Consumer spend on FMCG slows

Consumer spend on FMCG slows

Author | exchange4media News Service | Tuesday, May 04,2004 8:31 AM

Consumer spend on FMCG slows

The worst fears of fast-moving consumer goods (FMCG) companies have come true. Households are spending more on consumer durables and less on FMCG, according to a KSA Technopak consumer outlook study to be released shortly.

The study says the share of household spending on FMCG products like groceries and personal care items dipped more than 2 per cent in 2003, despite a 16 per cent rise in overall consumer spending by households in SEC (socio-economic classification) A and B. SEC A comprises middle and senior managers with professional degrees. SEC B comprises employees in clerical, sales and supervisory jobs.

While the spending on groceries came down to 41 per cent in 2003 from 42 per cent in 2002, the share of personal care products in the household budget fell from 8.8 per cent in 2002 to 7.6 per cent in 2003.

Spending on consumer durables, on the other hand, increased from 5 per cent to 6.6 per cent of the total household expenditure during the period.

The annual average disposable income of SEC A and B households for 2003 is estimated at around Rs 62,000 by the study.

According to KSA Technopak Chairman Arvind Singhal, this trend has not been seen before. “In 1991, when we started the consumer outlook study, there were only seven product categories that accounted for 80-90 per cent of consumer spending. Today, the basket has nearly 17 categories,” he said.

He added that consumers were willing to downtrade on run-of-the-mill FMCG in favour of consumer durables. “Since the beginning of 2004, 25 million new mobile handsets have been sold. At an average price of Rs 4,000, it means a spending of Rs 10,000 crore,” he said.

The shift in consumer spending has impacted the topline growth of FMCG companies. Explaining the modest 3 per cent growth in Hindustan Lever’s first-quarter sales, the company’s chairman, M S Banga, said last week the stagnation in the sector was due to consumers spending more on durables, automobiles and housing.

Nestle India’s Chairman and Managing Director Carlo Donati, too, attributed the company’s 5.5 per cent first-quarter turnover growth to a structural shift in consumer spending towards asset building and lifestyle expenditure.

Market research and consultancy firm Indica Research’s Executive Director B Narayanaswamy says FMCG will continue to suffer from low consumer involvement in the medium term.

“Smaller players like CavinKare and Ghari detergents are mopping up most of the FMCG growth,” he said. To be sure, CavinKare, the Chennai-based manufacturer of Chik and Nyle shampoos, has recorded sales growth of over 15 per cent in 2003-04.

Tags: e4m

Write A Comment