We hosted 23 dealers and distributors at Edel Pulse 2012, our unique one-day investor forum meant to provide on-the-ground insights into Indian businesses as well as to gauge the rural demand scenario in the wake of poor monsoon and general slowdown. The distinctiveness of this forum is its peer review of listed Indian corporates via interactions with competing businesses, consultants, service providers, suppliers, distributors and even function managers in listed companies.
We also took investors to the APMC market, warehouse and made them meet agricultural dealers to help understand the food supply chain.
Our interactions reveal that the rural slowdown is limited to consumer discretionary, but seems severe in areas having a weak monsoon. Everyone is pinning hopes of a turnaround on the ensuing festival season. Following are the key highlights from the event:
Slowdown limited to consumer discretionary…
Currently, the rural slowdown is limited to consumer discretionary like cars, two wheelers and white and brown goods where sales are sluggish and discounts are high. Enquiries for real estate have slowed down. On the positive side, FMCG demand continues to be robust. Rural NPAs for private sector banks remain low. Demand for mobile handsets has picked up due to cheaper smartphones.
...more pronounced in rain deficient states
Weak monsoon in certain parts of the country is becoming a major worry. Fall in demand for consumer discretionary is more pronounced in drought affected regions of Maharashtra, Karnataka, Gujarat and Rajasthan. FMCG has seen down-trading to lower SKUs in such areas, but within the same brands. Weak monsoon has affected demand of acute therapy (anti-malaria and anti-infective drugs). Banks have also seen a drop in demand in such areas though of late, there has been a recovery. Currently, all hopes are being placed on the festival season. If monsoon situation deteriorates further in September, it could dash such hopes and also affect winter crop. Thus, monsoon stays the key monitorable in the near term.
Farm to fork: Significant investment needed in warehousing
Our efforts to showcase the food-supply chain reveal that there exists ample scope for lowering wastage and improving productivity at various stages of sowing to distribution, the biggest being the lack of storage infrastructure. Rising land prices are rendering the setting up of new warehouses unviable. Thus, food inflation can stay sticky in the near to medium term.
Regards,
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