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India's FMCG industry on growth trajectory
Tuesday, 06 July 2004, 19:30 IST
NEW DELHI: India's 
600 billion ($13.14 billion) fast moving consumer goods (FMCG) industry is showing signs of continuing buoyancy after recording four percent growth in volumes and a lower 1.5 percent growth in value terms in 2003-04.
The Federation of Indian Chambers of Commerce and Industry (FICCI), in its latest survey, found that the "improvement has been much more pronounced in volume terms than in value terms for most products".
"The overall industry has achieved a growth rate of 1.5 percent in value terms and about four percent in volume terms during April-March 2003-04.
"The growth has been achieved in spite of rising raw material prices and the impact of a series of price reductions, slashing profit margins, but raising sales volumes," said the FICCI report released Sunday.
Rising standards of living in urban areas and better purchasing power of the masses from rural India together with the 'sachet' bug - enabling products to be made available in smaller packages at lower price points, have helped companies reach new users.
In addition, several cost-saving measures, various tax benefits, rising demand and a good monsoon have helped the industry to achieve positive growth, the report said.
The FICCI survey revealed that among products that recorded double-digit growth in value terms were shaving cream (20 percent), deodorant (40 percent), branded coconut oil (10 percent), anti-dandruff shampoos (15 percent), hair dyes (25 percent) and cleaners and repellents (20 percent).
On the other hand, personal healthcare, laundry soaps, dish wash, toilet soap, toothpaste and toothpowder recorded negative growth of up to eight percent.
"In most cases, price competitiveness and 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.
It noted that a package of fiscal incentives provided by the governments of states like Himachal Pradesh and Uttranchal had led companies to set up manufacturing facilities in these regions.
"The excise and income tax exemption for units located in backward regions have encouraged many companies to set up new units. De-reservation of many items like hair oil and toothpaste has also helped," the report said.
An encouraging trend is of multinational companies sourcing their products from India. Hindustan Lever Ltd (HLL) has become the production centre in respect of personal consumer products like oral care, skin care products, soap and detergents globally for Unilever.
There has also been a shift in trend to own manufacturing units in place of third party manufacturing or procuring goods from third party small-scale manufacturers.
The study pointed out that though companies are going global, they are focusing on overseas markets like Bangladesh, Pakistan, Nepal, Middle East and Commonwealth of Independent States (CIS) countries because lifestyles and consumption habits are similar to those in India.
Godrej Consumer, Marico, Dabur and Vicco Laboratories are among companies going global.
"Another significant feature with profound impact on the FMCG industry has been offshoots and mushrooming of regional companies, which are posing a threat to bigger FMCG companies like HLL," the report said.
It pointed to the rise of Jyothi Laboratories, throwing a challenge to Reckitt
Benckiser.
While the FMCG market remains highly fragmented with almost half of it representing unbranded and unpackaged homemade products, the study sees this as a good opportunity for makers of branded products to wean away consumers.
Source: IANS
600 billion ($13.14 billion) fast moving consumer goods (FMCG) industry is showing signs of continuing buoyancy after recording four percent growth in volumes and a lower 1.5 percent growth in value terms in 2003-04.
The Federation of Indian Chambers of Commerce and Industry (FICCI), in its latest survey, found that the "improvement has been much more pronounced in volume terms than in value terms for most products".
"The overall industry has achieved a growth rate of 1.5 percent in value terms and about four percent in volume terms during April-March 2003-04.
"The growth has been achieved in spite of rising raw material prices and the impact of a series of price reductions, slashing profit margins, but raising sales volumes," said the FICCI report released Sunday.
Rising standards of living in urban areas and better purchasing power of the masses from rural India together with the 'sachet' bug - enabling products to be made available in smaller packages at lower price points, have helped companies reach new users.
In addition, several cost-saving measures, various tax benefits, rising demand and a good monsoon have helped the industry to achieve positive growth, the report said.
The FICCI survey revealed that among products that recorded double-digit growth in value terms were shaving cream (20 percent), deodorant (40 percent), branded coconut oil (10 percent), anti-dandruff shampoos (15 percent), hair dyes (25 percent) and cleaners and repellents (20 percent).
On the other hand, personal healthcare, laundry soaps, dish wash, toilet soap, toothpaste and toothpowder recorded negative growth of up to eight percent.
"In most cases, price competitiveness and 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.
It noted that a package of fiscal incentives provided by the governments of states like Himachal Pradesh and Uttranchal had led companies to set up manufacturing facilities in these regions.
"The excise and income tax exemption for units located in backward regions have encouraged many companies to set up new units. De-reservation of many items like hair oil and toothpaste has also helped," the report said.
An encouraging trend is of multinational companies sourcing their products from India. Hindustan Lever Ltd (HLL) has become the production centre in respect of personal consumer products like oral care, skin care products, soap and detergents globally for Unilever.
There has also been a shift in trend to own manufacturing units in place of third party manufacturing or procuring goods from third party small-scale manufacturers.
The study pointed out that though companies are going global, they are focusing on overseas markets like Bangladesh, Pakistan, Nepal, Middle East and Commonwealth of Independent States (CIS) countries because lifestyles and consumption habits are similar to those in India.
Godrej Consumer, Marico, Dabur and Vicco Laboratories are among companies going global.
"Another significant feature with profound impact on the FMCG industry has been offshoots and mushrooming of regional companies, which are posing a threat to bigger FMCG companies like HLL," the report said.
It pointed to the rise of Jyothi Laboratories, throwing a challenge to Reckitt
Benckiser.
While the FMCG market remains highly fragmented with almost half of it representing unbranded and unpackaged homemade products, the study sees this as a good opportunity for makers of branded products to wean away consumers.
Source: IANS