India facing ‘probably the most difficult economic situation’: HUL chairman
Describing the current macroeconomic situation as “probably the most difficult economic situation”, HUL Chairman Nitin Paranjpe on Thursday said India will require some astute handling and a balancing act to make sure that growth does not stall, while inflation is contained, as the immediate future is challenging.
Responding to queries of shareholders in the annual general meeting (AGM), Paranjpe said global supply chain disruptions due to the pandemic and geopolitical tensions have had an impact on India as well.
“It is true that we are going through probably the most difficult economic situation. Inflation is high, there are supply chain disruptions that are going on,” he said.
Elaborating further, he said it is a result of a combination of factors that is the outcome of just coming out of the pandemic, which disrupted many supply chains and also of the geopolitical tension that is being witnessed in many parts of the world.
“Therefore in India, we are probably getting to a situation where we have now seen 14 consecutive months of double-digit wholesale price inflation. I don’t know when we have last seen something like that,” Paranjpe said.
Stating that this has had an effect on the Indian market, he said, “FMCG markets, which have generally been strong for a long period of time, have started seeing the effect of this and more recently, we have seen market growth rates moderate and our volume growth rates have actually become negative in the short term”.
“Many people were complimenting India on how we were coming out of the COVID period but it does mean that the immediate feature is challenging, and it will require some astute handling and a balancing act to be able to make sure that growth does not stall and we are able to contain inflation.”
However, he said, “I remain confident that as a country, we will be able to navigate through this crisis there. It’s not just my saying. The World Bank believes that India will remain the fastest-growing economy in the coming years and therefore that should give us look forward to it with optimism even though the short term is very very challenging”.
Expressing similar sentiments for the FMCG industry, he said, “I will say that we have to navigate the short term but I remain confident of the medium-term to longer-term future that this industry has”.
He cited low per capita consumption, a large young population, a growing middle class, rising affluence and adoption of digital technology as reasons for the company’s bullishness for the sector.
“All of this suggests that we are likely to see growth rates in the FMCG sector for a period of time,” he said, adding the fact that HUL has over a period of time developed a certain skill in driving penetration, driving market development and it is at the core of its strategy, it sees growth opportunity in future.
Responding to a query on a product price increase and its impact on consumers, Paranjpe said, “The reality is that when you take ingredients like palm oil, you take crude, the impacted derivative outcomes in terms of plastics, and in terms of logistics, we have seen inflation, which is in excess of 50 per cent, that’s the extent of inflation that we have seen. Therefore, it is truly an unprecedented moment. As a company, we are determined to try and see how we can mitigate the impact of some of this to our consumers”.
Stressing that HUL undertakes the price hikes in a calibrated manner, he said it would continue to do so and “there are price point packs that we have to be watchful and we will follow the appropriate strategies sometimes balancing reducing volumes of fill levels sometimes taking up prices”.
Acknowledging that it has hurt consumers, he said, “I feel for the common person in the country who has to deal with this hardship at this moment and you can be certain that this company will do everything possible to contain it to the extent that we can”.
Responding to the company’s acquisition plans, Paranjpe said, “inorganic opportunities are important” and HUL would continue to explore.
Asserting that HUL’s growth strategy involves organic and inorganic growth, he said, “by far, the largest contribution to growth is coming from our organic business. There is plenty of headroom (to grow)”.
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