Unfulfilled dreams: How Indian consumers left manufacturers high and dry in 2023

Dashing the hopes of manufacturers of consumer items - from daily essentials to two-wheelers and entry-level cars - the year 2023 ended on a subdued note. After major disruptions over the previous three years - first due to the impact of the COVID-19 pandemic in 2020 and 2021 - and then from the volatilities related to the Ukraine war in 2022 - companies were hoping for a rebound in demand. But that remained a pipe dream for most firms as consumers, especially in the mass market segment, remained cautious.

Take Hindustan Unilever (HUL), for instance. The largest pure-play fast-moving consumer goods (FMCG) company in the country with a wide portfolio - ranging from body soaps and detergents to beauty creams and frozen desserts - faced challenges in many categories. It reported muted sales growth in the July-September quarter.

During the period, the Mumbai-based FMCG major reported a meagre 3.2 per cent rise in its net sales to Rs 15,340 crore, while its net profit declined marginally to Rs 2,657 crore. HUL, which rules several categories of the local market with its array of products like Surf and Wheel detergent powders, Lifebuoy and Lux soap bars, and Ponds beauty products, managed to grow its volumes by a meagre 2 per cent in the September quarter. Most of its peers in the market, from Nestle India to Dabur India, faced an uphill battle as low-to-middle income households in the urban and, especially, in the rural market kept their purse strings closed.

In the automobile sector, sales of mid-to-premium end of the four and two-wheelers remained stable. But the sales number of entry-level passenger cars and affordable category two-wheelers indicate some serious issues that continue to haunt manufacturers.

Between April and November 2023, sales of entry-level hatchback four-wheelers plunged 42 per cent year-on-year - from 178,814 units to 104,716 units. The segment is primarily comprised Maruti Suzuki’s Alto and Spresso and Kwid from Renault India. While in the compact four-wheeler passenger car segment, sales declined by 3.4 per cent y-o-y to 863,596 units.

In the two-wheeler market, sales in the entry-level category (engine capacity between 75-90 CC) plunged by a whopping 96 per cent - from 54,397 units in April-November 2022 to 5,132 units in the same period in 2023.

According to Manish Raj Singhania, President of the Federation of Automobile Dealers Associations, during the festive season, sales of two-wheelers may have jumped due to rural consumers coming back to the market but the festive sales cannot be taken alone as an indicator of an overall recovery in the hinterlands.

As consumers tend to purchase items beyond their grasp during the period, it would be wise to wait for a few more months before concluding about a demand recovery in the rural market, he says. "I would rather wait for another 4-5 months to be sure that sales have in fact bounced back in the rural areas."