Rising demand, fiscal sops main drivers

Our Bureau

New Delhi, April 13, In spite of rising raw material prices, increase in costs of petro-based raw materials and packaging materials, the FMCG sector has seen sales grow at 16 per cent during April-February 2007-08.

The growth in the corresponding period of 2006-07 was 14.5 per cent.

According to a Federation of Indian Chambers of Commerce and Industry (FICCI) survey, the credit for the growth rate goes to rising demand, fiscal incentives and improved performance of leading companies that have plants in tax-exempt locations.

Shaving cream, anti-dandruff shampoo and tooth powders (22 per cent) along with skin and fairness cream, dish wash (20 per cent), cleaners and repellents (23 per cent) have done well. Hair dye and deodorant, working from a smaller base, recorded even higher growth of 30 per cent and 40 per cent respectively.

Soap and toiletries (10 per cent), detergent liquids and cakes (11-12 per cent), personal health care (16 per cent) saw high growth too. Oral care grew at 16 per cent with tooth paste sales growing at 15 per cent and tooth brushes 12 per cent. Skin care and cosmetics grew at 18 per cent and hair care at 15 per cent. However, toilet soaps (six per cent) and washing powders (eight per cent) and laundry soaps (5 per cent) grew at more moderate rates.

Changing dynamics

FICCI also takes note of the changing dynamics of consumer behaviour – luxury goods are now being perceived as necessities with higher disposable incomes being spent on lifestyle products. Consumers are increasingly seeking value-added and aspirational products such as anti-aging solutions, and these products have spurred growth in FMCG in value terms.

Companies have also started to focus on the neighbouring markets of Bangladesh, Pakistan and Nepal as well as West Asian and CIS countries where consumer lifestyles and consumption habits are similar to those in India.

There is also a revival of sorts in rural markets, and in FICCI’s estimates, the estimated number of households using FMCG products in rural India has grown from 13.6 crore in 2004 to 14.3 crore in 2007. HUL and Colgate-Palmolive (C-P) have used programmes like ‘Operation Bharat’ (HUL), Project Shakti and ‘Operation Jagruti’ (C-P) to make inroads into the rural economy. However, issues such as poor rural infrastructure and scattered markets are deterrents to the growth of the Industry, as does the continuing rise of raw material prices.

(This article was published in the Business Line print edition dated April 14, 2008)
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