The Hindu Business Line : Consumer goods cos on song as urban, rural spends remain strong

Consumer goods companies have seen their products really move fast off the shelves in the latest June quarter even as other key sectors of India Inc struggled to sell.

Sales of the listed FMCG (fast moving consumer goods) companies have expanded by an average 15 per cent for the June quarter, while CNX 500 companies averaged an 8 per cent sales decline.

Significantly, FMCG sales were driven by robust volumes and not product price increases. Most listed players managed a double-digit expansion in volumes.

According to the companies, urban consumer spending improved even as rural spends on FMCGs remained strong. Price-cuts, new launches and promotional offers also helped drive volumes.

Under-penetrated categories such as hair oils, shampoo, foods and skin-care led the growth as players redoubled efforts to expand distribution reach.

Cheaper brands score

Smaller companies managed superior growth on good demand for mass-market brands and strong overseas sales.

Consider these numbers. Dabur India’s 22 per cent growth in sales in the June quarter was its best in three years.

This was mainly due to a 20 per cent-plus growth such categories as hair-care, toothpaste, foods and skin-care, aided by a 52 per cent growth in international operations.

“The urban economy has seen a revival in terms of demand and availability of cash with the consumer,” said Mr Sunil Duggal, Dabur CEO, in an earnings call with analysts this week. Godrej Consumer, on the other hand, says it owes the 22 per cent expansion in its sales to its thrust into smaller towns and rural areas. The company has managed to grow ahead of the category both in soaps and hair colour, by launching more variants of popular brands such as Godrej No 1 soap.

Industry behemoth Hindustan Unilever may have reported lower growth rates than its smaller rivals this quarter, but the company points to the over 6 per cent “swing” in its volumes as a sign of improvement.

Its volumes grew 2 per cent in the June quarter, after shrinking 4.2 per cent in the preceding period.

The company attributes this to a renewed focus on improving consumer ‘value’ in the past six months; it has revived discount brands, reduced prices and increased grammage in key categories.

No monsoon impact

“Both urban and rural markets remain strong. We haven’t seen any impact from a delayed monsoon,” its CEO, Mr Nitin Paranjpe, observed in the company’s earnings call.

“Some of these players also noted an improvement in sales through modern trade, after the consolidation of stores in the preceding quarters.” Do players see such growth being sustained in the face of the erratic monsoon? At the moment, yes.

Asked about the impact of deficient monsoons on FMCG sales, Mr Duggal said: “It is not likely to be catastrophic. The monsoon is not going to change the dynamics of the market significantly. The government has enough (weapons) in its armoury to mitigate the impact of a poor monsoon — the buffer stock of foodgrains, for instance. The spending on the employment guarantee scheme may also mitigate the impact of a poor monsoon. You should also remember that low (agricultural) yields tend to improve farm product prices.”

The frenetic pace of new launches and the sharp increases in the ad-spends of FMCG companies in June also underscore their optimism on sustaining growth.

Related Stories:
FMCG industry set for 20-30% growth on increased rural demand
Volume growth holds the key for FMCGs next fiscal
‘No impact of economic slowdown on rural consumers’

More Stories on : Personal Products | Performance | Economy | Hindustan Unilever Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Centre cannot bail out private airlines: Patel

Airlines’ strike call not too well-timed

Maruti, Hero Honda race ahead in July

Weekly News Round Up

KG gas deflates naphtha

Consumer goods cos on song as urban, rural spends remain strong

Attractively-priced IPOs draw retail interest