant impact on the nation and its citizens, Paranjpe said adding, “At the same time, we believe that it has made us an even more agile and resilient organisation. We have been taking several actions to help us stay relevant in an increasingly volatile and challenging business environment.” Commenting on the immediate challenge faced by the FMCG industry, HUL chief executive officer and managing director Sanjiv Mehta said, “In the near future, with geopolitical tensions and commodity price inflation, the business environment will continue to be challenging.” He, however, said, “I truly believe that with a compelling business strategy, our five growth fundamentals – purposeful brands, improved penetration, impactful innovation, design for channel and fuel for growth, and the future-fit technology that we have built over the last few years, holds us in good stead.” In fact, Mehta said, “The last two years of the pandemic has made us even more responsive and resilient as a business. Our competitive advantage continues to be our purpose-driven set of people and a wide and diversified product portfolio with more than 50 trusted brands across 15 distinct categories.” Referring to the year 2021-22, he said it was “yet another challenging year for all of us” and the severe second wave of the Covid-19 pandemic had a significant humanitarian and economic impact.
“We witnessed socio-political unrest in several parts of the world, resulting in the disruption of global supply chains and unprecedented volatility in commodity costs. In this uncertain operating environment, our focus remained on the health and safety of our people, ensuring uninterrupted supply of our products, meeting the evolving demand of our consumers, caring for the communities, safeguarding the environment and protecting our business model,” Mehta said.
The FMCG major, which has for the first time crossed Rs 50,000-crore sales in FY22, said its goal remains the delivery of “consistent, competitive, profitable and responsible” growth.
It remains confident of outpacing FMCG market growth and maintaining margins at healthy levels.
“Notwithstanding these near-term challenges, Indian FMCG sector offers significant potential for growth. In the mid-long term, we will continue to create value for all our stakeholders by growing ahead of the market, delivering modest margin expansion and through disciplined use of capital,” said HUL.