The early arrival and prospects of a good monsoon are making FMCG firms such as Emami, Dabur, Marico and GSK Consumer Healthcare upbeat about expectations of growth in uptake in rural areas that account for up to 50 per cent of their sales.
According to the FMCG companies, a good monsoon adds to the ‘feel good factor’ in an economy and creates a favourable emotional base for consumption.
“Early and good monsoon specially means good news for the rural economy, where dependence on agriculture is high, and thus a good monsoon benefits rural consumers very much,” Emami Ltd CEO (Sales, Supply Chain and Human Capital) N. Krishna Mohan told PTI.
According to him, Emami which gets 40-45 per cent of its total sales from rural India, expects increased consumption of FMCG products due to a good monsoon. Emami had posted a total turnover of Rs 1,627 crore in 2012-13.
“A buoyant economy, especially in rural India, would mean higher disposable incomes and would be favourable to the FMCG industry as well and there would be increased consumption of FMCG products,” Mohan said.
Expressing similar views, Dabur India CFO Lalit Malik said: “Good monsoons are generally favourable for FMCG consumption, particularly rural markets. With a good monsoon, we expect an improvement in rural consumption sentiment.”
Nearly 50 per cent of Dabur’s domestic sales are from rural India. Last fiscal the firm had total sales of Rs 6,146 crore.
Terming the early arrival of the monsoon as a good development, Marico Group CFO Milind Sarwate said: “It creates a favourable emotional base for increased consumption... The feel good factor generated by a good monsoon does help in improving buyer behaviour.”
When asked how much of Marico’s sales comes from the rural market, he said: “The proportion has increased over time and is currently around 30 per cent.”
Another FMCG player GlaxoSmithKline Consumer Healthcare is also expecting this year’s monsoon to boost consumer spending in rural markets.
“An early monsoon lifts consumer sentiments and gives a boost to agriculture and the economy and therefore lifts consumer spending, especially in rural markets,” GlaxoSmithKline Consumer Healthcare Executive Vice-President Jayant Singh said.
The FMCG companies are, however, of the view that over the last few years the monsoon has not been playing as much of a role in pushing consumer demand as was the case a decade ago.
“This is because of various other reasons which impact consumer sentiment. Also, non-farm incomes in rural India are increasing. Therefore, the reliance on the monsoon is not what it used to be a decade ago, though the same is still significant,” said Mohan of Emami.