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Tuesday, Jul 09, 2002

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FMCG sector sees lower sales on dull demand

Ratna Bhushan


LACKLUSTRE performance and persistent weakness in consumer demand continue to badger the Indian fast moving consumer goods (FMCG) sector.

According to ORG-MARG's Retail Sales Report for May 2002, total retail sales of most big FMCG players fell by 4.4 per cent year on year (YoY) in May 2002, against 3.3 per cent the previous month. While personal care majors Hindustan Lever and Colgate-Palmolive recorded a patchy performance, food companies Nestle India, Britannia Industries and Cadbury India were better off.

Soaps and detergents recorded only marginal and inconsistent improvement, and shampoos remained unsteady. Toothpaste volumes declined 9.7 per cent in May against 12.6 per cent in April.

Skin creams and weaning foods fared better than other categories. Both categories managed to sustain positive growth for the period between March-May 2002. Biscuits remained healthy at 11.5 per cent growth in May, sustaining an eight per cent-plus growth for several months.

Among individual companies, HLL's poor sales run continued, with demand from rural markets remaining below expectations. Retail sales demand was down 10.1 per cent YoY in May - no different from the previous two months. While HLL's performance improved among detergents, toothpastes and skin creams, sales of tea and shampoos were poor.

SmithKline Consumer Healthcare's sales were down 11.6 per cent in May, against 6.8 per cent in April. The company had to suffer sales decline within the malted beverages category, owing to stiff competition from Cadbury.

Colgate-Palmolive witnessed market share value gains in toothpastes and better performance among toothpowders. Its toothbrush sales, however, decreased. Colgate's total sales decline in May 2002 was 5.3 per cent, while that the previous month was 6.4 per cent. While Nestle retained positive sales growth of 1.8 per cent in May, sales were still down from 4.6 per cent in April. Despite maintaining over 20 per cent growth in chocolates, Maggi noodles, Lactogen and coffee were slow movers, which impacted the company's overall sales performance.

Britannia retained positive growth in excess of five per cent. Cadbury, too, recorded gains in market share among chocolates and malted beverages.

In chocolates, Cadbury regained some lost market share from Nestle. The company's sales growth increased to 4.6 per cent in May, from 3.1 per cent the previous month.

Notwithstanding the overall bleak scenario, analysts tracking the FMCG sector expect better performance in the coming months. "Normal monsoons, price cuts among personal care products following excise reduction announced in this year's Union Budget, and commodity prices on the upward curve could propel consumer demand,'' analysts said.

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