Consumer goods companies show steady gains

Even as sales have slowed, benign commodity prices have allowed companies to protect margins

Samar Srivastava
Published: Jul 31, 2019 11:56:56 AM IST

After studying law I vectored towards journalism by accident and it's the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably now tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me, there are plenty of those in Asia at the moment.

g_119319_consumer_goods_280x210.jpgImage: Shutterstock

A slowing market for consumer goods companies has entered its third quarter and, for now, there is no end in sight. As quarterly results came in, it’s clear that rural markets continue to decelerate, some urban consumers are shifting to lower value packs and companies are going slow on increasing advertising spends. Volume growth at Hindustan Unilever was the slowest in seven quarters. “We haven’t seen any pick-up in demand in the first three weeks of July,” said Sanjiv Mehta, chairman and managing director at Hindustan Unilever. 

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While demand has been muted, benign commodity prices have allowed companies to protect margins. Both food and crude prices have stayed low keeping product as well as packaging costs in check.

With strong brands in place, companies have chosen to protect margins: For the last five years they have risen faster than sales. At Hindustan Unilever, margins have risen from 16 percent in the year ended March 2014 to 23 percent in the year ended March 2019, a CAGR of 13.1 percent. At Dabur and Marico, they are up by 9.4 percent and 11.3 percent respectively.

(This story appears in the 16 August, 2019 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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