Consumer goods companies eye robust demand growth as economy recovers

Consumer-facing companies that have announced earnings so far in the June quarter expect a 'very optimistic demand' scenario, consistent with a double-digit growth outlook for the year, as the pace of economic recovery quickens toward the latter half of FY22.

Jubilant Foodworks (JFL), which operates quick service restaurant brands Domino's Pizza and Dunkin' Donuts, said in its post-earnings commentary that it expects 'hyper-growth' for its brands led by Domino's. "We are looking ahead with optimism, confident of delivering hyper-growth and transforming into a food-tech powerhouse," JFL chief executive Pratik Pota said.

Sales for June recovered 99.5% to pre-Covid levels, led by deliveries, small-town demand and services on its own online platform.


Executives said companies have built supply chain resilience, focused on digital acceleration across functions and reset their go-to-market strategy with increased reliance on ecommerce, following shifts in channel preference by consumers, amid the sudden onslaught of the second wave of the pandemic.

Hindustan Unilever said if the government is able to ramp up the vaccination drive - from the current run rate of 4-5 million to 7-8 million daily, the picture will become significantly better in the next few months.

"Even if the third wave were to hit, the impact will be less and the severity of it on people who have been vaccinated would be much lower. That gives us optimism that things should turn out better as the year unfolds," said Sanjiv Mehta, chairman at Hindustan Unilever.

Revenue growth of the FMCG sector will double from 5-6% last fiscal to 10-12% in the current year - the highest in the past three fiscals - driven by price hikes across product categories, a new report by Crisil Ratings said on Tuesday.

Surge in at-home consumption, optimised last-mile deliveries, increased supply chain agility and relocation of inventory closer to demand centres have paid off, executives said.

"Looking forward, with the drop in Covid positivity rates and steady increase in the vaccination coverage, we expect the recovery momentum to accelerate," said Hina Nagarajan, CEO, United Spirits, after posting a 57% increase in net sales during June quarter.

Amul, which reported its highest ever sales for the year 2020-21 this week, has forecast growth of 15-16% for the next three quarters.

"We have re-modelled last-mile supply chains and continue to leverage online and home deliveries in multiple ways," said managing director RS Sodhi. "We have many new products on the immunity platform, and have also taken up pricing after a year and a half."

In the consumer market, sales climbed 30.3% during July 1-14 from the same period in the prior month, according to a study by sales automation firm Bizom. This was the fastest pace in a year, as concerns over the pandemic eased and most states - including several in the south - unlocked their markets. And discretionary categories - from cars to electronics to lifestyle products - saw an upsurge.

In an analyst call this week, Asian Paints said the demand outlook is very positive with the second wave abating.

"The vaccination drive is picking up to that extent. And what we see is definitely, a very, very positive environment and a lot of pent-up demand," Asian Paints managing director Amit Syngle said on an investor call.

Optimism is also translating into an increase in scale investments.

Last week, Britannia announced an investment of Rs 94 crore to step up production capacity at its Odisha plant.