Busines - Fast moving goods still not preferred in low-unit packs
The Rs 83,709-crore fast-moving consumer goods (FMCG) sector seems to be bucking the trend of inflation-hit consumers going for low-priced, low-unit packs (LUPs).According to Nielsen Retail Audit Data, LUPs of most food and non-food FMCG categories have shown slower (value) growth during April-June 2008 vis-a-vis April-June 2007. And in some categories, like skin creams and namkeens, LUP sales have fallen year-on-year (y-o-y) in the first three months. LUPs of washing powders and liquids registered a mere 7% value growth in May compared to a 44% jump last year. And this after a negative 6.5% and 8.3% growth in April and March 2008 against over 40% and 80% growth a year earlier. Growth of LUPs of detergent cakes/bars, on the other hand, came down to 61.1% in June compared to humungous 741% last year. Skin cream LUPs witnessed a negative 80% growth in June 2008 compared to a robust over 40% growth in June 2007. The only FMCG categories where LUP sales growth in April-June outpaced 2007’s are biscuits and refined oil. The Nielsen Company director (client solutions) Amita Shetye feels that while inflation has led to adjustments in budgets, there are no signs of consumers opting for small-unit packs in the period. “Inflation is surely a testing time for Indian consumers and they must be trying to adjust their household budget with the onset of high EMIs, increasing transportation cost and rising commodity cost. However, Nielsen Retail Audit Data does not indicate negative growth in household essentials, neither a considerable move in lower pack SKUs. This indicates that consumers, in adjusting their household budgets, are focusing on minimising other expenses rather than daily FMCG essentials.” With fears of cost-cutting by consumers due to inflation some companies introduced value-pack offers. For instance, Henkel started offering its products like Henko, Pril and Bref at a discounted price. However, the company is not sure if the numbers are coming from these offers. Says Henkel India marketing vice-president Ranju Kumar Mohan: “It is too early to say if there is downtrading in consumer goods. It’s difficult to say that lower-price segment is showing greater signs of growth particularly in April and May this year.” The company does not plan to add any new value packs in its portfolio. Subhiksha managing director R Subhramaniam is not surprised. “It is convenience that drives their sale rather than price points. Typically, consumers do not see trading down by opting for lower-sized packs to beat inflation. If a consumer has to consume say a kilogram of a particular product in a month, it does not make sense for him to buy several small packs, he would rather buy in bulk and save cost,” explains Mr Subhramaniam. In the food category, biscuits and refined oils have shown positive signs in 75gm and 200gm packs, respectively. However, Britannia marketing vice-president Neeraj Chandra maintains that given the flux in the market with inflation in the overall consumption basket and changes in prices of specific packs there are no clear patterns of shifts in the sale of small packs. “This may over time result in a different pattern of sales for pack/prices points. However, given the short period of a quarter and possibilities of trade pipeline adjustments and panel measurement limitations, these shifts in consumption pattern may be getting diffused and not showing through as yet,” says Mr Chandra. If the results for most FMCG companies in the April-June quarter are anything to go by, there are clear indicators of higher margins coming from price hikes, differential pricing across products and new product launches. Colgate-Palmolive notched up an 18% increase in net profit at Rs 71.9-crore on net sales of Rs 407 crore during the quarter. All its major brands—Colgate Dental Cream, Active Salt, and Cibaca—contributed to the volume growth of 11%. Marico, on the other hand, registered a 15% increase in net profit at Rs 46.2 crore, with more than half of the growth coming from volume expansion. Similarly, the country’s biggest FMCG player Hindustan Unilever undertook steep price rises for its products and registered a 13% growth in net profit at Rs 558 crore, mostly driven by higher volumes in personal-care products.