“Margin is under pressure because raw material prices are really ruling very high but now this quarter and next quarter there is some softening and that will help the company. The margins will improve in coming times,” says Rakesh Kumar Dua, MD, Relaxo Footwear.
Across the consumer space, price hikes are taking place. You have also taken a price hike. Is there any impact as far as demand is concerned? Has there been any sort of down trading in mass products?
We see that in articles, which are meant for masses, with up to Rs 150 MRP, there is an effect. Articles above Rs 150 MRP, such as those priced Rs 500 and above are rather improving. That means the masses are suffering from inflation more than other classes.
Purses are shrinking and masses are trying to find if they can have some cheap alternatives. But in the long term, things are only improving. People know that brand means quality and quality means better value for money.
In the coming days, things will improve in that segment and at the same time we will keep a watch on consumer behaviour and align our portfolio accordingly. Whatever is the need of the market, we will offer those products, which are in need.
Generally, when we see hyperinflation like it is now, does down trading happen immediately or does it takes a while for people to realise that they must shell out more and that is why in consumer products, they need to go slightly below the premium space?
This happens over time; it cannot have a knee-jerk reaction. Currently inflation is high although there is some softening in raw material prices, but if we compare with last year’s inflation, there is an impact and the worst sufferers are the masses which is why there is an effect. Otherwise, for articles of middle-class use, demand is growing despite inflation.
You have already taken a 20-25% price hike. How is this getting absorbed? Do you intend to take further price hikes because you have already talked about how the consumers are getting extremely conscious because of inflation uptick?
Offering out new product depends on what kind of evolving consumer needs are there so accordingly it is a fashion industry, we keep on launching new products trying to satisfy the evolving needs of the consumer so whatever they are whether it is in shoe division, whether it is hawai division or even our PU division, we keep on offering our products, pricing and the designs required, we have to come up to the expectation of the consumer and that process is always there.
Tell me about your margins because I guess raw material prices are owing heavy on the margin, but do you see any recovery coming in any time soon and do you have clear visibility on a margin uptick or stability?
Margin is under pressure because raw material prices are really ruling very high but now this quarter and next quarter there is some softening so that will help the company, the margins will improve in the coming times.
The pricing that we have spoken about and the margins that you just spoke about, the second is about this reopening trade. For two-three years, people have not bought. Have you seen the peak of so-called revenge buying already or do you believe that it can continue for a while because it is a two-year back dated demand that has not been fulfilled?
There are two things; the demand for mass articles which are meant for indoors like hawai slippers has gone down because now people are moving outdoor. So, demand for outdoor articles such as shoes, schoolmate and sport shoes have gone up.
There are visible shifts from sandals and slippers to shoes now. Is that what you are trying to say?
As far as we are concerned even sandal segment is growing because people wear sandals outdoors too. Even demand for PU slippers is growing because they are a semi formal footwear. Sports shoes and sandals are also used outdoors. So their demand is also growing. This way there is a shift with indoor articles’ demand going down a little and outdoor articles’ demand going up.
A lot of measures have been taken by various governments around the world to curb inflation. When it slows down, what sort of impact will it have on growth of consumption and especially consumer staples like your product?
When inflation goes down, consumption is likely to go up only for branded product like ours, because once the discretionary income goes up and inflation is down, then people can afford to buy more pairs. When the inflation is there then people don’t want to, because the money available is limited, so they will try to be little conservative on that because first of all one requires money for food then only he goes for shoes so when the money is available and inflation is less, products will become more affordable then demand is likely to rise.