The Hindu Business Line : FMCG sector stayed in fast lane despite economic slowdown, says FICCI study

NEW DELHI: True to its name, the fast moving consumer goods industry remained on the fask track in 2008, as the rising input costs, high inflation rates or the economic downturn failed to hinder the pace of activity in the sector.

As per a study by industry chamber Ficci, FMCG industry is projected to grow by 16 per cent to Rs 95,150 crore during 2008-09, up from Rs 85,470 crore last fiscal, amidst rising raw material prices, increase in costs of various inputs like petro-based ra w and packaging materials, and above all, that of key ingredient -- palm oil. The year also saw FMCG growth in rural market overtaking that of the urban market.

While the sector maintained a 17-18 per cent growth in the urban market, this year, according to industry estimates, the rural market showed over 20 per cent growth. Ficci had said about 35 per cent of the off-take for FMCG products come from rural area s, and the affluent segment in villages grew at a faster rate than the urban one.

The estimated number of households using FMCG products in rural India have grown from 13.6 crore in 2004 to 14.3 crore in 2007. FMCG products continued to show good momentum aided by buoyant demand in rural markets worth Rs 27,369 crore.

Perhaps, these were the reasons for major players like Nestle and Pepsi likely to announce multi-million dollar investments in India as they sought to consolidate their positions. While Nestle planned to pump in Rs 600 crore in 2009 to augment R&D, adver tising and capacity building, soft drinks major PepsiCo announced plans to invest USD million dollar in the Indian market over next three years with the aim of tripling the company's business in the country

Some others chose the inorganic route to grow. Dabur India acquired 72 per cent in Mumbai-based Fem Care Pharma Ltd, a leading player in the women's skin care products market, for Rs 203.7 crore. On the other hand, in a takeover replete with court battl es, Kolkata-based Emami got control of ayurvedic and herbal healthcare products firm Zandu Pharmaceutical Works.

All the action was happening at a time when companies were made to walk the tight rope: the pressure of rising input costs on one side and high inflation bringing down consumer spendings down on the other. The dilemma was whether to increase prices or no t. Ultimately, FMCG majors chose to bite the bullet. For instance, soap prices were hiked by various companies, including Wipro, Godrej, Reckitt Benckiser and HUL between Re 1 and Rs 4 for products to the range of one kilogram. Similarly, prices of hai r oil brands and detergents were also hiked by 4-5 per cent. The year also saw FMCG growth in rural market overtaking that of the urban market. While the sector maintained a 17-18 per cent growth in the urban market, this year, according to industry est imates, rural market showed over 20 per cent growth.

Ficci had said about 35 per cent of the offtake for FMCG products come from rural areas. A study by market research firm AC Nielsen for the April-September 2008 period showed that across a wide range of sectors, including skin creams and lotions, hair o ils, toothpaste and candies, volume and value growth in rural markets have been significantly higher than urban markets. Skin creams and lotions grew 26 per cent by volumes in rural markets compared with 12 per cent in urban markets for the April-Septem ber period. In value terms also, rural markets grew faster than their urban counterparts in skin creams and lotions, according to Nielsen numbers. - PTI

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