FMCG major Hindustan Unilever expects the first half of FY26 to be better than October-March FY25 and further moderation in gross margin due to existing commodity inflation, CFO Ritesh Tiwari said on Thursday. HUL will also step up investments behind its making platforms, channels of the future and strategic capabilities, he said in a post-results call.
"We anticipate the first half of FY26 to be better than the second half of FY25, if commodities remain where they are. We expect price growth to be low, in single digits," he said.
On gross margin, he said it "is expected to moderate further due to commodity inflation and HUL's continued commitment to provide consumers with the right price value equation."
In FY25, the FMCG market witnessed a subdued demand trend though rural demand improved gradually, while urban demand continued to moderate.
"Commodity movements for the year displayed diverging trends. Significant inflation was observed in palm oil, tea and coffee, whereas crude oil, soda ash and skimming powder were deflationary," he said.
Over downtrading in the FMCG sector, where the consumer opts for small pack sizes, Tiwari said it is "transitory" in nature and expects it to be over soon. However, he also added that downtrading had impacted HUL in the December quarter.
"We see the lesser impact of that in the March quarter, and I do believe that it would not last longer, " he said, adding, "It is a few quarter transitory impact, and I do expect it to now go away."
When asked about the urban demand, Tiwari said a recent tax cut by the government, along with moderating food inflation, should help the overall consumption climate in urban areas as well, including the urban middle class. Hence, HUL in its overall guidance for the first half of FY26 believes an improvement over the second half of FY25.
On the rural demand, he said the country has a good kharif outcome, and the latest data indicates a good rabi sowing. Moreover, there is a continued investment in the rural areas by the government.
Besides "lower inflation of big commodities like crude oil, further helps the disposable income because the cost comes down, and hence the disposal income improves, including rural area," he said adding " If I add all these signals and elements put together, we do see that rural recovery, which is gradual, will keep improving".
HUL, which posted sales of Rs 62,175 crore in FY25, gets around one-third of its business from rural markets and the rest from urban markets.
According to Tiwari, in the FMCG industry, rural always played a role of the creation of FMCG growth. India has a per capita consumption of around USD 50, in which the urban market is at around USD 85-90 and rural at USD 25-30.
"So the starting point for rural consumption is very low, and hence rural will always have an accretive job or a creative role to play in FMCG consumption, given the low penetration consumption levels. So I do expect that everything has been equal. Rural should always keep outpacing urban. So overall growth should become healthy, but within that, rural should have an accretive role in FMCG growth," he said.
"We anticipate the first half of FY26 to be better than the second half of FY25, if commodities remain where they are. We expect price growth to be low, in single digits," he said.
On gross margin, he said it "is expected to moderate further due to commodity inflation and HUL's continued commitment to provide consumers with the right price value equation."
In FY25, the FMCG market witnessed a subdued demand trend though rural demand improved gradually, while urban demand continued to moderate.
"Commodity movements for the year displayed diverging trends. Significant inflation was observed in palm oil, tea and coffee, whereas crude oil, soda ash and skimming powder were deflationary," he said.
Over downtrading in the FMCG sector, where the consumer opts for small pack sizes, Tiwari said it is "transitory" in nature and expects it to be over soon. However, he also added that downtrading had impacted HUL in the December quarter.
"We see the lesser impact of that in the March quarter, and I do believe that it would not last longer, " he said, adding, "It is a few quarter transitory impact, and I do expect it to now go away."
When asked about the urban demand, Tiwari said a recent tax cut by the government, along with moderating food inflation, should help the overall consumption climate in urban areas as well, including the urban middle class. Hence, HUL in its overall guidance for the first half of FY26 believes an improvement over the second half of FY25.
On the rural demand, he said the country has a good kharif outcome, and the latest data indicates a good rabi sowing. Moreover, there is a continued investment in the rural areas by the government.
Besides "lower inflation of big commodities like crude oil, further helps the disposable income because the cost comes down, and hence the disposal income improves, including rural area," he said adding " If I add all these signals and elements put together, we do see that rural recovery, which is gradual, will keep improving".
HUL, which posted sales of Rs 62,175 crore in FY25, gets around one-third of its business from rural markets and the rest from urban markets.
According to Tiwari, in the FMCG industry, rural always played a role of the creation of FMCG growth. India has a per capita consumption of around USD 50, in which the urban market is at around USD 85-90 and rural at USD 25-30.
"So the starting point for rural consumption is very low, and hence rural will always have an accretive job or a creative role to play in FMCG consumption, given the low penetration consumption levels. So I do expect that everything has been equal. Rural should always keep outpacing urban. So overall growth should become healthy, but within that, rural should have an accretive role in FMCG growth," he said.
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