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R. Ravikumar

Vinay Kamath

Chennai, Jan. 7

The fast-moving consumer goods industry that escaped the slowdown almost unscathed when other industries were hurting, is now beginning to feel the heat.

In the third quarter of 2009-10, the FMCG industry registered a drop in growth compared to the previous two quarters of the year. The industry expects growth during the third quarter to be well under 10 per cent compared to a heady growth rate of over 15 per cent in the first half.

Mr Ramesh Viswanathan, Executive Director of the Chennai-based FMCG major CavinKare Pvt Ltd, attributes the drop in growth in sales of personal-care products lead by shampoos, to “not-so-good monsoon and general inflationary trend that prevailed during the period.”

The December figures are yet to be out. However, according to Mr Viswanathan, even December would post a growth rate of only around 7 per cent “because of the recent disturbances in Andhra Pradesh, which is a critical market for most FMCG products across brands.”

However, Mr C. K. Ranganathan, Chairman and Managing Director, CavinKare, says the trend may not sustain as “we see recovery in the market place. The industry will resume its growth pace in the last quarter of the current fiscal.”

Mr Saugata Gupta, CEO, Consumer Products, Marico Ltd, says a slowdown is visible but it is too early to say if it would sustain. “Food inflation is causing consumers to downtrade; for mid- and lower-income groups, food is a big chunk of their incomes, so there's an issue there.”

ICICI Securities, in an equity research report, says FMCG retail sales during October-November indicate moderation in sales growth. Quoting Nielsen's sales audit figures, it says sales rose 7.1 per cent against 15 per cent reported in the first half of 2009-10. However, the volume growth was higher than the value growth during the period. This is due to high base of last year's price hikes vis-à-vis current price reductions due to lower input costs.

Mr Anand Shah, analyst at Angel Broking, points out that the first half of the year saw significant value growth due to the price hikes but that factor is now discounted. “Food inflation is impacting the sector leading to postponement of purchase; the pace of growth in many categories is slowing down,” he says.

According to the ICICI Securities report, Colgate-Palmolive posted 8.2 per cent growth in sales in October-November versus 12.3 per cent in Q2. Dabur's sales grew 6.2 per cent, lower than the 9.8 per cent growth in the previous quarter. Godrej Consumer Products grew 12.4 per cent as against 22.1 per cent growth in Q2. In the case of HUL, the growth was 0.3 per cent year-to-year in October-November '09 compared with 7.3 per cent in the second quarter.

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