Volume growth returning, rural demand seeing green shoots: Procter & Gamble

Volume growth returning, rural demand seeing green shoots: Procter & Gamble
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With softening of inflation, volume growth is finally returning and rural demand is witnessing green shoots, Procter & Gamble Hygiene and Health Care Ltd (PGHHL) said on Friday.

New Delhi: With softening of inflation, volume growth is finally returning and rural demand is witnessing green shoots, Procter & Gamble Hygiene and Health Care Ltd (PGHHL) said on Friday.

PGHHL, which reported a 12 per cent sales growth in FY23 and 3 per cent sales growth in the first quarter this fiscal, said FMCG consumption in the June quarter was the fastest in the last six quarters. "Inflation is softening and volume growth is finally returning. A growth of 7.5 per cent in a quarter for the industry is great news," PGHHL Vice President Finance Gautam Kamath said in an investors' call. This volume growth eventually unlocks capital investment and triggers a positive investment cycle. "In another piece of good news, the rural demand is growing as well. With a quarter showing 1.4 per cent volume growth in the non-food sector in the rural economy after four quarters of significant volume decline," he added.

After a couple of years of flat volume growth, the industry as a whole is looking to come back strongly and competitive activity is fairly intense, he added. PGHHL, which owns popular brands such as Vicks in healthcare and Whisper in feminine care, remains "optimistic about growth with some concerns about the monsoon and retail inflation, but the broader trend is very encouraging". "It will also require companies like us to continue to invest in rural growth through awareness programmes, which we are already working towards," he said.

On growth expectations for the next 5-7 years, he said, "We expect volume consumption growth within the FMCG category to be in the mid-single digits." However, Kamath added there are several categories, where consumption is fairly low, and P&G is looking at the potential to further improve and impact consumers' lives. "We see an opportunity for double-digit growth in these categories... the role for companies like P&G is to continue to drive awareness and making our products available to consumers at varied price points and retail channels," he said. On Ebitda margins, Kamath said PGHHL will continue to drive both top line and bottom line. PGHHL is a market leader today with half of the market in both feminine care and cough & cold categories and would continue to focus on them, he said. The company is further deepening its reach with direct distribution, he said.

"We developed in-house artificial intelligence and machine learning algorithm that analyses consumer behaviour patterns to customise the range of P&G products that are at a store level. "With this, we have transitioned from cluster-based planning to a store and neighbourhood-based planning," he said, adding that it also helped store owners to optimise inventory and significantly reduce non-moving stock. Penetration levels for its feminine care products is significantly less in rural India than that of urban India, he said, adding that there is a strong opportunity to increase penetration even in urban areas in terms of value spent per consumer. "We are at one-fourth of the average consumption of BRICS countries. The penetration and consumption gap has only widened with the pandemic-induced challenges... our aim has been to address the common and diverse challenges," he said.

Responding to a query during the investors' meet of P&G's subsidiary Gillette, on how is P&G global looking at the Indian entity from a growth and profitability perspective, Kamath said the US-based FMCG major continues to see huge growth potential from its Indian subsidiary. "P&G Global continues to see huge growth potential from the Indian subsidiaries. India is among top 10 markets for P&G globally. "In fact, the P&G Global COO has gone on record to say that he expects India to deliver consistent double-digit growth and become one of the top contributors of top-line and bottom-line for the company globally," said Kamath, who is also the Chief Financial Officer for Gillette India.

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