Anti-profiteering turns out to be weighty issue for FMCG companies

Source: The Economic Times, June 08, 2017

MUMBAI: If you buy a soap or a bottle of shampoo this month, chances are it will weigh less than what it did about a month ago.

The difference in weight could be there because of fast-moving consumer goods (FMCG) companies, fearing penalties in case their profits go up after the goods and services tax (GST) comes into force, are adopting innovative price/value strategies to insulate themselves. Under anti-profiteering rules of GST, any company or vendor whose profits jump due to the new tax regime must pass on the benefits to consumers.

So, companies are adopting this temporary measure and would bring the prices back to where they were after GST.

Consumer goods firms see a sales revival in March quarter

Source: LiveMint.com, Feb 16, 2017

New Delhi: Consumer packaged good companies expect sales to revive in the March quarter after a government decision to outlaw high-value banknotes in November and the ensuing cash scarcity crimped sales.

Company executives cited increased stocking by wholesale traders by way of evidence. This, they said, indicated better demand from retailers and, in turn, from consumers.

“We believe the consumer staples sector should see better days ahead because most companies in their conference calls have highlighted that the wholesalers are slowly getting back to business,” said Sunita Sachdev, an analyst with UBS Securities India Pvt Ltd.

FMCGs hit harder in urban areas

Source: The Hindu Business Line, Jan 22, 2017

Mumbai: The impact of demonetisation on sales of FMCG categories in urban markets has been more than double as comapred to rural markets. The dip in volume of sales in the overall urban FMCG category was at 24.37 per cent, compared to the overall rural FMCG category, where the drop was at 7.47 per cent between the pre- and post-demonetisation months of October and December, according to data from Brickworks Media (a concern of Chrome DM), a research and data analytics company.

In the urban markets, it was a non-seasonal category like noodles, which felt a greater impact where sales dropped to 33.23 per cent – while tea remained the least impacted at 10.77 per cent.

Consumer packaged goods companies likely to record slow Q3 growth

Source: LiveMint.com, Jan 20, 2017

Mumbai: Sales of consumer packaged goods companies are expected to record their slowest growth in two years in the December quarter as customers cut back their spends even on essentials and groceries following the cash crunch after the scrapping of high-value banknotes on 8 November. Moreover, increasing raw material prices have put margins under pressure, and there was not much relief even as companies cut back on their advertising spends.

Demonetisation has hit consumption, a key growth driver of India’s economy across sectors from automobiles to telecom services and consumer. “We expect key consumption-driven sectors such as automobiles, telecom services and fast moving consumer goods (FMCG) to record the slowest growth in two years,” said Prasad Koparkar, senior director, Crisil Research, in a 10 January preview report.

FMCG firms take start-up route to new turf

Source: The Hindu Business Line, Jan 04, 2017

Mumbai: When Dabur copied Paper Boat’s famous ‘doy’ packaging for its Hajmola Yoodley ethnic beverage brand, the start-up did not object. After all, there was a connect with the FMCG major since one of its family members had already picked up a small stake in Paper Boat.

“We are a small company and when a larger company like Dabur has similar packaging, it helps in extending our brand to the masses,” says Neeraj Kakkar, CEO, Hector Beverages, the maker of Paper Boat.

When it comes to new products or packaging innovation, large FMCG companies and their family offices have been taking a leaf from start-ups they have invested in. Globally too FMCG majors like Coca Cola and Pepsico have been regularly investing in new-age start-ups to enter fresh categories.

For instance, Pepsico made an entry into fresh dips by acquiring Sabra Hummus, while Coca Cola entered the smoothies segment by taking over Innocent Drinks. Besides, Unilever has its own fund which participates with PE funds for new-age ventures. In India, however, the trend is just catching up. Last year Marico picked up a 45 per cent stake in a Mumbai based start up — Bellezimo — to gain access to the salon distribution channel for its hair and skin-care products.

“Instead of starting a new journey of manufacturing and marketing skin-care products for salons internally, where the company might not have a ready-made capability, Marico has taken a stake in a start-up to learn about consumer habits and see if the salon can be used as an influencer,” says Saugata Gupta, Managing Director & CEO, Marico. Now after a year, Bellezimo is on its way to have a pan India presence, with financial back up from the FMCG major.

Dinesh Bhat, Managing Director, Bellezimo, says, “We had presence only in eastern India… Today we have 10,000 salons and are now entering the southern markets.”

Tea and coffee start-ups have been attracting the attention of big FMCG players. For instance, when Tata Global Beverages wanted to enter the gourmet coffee segment, it sent feelers to Indian Bean, which had entered online coffee retail.

Kunal Ross, Founder, Indian Bean, said, “Tata Global Beverages had shown interest in our start-up as it wanted to enter the gourmet section under a new brand of Tata Grande.”

Meanwhile, the Apeejay Surrendra Group which owns the Typhoo tea brand, is interested in coffee start-ups, as it wants to enter the segment under a new brand.Subrata Mukerji, Business Head, Typhoo India, said: “Coffee is now on our radar, and we are scouting for companies to make a strategic investment.”

Rural consumption holds the key for FMCG in 2017

Source: The Hindu Business Line, Dec 27, 2016

Mumbai: FMCG companies may have faced a dismal 2016 due to demand slowdown and demonetisation, but the players are still hopeful of a turaround by the last quarter of FY2017 on the back of revival in rural demand.

There was bad news for the ₹2.56-lakh crore FMCG industry in 2016, which was looking at rural consumption to fuel demand, as the volume growth in urban consumption had slowed down a year ago.

FMCG companies clock slowest Q2 sales in a decade

Source: LiveMint.com, Oct 27, 2016

MUMBAI/ NEW DELHI: Volume sales of top consumer products makers such as Hindustan Unilever and Dabur hardly picked up in the quarter ended September, making it one of the worst in more than a decade for the industry even as consumers across rural and urban markets remained close-fisted.

Hindustan Unilever, the largest FMCG company in the country, posted just 1.6% year-on-year increase in its net sales for the second quarter while Dabur posted standalone revenue growth of just 2.3% and ITC’s FMCG business grew 13%, prompting everyone to concede that the overall market in the country remains “challenging”, but they said market conditions could improve in the next few months.