The comments come against the backdrop of data showing a decline in car sales and slowing consumption, which has triggered worries over the country’s overall economic growth. Food inflation, as measured by the wholesale price index, has soared to a 33-month high.
“If monsoon is less than optimal, definitely there will be a dampening effect as far as rural demand is concerned, one has already started seeing those manifest,” Narayanan told reporters.
“In terms of agri-commodities, trend is going upwards. In Q1, we’ve tried to mitigate 160-200 basis points (100bps = 1 percentage point) of the incremental cost that has gone up because of agri commodities like wheat and others. This will exacerbate if monsoon worsens. One of the highlights of India’s relatively stable performance has been low level of food inflation, which is likely to change if the monsoon situation changes,” he said.
Narayanan was responding to a question about the monsoon prediction by private forecaster Skymet.
Narayanan said India has emerged as one of the fastest growing markets for the Swiss consumer goods giant and most of its products have posted higher sales.
Maggi is among the brands which have notched up sustained double-digit growth, both in terms of volume and value in January-March, building on the recovery it scripted after the crisis that hit the popular product. The Food Safety and Standards Authority of India (FSSAI) had banned sale of Maggi in June 2015, alleging it contained harmful monosodium glutamate (MSG) and excess lead. This had resulted in a dramatic decline in sales of the top selling brand.
Narayanan said the company has seen stronger volume growth than many of its peers in the quarter because of robust urban growth rate. “What is happening in the first quarter is a bit of a correction — rural and urban growth rates are converging back to the earlier norms and averages that we’ve had.” The company reported a 9.2% increase in the net profit in the January-March quarter at Rs 463 crore.
He said companies that had a large rural footprint were able to grow faster as compared to those with a more balanced footprint in Q3 of 2018, and this has corrected itself in this year’s first quarter. Nestle’s rural sales account for 22-25% of its overall sales.