The Hindu Business Line : Assocham sees 4 pc growth in FMCG sector during next fiscal

THE Rs 48,000-crore fast moving consumer goods (FMCG) industry, which grew by a mere 1.5 per cent during the last four years, is all set to achieve 3-4 per cent growth in 2005-06, according to a survey by Assocham.

The Assocham President, Mr Mahendra K. Sanghi, said while releasing the survey "major products moving towards recovery in terms of higher sales include biscuits, beverages, toothpastes, shampoos, washing powder, skin creams and chocolates."

The survey found that already, most FMCG segments have shown a growth in terms of value in October this year. For example, biscuits grew by 12.2 per cent, beverages by 7.2 per cent, toothpastes 6.1 per cent, skin creams 7.1 per cent and shampoos 13.1 per cent.

He said that the prevailing competitive pricing environment has been adequately established and this will improve profitability margins of companies in the consumer goods segments.

The turnaround in the fortunes of this industry is also reflected on account of aggressive advertising and brand promotions.

The slow growth of 1.5 per cent that the FMCG industries registered in the last four years was because it went through challenging times in terms of price wars and poor monsoons, he said adding that the price war between market leaders Hindustan Lever Ltd and Procter & Gamble hit these companies' bottomline.

Also, smaller detergent brands such as Ghadi and toothpaste brands such as Anchor put pressure on larger players.

As a result of intense competition, only five out of 12 FMCG companies managed a cumulative annual growth rate in double digits between 2000 and 2004, the Assocham statement said.

It said the year-on-year growth rate of HLL profits declined from 22.45 per cent in 2001 to 4.22 per cent last year and its CAGR sales growth was paltry 0.02 per cent last fiscal.

Assocham also pointed out that while transnational companies such as HLL, ITC, Colgate Palmolive and P&G are dominant players, many home grown ones such as Godrej Consumer Products, Dabur India and Nirma have also become household names.

Besides, small and regional brands, supported by low pricing and aggressive marketing, have of late been giving tough competition to big firms such as HLL and P&G.

This has led to a margin squeeze and topline growth till end of fiscal 2003-04 remained stagnant, the survey found.

It predicts a pick-up for FMCG sector in the current fiscal, which will further be strengthened in 2004-05 due to a general improvement in business environment, economic activities and possible acceleration in agricultural activities.

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