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Innovation helps FMCGs maintain growth in Oct

03-December-2005
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Innovation helps FMCGs maintain growth in Oct

Improved consumption levels in both urban and rural areas have helped the fast moving consumer goods (FMCG) segment maintain its growth rate in October '05 at an upbeat 6.1%. Categories which innovated the most, thanks to the entry of fresh competition, continue to record good growth rates. Biscuits, for instance, grew by 13% in value terms, while shampoos rose 16.3% and washing powder rose 9.4%, according to ACNielsen estimates.

New categories with relatively lower penetration levels, like namkeens, batteries, biscuits, hair oils, shampoo, mosquito repellents, are growing faster than the highly-penetrated (over 80%) sectors like toothpaste, soaps and detergents, which have also recorded good growth rates. Toilet soaps grew at 4.9% and toothpastes 4.7%, while packaged tea declined 1.4%.

CK Ranganathan, CMD, CavinKare, said the overall market showed an optimistic trend and companies which innovated faster have been the beneficiaries. “Companies are finally understanding rather than dictating consumer needs,” he said.

Mid-sized companies like Dabur, Marico, Parle Products, J&J, Godrej Consumer, P&G and others are leading growth rates backed by innovation and 'guided distribution' strategies. The share of non-farm income has risen and has contributed substantially to the overall growth across categories, said industry sources.

Both large and small packs have contributed to the uptrend in the industry, aided largely by the modern retail formats. Several companies, especially the Indian players, have focused on operational efficiencies to achieve a 6% reduction in their expense to sales ratio, according to a recent CII-AT Kearney survey. Serious attempts have also been made to invest in manufacturing and supply chain capabilities.

“While topline has certainly improved, companies also need to look at unconventional ways of tapping the Indian consumer. Upgrades have also helped improve the value growth in specific categories,” said Piruz Kambhatta, CMD of Rasna and chairman, FMCG Task Force, western region of CII.

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