X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
FMCG: The year gone by - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jan 2, 2008

    FMCG: The year gone by

    India is the world's twelfth largest consumer market. The Rs 700 bn FMCG sector grew by 12% in 2007. Most of the products in the FMCG space, though at different rates, witnessed growth. The sector had a satisfying year led by a booming economy and consumerism.

    2007: A roundup...

    Higher penetration, per capita consumption, increasing population base, and household income continued to drive the growth. Further, this year the willingness to spend backed by the ability to do so spurted the growth. 21 of the 90 FMCG categories exhibited remarkable growth of around 25%. While food was the fastest growing segment, health and wellness products followed next. The sector got further impetus led by several tax sops, greater focus on infrastructure development as well as a boost to rural income. Exemption of excise duty and custom duty on certain products and machinery aided the companies. However, input costs and crude prices continued to worry.

    What were the growth drivers?

    Rural markets - Strong growth:
    Rural regions, where nearly 70% of India's population resides, accounted for 34% of the offtake for FMCG products. The rural market registered a growth rate of 17% in the first ten months of 2007. The reasons for the high growth were:

    • Increasing households:The number of households in rural areas using FMCG products has gone up from 136 m in 2004 to 143 m in 2007 implying a CAGR of 1.7%.

    • Higher income With the economy growing at a strong pace, the income of the people has increased. The changing lifestyle has increased the consumption of FMCG products. Further, a shift is also being witnessed to higher-value products across categories and from unbranded to branded products.

    • Increasing penetration 2007 also witnessed higher penetration in the rural regions. As seen from the table (published in a financial daily), while the penetration of household care products remained sluggish, personal care products witnessed higher growth.

    Penetration : Rural India
    Category 2004 2005 2006 2007
    Detergent/soap 93 92 92 92
    Washing powder 95 96 96 97
    Toilet soap 98 98 98 99
    Shampoo 68 77 80 83
    Hair oil and dressing 84 85 85 86
    Skin cream 64 71 71 72
    Source: IMRB International

    Food and beverages: The Indian food processing industry logged an impressive growth rate of 18% till October 2007. Overall economic growth was favourable for the F&B market, with more products becoming affordable due to rising incomes, changing lifestyles and a rapidly growing population. Cumulative foreign direct investment in the food processing sector has almost trebled in the past two years, going up to Rs 4.4 bn in 2007 from Rs 1.7 bn in 2005. It is also experiencing good growth from the modern trade format. Processed food products, impulse food products and packaged grocery are the segments that have witnessed immense growth from urban Indian modern stores.

    New launches: Another feature, which was highlighted this year, was the launches of new products. As per IMRB, 251 new products (223 variants and 28 brands) were launched this year as against 191 (173 variants and 18 brands) in the same period last year. Branded snacks and shampoos witnessed the highest new launches. ITC was the biggest launcher this year. It launched Bingo in the snacks category. The year also marked its entry into the personal care space with the launch of Fiama Di Wills' brand of products. Dabur increased its presence in the beverage segment, while HUL launched its water purifier product.

    Looking ahead...
    The consumer base in the rural sector and the growing middle class provide huge potential to the FMCG companies going forward. Increase in rural income would aid growth. Personal care, household care and foods are estimated to grow at high rates. According to a CII-AT Kearney report, the FMCG sector is expected to grow at a compounded annual growth rate of 9% to a size of Rs 1,430 bn by 2010. Since urban regions are already matured, the rural regions would continue to be the key growth driver. In urban areas, introduction of newer, convenience and higher end products would propel growth. However, concerns remain with respect to the increasing competitive environment, input cost pressures and infrastructure bottlenecks. Overall, we remain positive on the growth prospects of the FMCG sector.

     

     

    Equitymaster requests your view! Post a comment on "FMCG: The year gone by". Click here!

      
     

    More Views on News

    Marico: Earnings Hit by Lower Volumes and Firming Input Prices (Quarterly Results Update - Detailed)

    Aug 9, 2017

    While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.

    P&G: Strong Core Growth (Quarterly Results Update - Detailed)

    Dec 9, 2016

    Procter & Gamble Hygiene and Health Care has announced the first quarter results of the financial year ended June 2017 (1QFY17). The company's sales rose by 12.5%YoY while net profit rose by 50.1% YoY during the quarter.

    Nestle India: Sales Traction From New Products (Quarterly Results Update - Detailed)

    Nov 30, 2016

    Nestle India declared results for the quarter ended September 2016. Here is our analysis of the result.

    GSK Consumer: Price Hike Hurts Volumes (Quarterly Results Update - Detailed)

    Nov 30, 2016

    GSK Consumer Healthcare declared results for the quarter ended September 2016. The revenues dropped by 1.3% during the quarter as compared to a year ago; while the profits declined by 16.6% YoY during the quarter.

    Marico: Margin Expansion Drives Profit Growth (Quarterly Results Update - Detailed)

    Nov 28, 2016

    Marico has reported a flat topline while the bottomline has grown by 18% YoY during the quarter.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE FMCG


    Aug 24, 2017 03:08 PM

    S&P BSE FMCG 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS