India shines as key growth market for consumer goods MNCs despite urban slowdown

In a global market besieged by uncertainties, India remains a rare bright spot for multinational consumer goods companies despite a demand slowdown in its cities. Top executives of nearly a dozen consumer goods multinational companies, including Unilever, Procter & Gamble, Pernod Ricard, Reckitt, PepsiCo, Heineken and L'Oreal in their earnings calls cited India as a major growth driver, especially among emerging markets, in the past quarter.

Some have flagged a softness in urban markets due to slow wage growth and inflation squeezing household budgets, but predicted a strong recovery to set in this fiscal year.

“India is driving mid-single-digit growth very nicely,” P&G chief financial officer Andre Schulten told investors last week. “The market gets better every time we look at it. So again, we feel very solid about the growth opportunity there.” But the growth rates are volatile, the company that sells the Ariel detergent and Vicks Vaporub balm said, highlighting India’s fluid market dynamics.


Over the past decade, sales of branded daily need products in the nation of 1.4 billion have increasingly relied on rural India, which is home to more than 800 million people whose purchase behaviour is largely linked to agricultural production.

Slower demand in rural
areas that dragged the overall market down until last year has recovered significantly in the past three quarters. But demand for groceries to apparel and lifestyle products in urban India has been witnessing a slowdown for more than a year now.

“In India, the urban market continues to be soft, and we had anticipated that it would come back a little bit faster this year,” Colgate-Palmolive chief executive Noel Wallace told investors late Friday.

Emerging Markets Fare Well
While mass-priced categories and brands in India have been impacted, demand for pricier products remained strong, said companies. PepsiCo, Reckitt and L'Oreal, which are seeing volatile market conditions globally, said performance in emerging markets was particularly strong in the quarter ended March and India was one of their growth engines.

For Unilever and Pernod Ricard, India is the second-largest market in terms of scale. While the country may not remain among the fastestgrowing market that it was until two years ago for them because of the urban showdown, both said it still is a key growth driver.

Unilever chief executive Fernando Fernandez said India has been a consistent performer for the AngloDutch parent of Hindustan Unilever, the country’s top consumer goods firm. It has been gaining shares in India for the last three years, he said. “I think this is a market where we will be unblinking in our defence and when we get our growth engine moving up, we know how to real ly make money here and how really to drive earnings ahead of growth,” Fernandez said during an investor call on Thursday.

Pernod Ricard, the world’s secondlargest distiller that sells premium brands like the Absolut vodka and Chivas Regal Scotch whisky, said India saw dynamic growth during the year with strong underlying market demand and continuing premiumisation trends.

Harald Van den Buch, chief financial officer at Heineken that owns the Kingfisher brand, also sounded upbeat about the India market during an analyst call in mid-April. “In India, beer volume grew by a mid-single digit, continuing its growth momentum with premium volume growing in the 20s,” he said.