NEW DELHI: Hindustan Unilever Ltd's chairman and managing director, Sanjiv Mehta, is hopeful that economic activity will pick up and demand revive by the end of 2020 or early next year.
Mehta, however, warned that the next few quarters could be tough for the country and said in a consumption driven economy like India, thgovernment would need to come out with a bigger package to help stimulate demand.
In a detailed interview with analysts at Jefferies Equity Research, released on 29 May, Mehta discussed issues around supplies, the company's efforts to work from home, and near-term impact of covid-19.
"We should be absolutely clear that no one can predict with a high degree of accuracy of what is going to happen. A lot will depend on the trajectory of the virus, what happens to the economy, to what extent is the demand postponed or impaired, the unemployment trend, etc. So, there are various variables at play here. I would not want to hazard a guess, but I do hope that by the end of this year or early next year, we will see the economy picking up and the demand coming back," Mehta said.
He was answering a question on the near-term impact of covid-19 on the fast moving consumer goods industry.
Several businesses, including makers and distributors of fast moving consumer goods (FMCG), traders, retailers have seen businesses disrupt as the pandemic-led lockdown led to suspension of manufacturing and movement of goods.
HUL, the bellwether for India’s packaged consumer goods market and that sells soaps, shampoos, detergents, packaged soups to millions of households across India, has seen production ramp up since the early days of disruption in March.
"From a virtual standstill when the lockdown was announced we have now been able to ramp up our production to 80-90% of normative levels. I am extremely proud of my teams for the way they have risen to the occasion and have adopted new and innovative practices," he said.
On ground, though, it is hard to gauge consumer demand as companies focus on resuming supply lines.
"Right now, the challenge for us is to get the supply lines going. Because the stock in the trade is lean, we are currently able to sell everything that we produce. Hence, it is difficult to gauge the end-consumer level demand. Once supply is normalised and trade pipelines fill up, we will get to understand the underlying trend," Mehta said.
He, however warned that consumers could "be more circumspect with their money" as a result of restricted economic activity that has cast uncertainty over household finances and future employment.
"The economy had slowed down even before covid-19. In the categories in which we operate the rural growth had all but disappeared. With this pandemic, the next few quarters are going to be tough for the country. Slowdown in economic activity, dip in GST collections all point to a difficult time ahead. The fall in stock markets has also eroded wealth. Consumers, hence, would be more circumspect with their money," Mehta said.
He added that measures announced by the government to help mitigate the economic fallout of the pandemic are largely positive as they will help aid rural demand. "However, I do believe that the government will have to sooner rather than later come out with a bigger package to stimulate demand. We are a consumption driven economy and it is vital to get the consumption going so that the economy gets into a virtuous spiral. If this implies that the government has to optimise spending in some other parts of the economy then so be it," he said.
Last month, market researcher Nielsen halved its growth forecast for the FMCG sector to 5-6% for the current fiscal.
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