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FMCG juggernaut slowing down?

Aug 24, 1999

A study of top 8 FMCG companies in India (excluding Hindustan Lever) reveals that the FMCG sector faced a difficult time in FY99. Total sales of these companies increased by 14%, as compared to a growth of 17% in FY98. Net profit growth declined by more than half to 12% in FY99, compared to growth of over 25% in FY98.

When Hindustan Lever's (HLL) figures were added to the tally, then sales growth shot up to 19% in FY99 compared to 17% in FY98. Net profit growth stood at 29% compared to 32% in FY98. But HLL's figures are not comparable as it has acquired several companies over the past three years and a comparison with its figures will not give an accurate view of consumer sentiment.

The figures suggest that the FMCG juggernaut is slowly coming to a halt. The companies' average realisations have gone down drastically as a result of increased competition and economic slowdown. The slow down led to reduced consumer spending and forced companies to offer discounts and other freebies.

The picture has not been very encouraging in the first half of the current year for December ending companies (excluding HLL). Net profits increased by 28% during this period as against 57% growth during the corresponding period of the previous year. Sales growth was flat as compared to a growth of 21% last year. In the face of falling demand, better-cost controls and efficient working capital management have enabled these companies improve their margins on a flat sales growth.

The 'big daddy' of them all - HLL has not been spared either. Sales for the FMCG major grew by only 11% in the first half of the current year as compared to 20% in 1HFY99. However, HLL's profits grew at a healthy 34% (28% in 1HFY99) aided by robust rural demand and removal of excise duty on packet tea.

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