FMCG cos unfazed by low rain forecast, say rural demand will not fall

FMCG cos unfazed by low rain forecast, say rural demand will not fall

Monday, 27 June 2011, 09:33 Hrs
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New Delhi: The Indian fast moving consumer goods firms are unfazed by India Meteorological DepartmentÂ’s forecast that the country might witness a below normal monsoon this year, saying the sector will not be impacted as demand and consumption power are unlikely to fall.

“We expect normal monsoon, good crop and therefore a good agricultural season this time. So we expect that demand will be better and FMCG sector will definitely have a good growth this year,” Godrej Group Chairman Mr Adi Godrej told PTI.

Similarly, Emami Group of Companies Director Mr Harsh Agarwal said there is no need to worry over IMDÂ’s prediction that rainfall will be below normal this year at 95 per cent of average.

“Monsoon may be below normal in certain parts of the country. We don’t see any major impact on the sector as there will not be much of a difference in the consumers’ spending power,” he said.

At present, size of the Indian FMCG market is estimated to be around Rs 1.25 lakh crore and is growing at the rate of 12 per cent.

Traditionally, good monsoon plays a major role in FMCG firmÂ’s rural sales as agricultural output determine farmerÂ’s income and consumption power.

According to reports, the sector is expected to grow by up to 17 per cent annually to touch Rs 4 lakh crore by 2020, driven by increased income in rural areas of the country, and evolving consumer lifestyle and buying behaviour.

However, experts said it is too early to talk about how the monsoon would impact the sector saying that July forecasts would be more crucial.

“It is too early for the day to talk about how monsoon might impact the sector this time. It will depend more on how the season shapes up in July, but what is more critical is the dispersion of rain across the country,” IDFC SSKI Securities Managing Director Mr Nikhil Vora said.

The initial dispersion data available is quite normal and is not alarming. It will not have any negative impact on the growth of the sector, he added.

“Good monsoon does help the growth of the sector as it depends on the agricultural output and also impacts the farmer’s income. Rains during the month of June, July and August are crucial,” Mr Vora said.

Below normal monsoon might bring down the growth of the sector by 2-3 per cent but as a company it is not much of a concern as yet, he added.
Source: PTI
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