Sula Vineyards CEO: Urban Demand Slowdown a Blip?

New Delhi, Nov 20 (PTI) Wine producer Sula Vineyards Ltd CEO Rajeev Samant hopes that the current slowdown in urban discretionary demand is "more of a temporary blip and not structural" one.

In the second quarter of the fiscal year, the company's net revenue declined 1.2 per cent to Rs 142 crore as compared to Rs 143.7 crore in the year-ago period, while profit after tax dipped 37.3 per cent to Rs 14.5 crore as against Rs 23.1 crore in the same quarter last fiscal year.

Samant told analysts that in the second quarter the company witnessed "a temporary slowdown in consumer demand across discretionary categories, including alcoholic beverages, particularly within urban India, which does represent more than 90 per cent of Sula's customer base".

Post-Covid, he said, "We saw a surge in domestic wine consumption which lasted until last year, as the consumer did a bit of cocooning at home and splurged on creature comforts."

However, Samant said, "It now seems that that level of growth was unsustainable, and we see calendar year 2024 as a year of some demand reset as consumers grapple with rising inflation and cost of living."

The company had also encountered temporary disruptions in key states of Karnataka and Delhi, which further impacted its Q2 revenues, he added.

Looking ahead, Samant said, "We believe the current slowdown in the urban discretionary demand is, we believe and hope that it's more of a temporary blip and not structural. We remain cautiously optimistic for the second half of the year and should benefit from some specific structural tailwinds in H2."

He cited reopening of Andhra Pradesh, after the company had voluntarily withdrawn from the state five years ago, would be one of the favourable factors.

FMCG majors, including Nestle India and HUL, have stated there has been a slowdown in urban demand for their products.