The Hindu Business Line : FMCG slowdown may continue: FICCI

AN FMCG sector survey by FICCI on Sunday confirmed that this sector is not so fast moving after all and is in fact afflicted with a pronounced slowdown.

FICCI found the FMCG sector grew by a mere 1.5 per cent in value terms during 2003-04 to touch Rs 60,900 crore.

What's more, this pace of almost no growth is expected to continue well into the first six months of the present fiscal also, with the sector expected to log only two per cent growth between April-September 2004.

Also, as a result of the series of price reductions that led to proportionately lower profit margins, volume growth in the FMCG sector more than doubled last fiscal to touch four per cent.

In a statement here, the chamber has said that the expected policy packages to be announced by the new Government for farmers for raising rural income are "bound to stimulate growth further" but offered no data on the level of penetration FMCG companies have been able to achieve last year.

While eulogising the efforts put in by the FMCG industry to spur growth, the survey does note that mushrooming of regional companies has posed a threat to bigger players such as Hindustan Lever Ltd, taking the example of Jyothi Laboratories throwing a challenge to Reckitt Benckiser.

Besides, it noted that the FMCG market is highly fragmented with almost half the market representing unbranded, unpackaged home-made products.

"This presents a tremendous opportunity for makers of branded products who can convert consumers to branded products."

In a further sector-wise analysis, the chamber found that sectors which have recorded negative growth include personal health care (-3 per cent), laundry soaps (-5 per cent), dish wash (-3 per cent), toilet soap (-4.5 per cent), toothpaste (-5 per cent) and toothpowder (-8 per cent)."

"In most of the cases, price competitiveness, price reductions leading to low value realisations have contributed to the negative growth rate in addition to rising raw material prices and huge market promotion expenses," FICCI said.

Among the sectors which actually recorded double-digit growth even during the overall slowdown include shaving cream (20 per cent), deodorant (40 per cent), branded coconut oil (10 per cent), anti-dandruff shampoo (15 per cent), hair dyes (25 per cent), cleaners and repellents (20 per cent).

While analysing basic issues and constraints facing this industry, the FICCI survey found several entry barriers in the FMCG market including intensity of competition between branded and unbranded goods and the long-established holds of retailers, making this industry unattractive for new entrants.

The survey said India has six million retail outlets of which four million are situated in villages, noting that the absence of supermarkets in the country makes logistics very difficult, particularly for new players.

"It also makes new product launches very difficult since retailers are reluctant to allocate resources and time to slow-moving products."

While emphasising the difficult operating conditions for the FMCG industry, FICCI has sought several sops from the Government including revision of abatement for soaps and detergents to 45 per cent and reducing excise on alcohol based toiletries.

More Stories on : Personal Products | Industry Associations

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