Overall, 2009 remained favourable for the fast moving consumer goods (FMCG) industry, more so for the domestic companies that wrested market share from leaders with the help of aggressive marketing. This was despite the economic downturn and the erratic monsoons.
Barring a few categories, which consumers treated as discretionary, the sector has maintained its tradition of showcasing strong double digit sales growth. According to FICCI estimates, the sector grew by around 15%. The FMCG market is worth around $25 billion (Rs 1,20,000 crore).
The downtrading (the tendency to shift to cheaper, regional brands) by consumers owing to the cautious spending led to major changes in the market share of major players. Some domestic companies and smaller brands immensely benefited from this trend.
The prominent amongst the few acquisitions during the year was Wipro’s Rs 210 crore acquisition of UK-based Yardley’s overseas operations. Marico Ltd, the makers of Parachute hair oil, acquired Colgate-Palmolive Company’s hair-care brand ‘Code 10’ in Malaysia.
Internationally, Unilever bought US-based Sara Lee Corporation’s personal care unit for $1.88 billion while Procter & Gamble Co bought Sara Lee’s air-care brand Ambi Pur for $472 million.
Godrej Consumer Products Ltd in India continues to look for acquisitions on a global scale in personal care and household care space.
High input costs were a major point of concern for the sector, especially for food and beverages companies. Sugar prices almost doubled to Rs 40 per kg, putting margins under pressure.
Almost all Indian FMCG companies recorded a phenomenal growth in their respective international businesses. The growth was as high as 40-50%. Interestingly, growth in the international field far outpaced the growth in the domestic market for all Indian
FMCG companies.
“The growth for the domestic FMCG companies in their international market had been remarkable in Third World countries, comprising those in Africa and SAARC region. The growth had also been phenomenal in the Middle East markets,” said Mohan Goenka, director, Emami Group.
A lot of new consumers migrated from buying unbranded products to branded items. This is more noticeable in the semi-urban and rural markets.
“This consumer behavioural pattern has got to do with increased levels of disposable income, better penetration by the FMCG companies in the rural markets though strengthened distribution networks and also media influence,” Goenka added.
Recently, giants such as Hindustan Unilever (HUL), GlaxoSmithKline Consumer and Procter & Gamble (P&G) have increased their focus in India, which has been one of the very few countries with a growing GDP. Each of these players is increasingly bringing products from their global portfolio to India.
There is increased thrust on personal care as a category, which promises faster growth than laundry and toilet soaps owing to low penetration levels.
Besides, innovative strategies, introduction of low unit packs at popular price points has also helped. Cadbury recently introduced its Perk brand of chocolates at Rs 2 so did Britannia with 50:50. Low-priced products have been a big learning during the slowdown.
One must also take into account that neither the economic downturn nor monsoons had an adverse effect on agriculture income. This helped FMCG players earn a sizeable portion of their revenue from the rural markets.
“Volume sales, particularly for products with popular price points, saw a surge with rural India driving demand growth,” said an analyst.
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