FMCG growth slows down in December

FMCG growth slows down in December

Author | Source: The Economic Times | Saturday, Feb 04,2006 8:17 AM

FMCG growth slows down in December

The FMCG sector hit a barrier in December '05 with growth falling to 3.5% compared to 4.4% in the previous month. Overall, the sector reported an average 4.6% growth for the quarter ending December '05.

According to a Morgan Stanley report, the slowdown in December '05 was partly on account of the high base reported in December '04, which was the only month in three years that witnessed double-digit sector growth. The report quotes, AC Nielsen numbers for the month of December '05.

Shampoo has been the only silver lining amidst the cloudy performance across categories and continues to drive growth. While shampoo recorded an impressive 19% value growth, others such as laundry power, laundry bar, tea, noodles, toothpastes, soaps, and chocolates have reported declining volumes in December '05. Laundry bars and tea recorded sharpest dip in volumes of 15% and above while vermicelli and noodles was the next poor performer registering a fall in volume, close to 10%.

Biscuits and skin care segments, however, held their own with value growth of 13% and 10%, respectively. According to the marketing head of a prominent FMCG company, biscuits have been growing at an average of 10-12%. “The incremental growth is actually on account of the eastern markets, which the retail audit has now picked up,” he said.

Interestingly, while vermicelli and noodles logged declining volumes, they grew in value. Analysts find it rather hard to believe the decline as the audit has reported. “December could be an aberration,” says Sukanya Kripalu, a strategic marketing consultant and former FMCG honcho. “This is certainly not a market slowdown if we take FMCG performance in January into consideration.”

However, according to Morgan Stanley, HLL reported a decline in revenues for the first time since December 2003, Nestle doubled its growth rate to 9.9% as compared to November 2005. Dabur, which saw petering growth in revenues during the last few months, saw some acceleration in growth at 4.8% and Godrej Consumer's growth slowed to 14% compared to an monthly average of 18-20% witnessed during the year.

Quarterly results of heavyweights such as ITC, GSK Consumer and Godrej Consumer suggest that the consumer sector continues on an uptrend. P&G continues to be the fastest growing company whereas Tata Tea has witnessed the sharpest value decline - around 4.8%. Equity researchers, however, believe that the consumer staples industry is on the recovery path and more importantly, this recovery is sustainable at least over the next 1-2 years. No wonder then, they give their thumbs up to most of the scrips on the bourses.

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