Here is why top FMCG companies in India are boosting portfolio and reach

Over the last few quarters, fast-moving consumer goods (FMCG) companies saw tepid growth, with demand in urban markets being sluggish, even as rural consumption had started showing an uptick. Top companies have been focusing on new product launches and category expansions as they look to boost sales and drive more premiumisation, with demand seen gradually improving.

Hindustan Unilever, the largest FMCG company in the country, expects the first half of the current financial year to be better than the second half of last year. 

"The macro triggers are all turning out to be favourable. Rural markets have essentially recovered and are resilient and robust over the last few quarters. The monsoons have been good. The monsoon projected is going to be decent again. Agriculture output is strong. Reservoirs are full. We believe that this will really be an important trigger, given companies like ours actually do have a very large rural-facing portfolio," said Rohit Jawa, CEO and MD of HUL.

"Urban growth has come down over the last several quarters. But, the food inflation coming down to lower levels of late, the drop in interest rates making the instalments and EMIs low for households, the tax relief, crude, which will impact the entire country and household in a meaningful way, is soft as well. All of these factors really bode well for consumption," added Jawa.

HUL reported a 4 per cent year-on-year rise in net profit for the Jan-March quarter at ₹2,493 crore, compared with ₹2,406 crore, a year ago. Its quarterly revenue rose around 3 per cent to ₹15,513 crore from ₹15,077 crore. 

Volume growth (number of units sold) in the March quarter was 2 per cent, compared with a flat growth in volumes it had reported in the October-December quarter.

In the fourth quarter, while the company saw volume growth in the home care as well as beauty and wellbeing space, it saw volumes decline in the personal care space. It also saw volumes decline in the foods space, which was offset by some price-led growth. HUL has been impacted in the nutritional drinks space, with revenue declining amid continued category headwinds. The company is planning various measures to revitalise this space, which it entered five years ago with the acquisition of GlaxoSmithKline Consumer Healthcare.

"We have got two very good solid equities with Horlicks and Boost. What's not gone well is that the consumption of the category has not gone up," said Jawa.

As a part of its plans to boost consumption in the segment, the company plans to revitalise the brand Horlicks, incentivise consumers to use larger packs and drive its adult nutrition business more aggressively. 

"We are doubling down on our chemist program, on our medical marketing program, and we will essentially drive that harder in the quarters to come," said Jawa. 

The company has expanded the Boost brand as a ready-to-drink beverage, while the company is also looking to expand its availability. Similarly, it is also expanding coffee and Horlicks in the ready-to-drink format. 

HUL's rivalry with Nestle India

HUL's rival Nestle, too, has been busy with several launches. For instance, it has introduced baby food variants with no refined sugar. Nescafe's ready-to-drink cold coffee range, one of the fastest growing segments globally, expanded its new range to India, while it has also introduced Nescafe Roastery in the premium coffee category.

The company has also expanded its Kitkat brand as a professional spread that chefs can incorporate into dessert preparations. Targeting affluent consumers, Nestle also has recently opened its first Nespresso boutique in Delhi, offering Nespresso coffee machines and coffee pods.

Nestle India reported a 5 per cent decline in the January-March quarter standalone net profit at ₹885 crore, versus ₹934 crore a year ago. Its quarterly revenue rose to ₹5,504 crore from ₹5,268 crore. The company has in recent years focused on expanding deeper into smaller towns, under its "RUrban strategy", as it looks to drive consumption across its categories.

"We have strengthened our route to market through a comprehensive RUrban strategy focused on five key pillars: infrastructure, product portfolio, visibility, consumer connect, and technology. Our RUrban distribution touchpoints have increased to 27,730. We are present in approximately 208,500 villages," pointed out Suresh Narayanan, the chairman and MD of Nestle India.

Shares of both companies ended mixed on Thursday. While HUL ended 4 per cent lower, Nestle India closed 0.03 per cent higher. The broader BSE Sensex declined 315 points or 0.4 per cent at 79,801.43 level. 

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