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FMCGs reap what they invest, enter fast lane

FMCGs reap what they invest, enter fast lane

Author | Source: The Economic Times | Wednesday, Jun 15,2005 7:32 AM

FMCGs reap what they invest, enter fast lane

Companies that have made substantial investment in expanding their product portfolio and distribution dominate the list of top ten fastest growing companies in the fast moving consumer goods (FMCG) industry.

For April '04-March '05, the top three includes Ruchi Soya Industries with a 62% revenue growth rate, Adani Wilmar at 36.7% and P&G at 29.4%. Most of the top ten companies, traditionally known as mid-sized like Dabur, Marico and Parle Products have now increased their turnover to above Rs 700 crore.

Shantanu Khosla, managing director, P&G told ET that the company has focused on launching products that touched the needs of the consumers. “We have closely monitored consumer needs and partnered in fulfilling them. We are delighted that our focus has been rewarded,” he said.

Other fast movers include Godrej Consumer, J&J, Parle Products, Dabur, Eveready, Marico and Reckitt Benckiser. Traditionally, HLL has been seen the only FMCG company with a massive distribution systems across urban and rural markets. But several other companies such as Colgate, Marico, P&G have begun investing in optimal distribution in recent times, say industry sources

“Effective distribution and innovation has played a crucial role in our growth. I am confident that the company has the right systems and approach to the market to ensure double digit growth rates in the coming years,” said Adi B Godrej, chairman, Godrej Consumer. Companies are now targeting stores that are more profitable and ensure that the offtake will be higher. “Indian companies have matched the distribution policies of multinationals,” a fund manager of a leading brokerage firm said.

In terms of growth too, while Indian companies show better understanding of the Indian market through faster innovations, multinationals like P&G, Nestle, HLL and others are also catching up fast.

Most of the companies have shifted manufacturing facilities to the excise duty exempt areas, which is expected to result in substantial cost-savings.

“We have made a conscious decision to reduce dependence on the old portfolio of brands and are expanding the new product range. But I would call the shift from our earlier conservative image a thoughtful aggression. We are studying consumer needs closely, innovating and testing faster,” said Milind Sarwate, CFO, Marico.

There is a strong sense of bullishness in the market which stems from a significant price realignment in the entire sector, followed by market share gains by leading players and a significant capex in the business.

“Against the earlier trend of brand investment that we have historically looked at in the sector, the industry is looking at asset investment, a clear sign of a turnaround,” said a leading industry analyst.

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