Concerns over slowing Indian economy highlighted by Unilever profit warning

By Simon Pitman contact

- Last updated on GMT

Concerns over slowing Indian economy highlighted by Unilever profit warning

Related tags: Personal care products, Unilever, Tax

The slowdown in growth of the Indian economy is leading to signs that it is starting to hurt big cosmetic and personal care manufactures, highlighted by Unilever’s recent profit warning.

The Anglo-Dutch consumer giant earlier this week put out a profit warning stating that its sales growth for the third quarter was likely to come in at the region of 3.0 to 3.5 per cent, compared to earlier estimates of around 5.0 per cent growth.

The company squarely put the blame on a slowdown in its emerging markets, which currently account for around 50 per cent of its total revenues.

Unilever particularly feels slowdown in India

In particular the performance in big emerging markets such as Thailand and Brazil are likely to have attributed to the profit warning on account of market volatility there, but it is in India, where the sheer size of the market and growing economic hurdles are likely to hit the company hardest.

In the last quarter of 2012, sales of both soaps and detergents, as well as personal care products in India grew at 15 per cent and 20 per cent respectively, whereas by the current second quarter of 2013 sales growth had slipped by 8 per cent and 2 per cent for the two categories.

Total revenues for Hindustan Unilever, which is wholly owned by the Unilever group, came in at $3.4 billion for the fiscal year 2011/2012.

Product innovation does little to stem tide

Although the company’s Indian division has continued to launch a raft of new products throughout this year in both of the soap and personal care categories, it says that the slowing market, particularly in the personal care products market, was impacting growth rates.

The slowdown in the consumer market in the country has been bought about by an increasing government deficit in the face of record spending, which in turn has weakened the rupee against the dollar.

This has meant that economic of growth of between 8 and 9 per cent in 2012 has now fallen to a current figure of just over 5 per cent, a problem that has been compounded by rising inflation which has ultimately left consumers with less spending power.

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