India's Rural Markets Impacted Due To High Food Inflation, Says Alan Jope

Urban markets in India have seen strong growth, but low-income consumers, especially those from rural areas, have continued to reel from high food inflation, Alan Jope, Unilever CEO, told investors on Thursday during a conference call after announcing its December quarter earnings.

“Rural markets remain broadly flat… But we remain confident that we can continue to grow ahead of the market in India,” Jope said.

October-December quarter growth remained strong for Unilever driven by India, Southeast Asia, and Africa, Graeme Pitkethly, CFO of Unilever, said.

Jope said the company saw 15.6 per cent growth in the country during the quarter, during which price and volume were up 11.2 per cent and 3.9 per cent, respectively.

“Growth is broad-based, because it’s driven by strong competitiveness and a portfolio that’s been built with brands competing across all price tiers,” he said.

On tea consumption, Jope said consumers have shifted to very low price, low margin powder tea, where it chooses not to compete. “In the premium tea segment, we’re gaining share but there’s a shift to very low-cost tea where we frankly see no margin and don’t want to participate," he said. Red Label, Taj Mahal, Taaza are among HUL's biggest tea products in India.

After announcing Hindustan Unilever’s December quarter results last month, Ritesh Tiwari, CFO at HUL, said in a press conference that rural markets had shown signs of improvement. “Rural markets are showing some signs of improvement with the December quarter growth higher than the September quarter and the last 12 months. With lower inflation, strong winter crop sowing, and signs of pick-up in farm incomes, it is likely that rural slowdown is bottoming out.”

Sanjiv Mehta, MD and CEO at HUL, had said, “Value growth in June and July in rural was negative and volume growth was -13 per cent and -12 per cent (respectively). In the December quarter, value growth was back in the black at 2.5 per cent, while value and volume growth improved to -9 per cent.”

He added, “Things are improving, but there’s a long way to go before volumes and rural (demand) become positive.”