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Due of the impact of rising food inflation on low-income consumers, rural markets in India are stagnant, according to Unilever CEO Alan Jope

Unilever global chief executive Alan Jope said high inflation impacted demand from low income consumers in Indian villages even as growth remains stronger in cities.

“The market growth in India remains stronger in urban areas than in rural areas and that reflects the high impact of high food inflation on low income consumers. We are seeing rural markets broadly flat in value terms with lower volumes,” Jope said during its earnings call. “But we remain confident that we can continue to grow ahead of the market in India.”

For Unilever, India is the second biggest market in revenues after the US. The Indian unit posted 15.6% sales growth during 2022, with price growth at 11.2% and volumes up by 3.9%.

“The growth is broad based because it’s driven by strong competitiveness and a portfolio that’s been built with brands competing across all price tiers,” added Jope.

Most companies including Marico, Dabur and Godrej have recently said rural consumption is yet to pick up and there has been some stress in discretionary spending in urban areas since Diwali. India’s largest consumer goods company, Hindustan Unilever Ltd (HUL), said on a recent earnings call that growth will continue to be price-led as volumes are likely to remain under pressure as in the last few quarters.

In terms of volume growth or increase in the number of units sold, NielsenIQ reported urban markets advanced 1.6% last quarter while rural declined by 2.8%. It said consumers continue to favour small packs in both traditional and modern trade.

Over the past decade, sales of branded daily needs goods in the nation of 1.3 billion people have increasingly relied on rural India – home to more than 800 million people whose purchase behaviour is largely linked to farm output.

Last month, HUL’s managing director Sanjiv Mehta told ET that moderating inflation, strong winter crop sowing and signs of a pickup in farm incomes may lead to the bottoming out of the rural slump. “In terms of volume growth, it is understandable that there is stress. If the price growth in the market is in the vicinity of 12% and income increase doesn’t move in tandem, then people would optimise the volumes so that they are able to manage the household budgets,” Mehta said.

Over the past few months, HUL has slashed the prices of soaps and tea after commodity costs, especially palm oil, tapered off.



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