Consumer companies' chiefs bet big on festive demand

Chief executives of top consumer goods makers are bullish about the festive season, saying that multiple indicators were pointing to a demand revival.
Higher stocking of products by wholesalers and trade since end July as compared to the previous months, faster movement of FMCG from wholesalers to kiranas, a reduction in the trade credit period and strong Independence Day sales all suggest improving consumer spending, they said.

Apart from these micro trends, positive macroeconomic indicators - such as a slowdown in inflation in July - augur well for the festive season, the largest consumption period in the country.

"All these are positive indicators," said Mohan Goenka, vice-chairman of FMCG company Emami Ltd that manufactures Boro Plus cream and Zandu pain balm. "Overall, the monsoon is normal and inflation pressure is also easing. So, demand should improve in October-December."

Mayank Shah, senior category head at Parle Products, India's biggest food company, said orders for large sales events like Independence Day were up 15-20% from last year. He expects the momentum to continue into the festive season, with at least 15% increase in orders.

Consumer demand in India had taken a beating in the past few months, with people prioritising spending amid high inflation and rising interest rates.

Past the Sales Dip
The FMCG sector is showing signs of a demand pick-up after sales volume fell for 13 straight quarters, though price hikes helped companies post higher sales and profit.

In consumer electronics too, where sales have been falling since May, indications are of improving demand. Discretionary categories such as televisions, refrigerators and smartphones are likely to recover during Diwali, considering that stocking and sales during Independence Day have been extremely buoyant, industry executives said.

"Independence Day sales set the mood for the festive season and all indicators are positive this year," said Deepak Bansal, vice-president of LG Electronics India, the country's largest maker of appliances. "Trade has stocked up well and early signs of Independence Day sales are in tandem with expectations. There has been a gradual improvement in sentiment."

Nilesh Gupta, director at electronics retail chain Vijay Sales, said sales during the Independence Day weekend had been better than last year, with 5-10% growth after accounting for the price hike, as compared with flat sales last year when the market was just coming out of Covid restrictions. "Overall, the job market is stable, people are switching jobs and increments are back - all these are making people want to buy," he said.

Apparel retail was faster than most other consumer segments to shrug off the pandemic impact, with sales already growing for two quarters due to pent-up demand and office-goers upgrading their wardrobes after offices opened up.

Aditya Birla Fashion & Retail chief executive (lifestyle business) Vishak Kumar recently told analysts that strong demand from wholesale channels for the Onam and Durga Puja festivals indicated that it was going to be a strong festive season. He said this should continue till Diwali.

While in-home consumption of liquor increased during the pandemic, last quarter also saw alcobev sales at bars and restaurants reaching pre-Covid levels for the first time in two years.