Fairval

Notes on Indian equities, sectors and economy

Why UPA lost: HUL results tell a story

Posted by fairval on May 17, 2014

One answer for the decisive boot given to the UPA lies in FMCG leader Hindustan Unilever (HUL’s) results. See the chart below. this shows volume growth for HUL on a quarterly basis:

Image

Over the last 3.5 years, volume growth has dropped sharply from close to 15% to ~3% now. This despite the so-called rural growth story. 2-3 years ago, all FMCG companies were furiously looking at expanding rural distribution, given the possible positive impact of the rural employment scheme (MNREGA), and the regular 10% rise in base crop prices (MSPs) for key crops.

Somewhere along the line, it is clear the consumer – whether urban or rural – has sharply reduced consumption. If a company, which spends more than Rs 3000 crore on annual advertising, and hires the best, has to struggle for growth, one can imagine the plight of SMEs.

As this blog as written before, rampant inflation is nobody’s friend. When across the board consumers are being forced to cut corners in spending, no wonder UPA got drubbed. Sonia and her NAC can ponder this at leisure now.

 

 

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