Britannia Industries‘ executive vice-chairman, Varun Berry, revealed that metropolitan cities hindered the fast-moving consumer goods (FMCG) market growth in the previous quarter.
Housing cost is 22% of CPI – Varun Berry, executive Britannia
Rising housing costs and lower wage growth affected consumer spending, particularly in urban areas. According to ET, Berry stated, “The housing cost in urban and especially in metro areas is about 22% of the total consumer price index (CPI) basket rate… and that’s creating stress for most consumers in large cities and metros.”
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Further, Berry noted that non-salaried workers saw a mere 3.4% increase in earnings, while salaried classes experienced a 6.5% rise. “There’s stress in almost 51% of the workforce sitting in urban areas. That is the double whammy, which is creating a demand shortfall as far as urban and especially metro is concerned.”
Britannia registers 5% revenue, 8% volume growth in Q2
Despite this, Britannia reported a 5% revenue growth and 8% volume growth for the quarter ended September. To offset rising input costs, the company plans to increase prices by 4-5% in the next two quarters. Berry emphasised, “We are not operators who look at a quarter to quarter… We want to have a robust solid business in the long term. So, if we feel that the volume is under stress and we need to be a little careful about our price increase, we will do that.”
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Meanwhile, Unilever‘s global CEO, Hein Schumacher, echoed similar sentiments, stating, “India’s consumption is mimicking global trends… consumer confidence is back, but wages have been behind the rate of inflation, resulting in lower savings.” Schumacher added, “The aspiration level is going up, and that has consequences… on where people spend their money.”
Following Britannia’s comment, industry experts attribute the urban demand slowdown to the impact on daily wage earners and gig-workers. A large food company executive noted, “Urban poor… have been impacted the most over the past few quarters… And these consumers have been buying mass products like biscuits and snacks.” The executive also cited the normalisation of packaged food growth post-Covid-19 as a contributing factor.
