CII Communique - December, 2010

sectoral synergies
fmcg
FMCG Industry Optimistic
Despite Challenges
The Indian FMCG industry has
displayed high optimism, despite a
moderate downswing in the second
quarter (July-September 2010). The
latest CII FMCG survey reflects
higher levels of growth in the current
fiscal i.e. April-March 2010-11. The
survey covered 30 Fast Moving
Consumer Goods (FMCG) items
such as personal care products,
cosmetics and toiletries and
household products. The results are
based on feedback received from industry associations
and companies in the FMCG space and interactions with
the representatives of various FMCG companies.
FMCG has helped the Indian economy to emerge
speedily from the impact of the global recession. Though
rising food inflation and high input costs have hurt
the FMCG sector in the first half of the financial year
2010-11, the industry is optimistic about its performance
during the full year.
The CII FMCG survey reveals that the sector registered
a growth of 11.4 percent in April-June 2010 compared
to a growth rate of 12.0 percent in Q1 2009 -10. During
the second quarter, the sector has, however, experienced
a slight drop in growth rates to 11.0 percent, due to an
increase in the costs of various inputs such as petroleum
products and packaging materials, food inflation, etc.
But the industry, according to the survey, expects to
maintain higher growth at 13.0 per cent in the fiscal year
April-March 2010-11, as commodity prices are expected
to cool down on the back of a good monsoon. The
festive season spread over the second half of the year
would also lead to more consumer spending spurred
by the recent hike in the salaries of employees.
The sectors which are projected to achieve excellent
growth of above 20 per cent during April-March 2010-11
over April-March 2009-10 are: deodorants 41.5% (40%),
anti-ageing creams 30.5% (30%), toothpastes 22% (20%),
skin and fairness creams 18% (16%), men’s fairness
products 32% (32%), hair colorants/dyes 22% (21%),
cleaners and repellents 23% (22%), feminine hygiene
products 22% (20%), baby diapers 21% (20)% and dish
washes 27% (26%).
The categories expected to witness high growth rate of
A CII FMCG survey
reflects higher levels
of growth in the
current fiscal year
10-20 percent are: detergent powder
16% (15%), washing cakes 13%
(13%), toilet soaps 16% (15%), tooth
brushes 13% (13%), fairness creams
18% (16%), men’s hair grooming
and styling products 20% (18%),
branded coconut oil 10% (10%),
shampoos 12% (9.8%), baby care
products 17% (17%) and skin care
products 15% (15%).
The categories of toothpowders
1.8% (2%), liquid soaps 7% (6%),
shaving products 8% (7%), and coconut oil 2% (2%)
are expected to register moderate growth of 0 to 10
percent.
The positive growth drivers for the industry relate to
companies’ focused initiatives and strategies including
mergers and acquisitions, overseas expansion, new
product innovations and launches with smaller packs/
sachets to tap vast niche segments, and aggressive
rural market penetration. Growing incomes and changing
lifestyles and preferences for branded products, as well
as continued fiscal stimulus, pay hikes of government
employees, resurgence of tier II and tier III cities, young
population, rapid urbanization and increased allocation
for rural development schemes like NREGA and Bharat
Nirman have added to the positive momentum.
The CII survey has also identified some major issues
and constraints faced by the FMCG sector. Fake or
counterfeit products are a serious challenge for the
industry. According to estimates, they amount to a loss
of around Rs 27 billion to the exchequer. Rising input
cost including high cost of raw materials, increase in
packaging cost and higher logistics cost due to fuel price
increase are all affecting the profit margins of FMCG
companies. Lack of proper infrastructure and logistics,
multiple taxes, and absence of FDI into multi-brand
retail are the other issues constraining the full take-off
of the FMCG sector.
The survey urges the need for pro-active government
action in the form of early implementation of GST, strict
monitoring and controlling of prices, enforcement of
copyrights and better infrastructure facilities. All these steps
are vital to achieve lower cost, improved quality and better
performance in the competitive FMCG environment.
28 | December 2010 Communiqué