• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Rina Chandran

"While a good monsoon puts more money in the hands of the rural consumer, it does not change her habit of using neem to brush her teeth, for instance," says Mr Hoshedar.

Mumbai , Nov. 19

A GOOD monsoon alone is no panacea for the ills of the Rs 85,000-crore FMCG sector.According to a report from management consultant AF Ferguson, the greatest challenges to the sector include sustaining growth in mature categories, increasing penetration in emerging categories, creating products for rural India and increasing manufacturing and distribution efficiencies.

Players will also need to convert sales promotion activities into value-drivers for brands and prepare for more competition from the unorganised sector and cheaper imported products.

The recession led to a slowdown in demand across categories and markets, and a particularly sharp fall in rural purchasing power due to the drought and falling commodity prices, following the good monsoon. However, the FMCG sector will grow at a rate of 8 per cent -10 per cent in the coming year, driven by the increase in consumer spending in rural as well as urban India.

But some experts believe the good monsoon will not translate into a rosier picture: "While a good monsoon puts more money in the hands of the rural consumer, it does not change her habit of using neem to brush her teeth, for instance," Mr Hoshedar K. Press, Executive Director & President, Godrej Consumer Products Ltd, told Business Line on the sidelines of the 2nd FMCG conclave in Mumbai.

"If the aspiration already exists - through advertising, awareness, education or trial - then it is possible that the consumer may buy new products or upgrade." But aspiration is also being created in categories like durables, auto and two-wheelers and mobile phones, so the consumer is looking to prioritise her purchases, he added.

According to Mr R. Subramanian, Managing Director, Subhiksha Trading Services, "Everyone is looking to get a better quality of life, so the consumer is spending less on daily necessities and more on products or services that promise that." "And the money for the durables and mobile phones will have to come from somewhere - and it is coming from the budgets for everyday products."

So it would all come down to how the consumer chooses to prioritise her spend: "Today, the consumer doesn't think twice about spending Rs 200 on a movie ticket in a multiplex, but will search for rice that is cheaper by Rs 10/kg," Mr Subramanian said. "Because to the consumer, a soap or a toothpaste is not seen as providing much value or a better quality of life, while a movie or a mobile phone is seen as doing that."

According to the Ferguson report, while FMCG companies have retained their bottomline, there has been little or no topline growth. Among companies like Britannia, Cadbury, Colgate-Palmolive, GlaxoSmithKline, Godfrey Phillips, HLL, ITC, Nestle and Marico, net sales increased only by 1.2 per cent in fiscal 2003, as compared to 7.6 per cent in fiscal 2002. Net profit increased only 7.1 per cent (24.5 per cent).

Article E-Mail :: Comment :: Syndication

Stories in this Section
Sony targets mass market with Aiwa

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line