Revival in FMCG sector still a few quarters away

HUL and Godrej Consumer account for close to 60 per cent of the soaps market and general skincare has remained weak though HUL grew due to the re-emergence of Fair & Lovely.

July 29, 2014 08:29 pm | Updated November 26, 2021 10:27 pm IST - MUMBAI:

HUL and Godrej Consumer account for close to 60 per cent of the soaps market and general skincare has remained weak though HUL grew due to the re-emergence of Fair & Lovely.File photo: Vaidya

HUL and Godrej Consumer account for close to 60 per cent of the soaps market and general skincare has remained weak though HUL grew due to the re-emergence of Fair & Lovely.File photo: Vaidya

The spectre of the economic slowdown still looms large over the Indian fast moving consumer goods (FMCG) sector. The performance of larger players in the segment in the first quarter of the current fiscal indicate that although business grew, there was only single digit volume growth.

While Hindustan Unilever (HUL) grew 6 per cent, Dabur India grew 8 per cent and Colgate-Palmolive 5 per cent.

In a statement, HUL Chairman Harish Manwani said there were headwinds on market growth, consumer spending and inflation. “There could be further deceleration in growth,” Ritwik Rai, FMCG Analyst, Kotak Securities, said.

Major players derive a significant portion of their sales from the rural segment and industry watchers say weakness in rural demand continues. A few years ago, there was buoyancy in the rural market driven by farm loan waivers and employment guarantee schemes which improved rural income and demand. But a diminution of these triggers and a truant monsoon in several parts of the country, have played spoil-sport.

On the other hand, urban demand may revive with an improvement in consumer sentiment. “But real income-led revival is missing and as of now, it is backed more by hope than by data,” Mr. Rai said.

Among FMCG categories, soap remains weak. HUL and Godrej Consumer account for close to 60 per cent of the soaps market and general skincare has remained weak though HUL grew due to the re-emergence of Fair & Lovely.

The toothpaste segment has also weakened with growth decelerating from 8-10 per cent last year to 3-4 per cent largely due to the high base effect.

“We feel optimistic that the worst is over,” Adi Godrej, Chairman, Godrej Group, said in a statement. “We are beginning to see improved consumer sentiment on the ground and are hopeful that this will start translating into better consumer demand in the quarters ahead. Growth in the second-half of this year should be better than the first-half,” he said.

A revival in the sector is expected only a quarter or two later to herald the festive season later in the year.

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