Unilever's Indian unit is looking less like a consumer goods empire and more like a faltering commodities business. The multinational's struggle is emblematic of a larger problem. Despite economists' claims that the country will be a major beneficiary of the global raw materials rout, the gains are nowhere in sight for companies plugged into India's domestic demand.Sales growth at Hindustan Unilever slumped to a worse-than-estimated 3.2 percent in the December quarter, its weakest in more than six years, according to data compiled by Bloomberg on comparable revenue.
Worse still, this revenue expansion has, over the past three years, shown a disturbingly high 74 percent correlation with changes in the Thomson Reuters/CRB commodity Index. In other words, the Anglo-Dutch company has been forced to pass on most of the 40 percent drop in raw material prices during this period to Indian consumers of its soap, detergent and other consumer products, but without a commensurate increase in sales volumes.As more Indian companies report earnings over the coming days, investors may be disappointed to discover that falling prices of energy and other resources, touted as a bonanza for a commodity-importing country like India, are failing to whip up consumer demand. Goods have indeed become cheaper, and yet not many more of them are being bought.
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