Tag: FMCG sector

Festive season, lower mortality rate led to recovery in urban demand: Parle’s Mayank Shah

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The third quarter is expected to be a quarter of demand recovery for the FMCG sector, said Mayank Shah, Senior Category Head of Parle Products on Tuesday. Rural growth is likely to continue while urban markets are expected to recover, he added.

“Demand during the peak of lockdown was very high, post things started opening up in the second quarter onwards. The packaged food demand was slightly moderated, not high as it was but still much higher than what it was in the last year,” said Shah.

He added, “In the third quarter, we saw urban demand reviving which was impacted because of the lockdown. Revival in demand was led by two things in urban India, one was cases going down, mortality rates going down, and the second thing was—it was largely driven by festive season buying plus revival in demand coming in from modern trade as well is the result of that.”

On the industry growth, Shah said, “In the pre-COVID year the category was growing at somewhere around 8-9 percent and we are expecting that going forward the category would be growing at 15-16 percent almost about 2x. This is largely because of consumer propensity towards trusted brands.”

Shah is very confident that they would probably see double-digit growth in the next two-three years.

RS Sodhi, General Manager of Gujarat Cooperative Milk Marketing Federation said, “Demand this year was much better than 2019, in case of food consumer this year has shifted from unbranded to the branded products.”

He added, “HoReCa which was totally closed down now up 60-70 percent. HoReCa is opened up.”

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Coronavirus impact: FMCG distributors seek relief from sales targets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The increasing buying activity playing out in the market over the last few days has put severe pressure on the FMCG distributor community. Owing to the Coronavirus outbreak, people have been stocking up on essentials in the food and personal hygiene space.

“Work hours have multiplied for us because of the high demand for packaged foods. We have told the field staff to wear masks and operate,” said a distributor.

FMCG distributors are appealing to companies to regulate product wise sales growth targets. Packaged food items like biscuits, noodles, etc. make up only 15-20 percent of revenues for distributors. Therefore in these situations, the demand for these products has gone up. “All we are asking companies to do is to regulate sales growth targets for products. There should be no compulsion for distributors to buy products that are not selling in the market at this point,” said a distributor.

Dumping of non-essentials like cosmetics, creams, etc. into the market is not going to help anyone, said some distributors. The distributor community is also financially stressed as there is a delay in payments from the retail/’kirana’ outlets. “They are delaying payments owing to the uncertainty associated with the outbreak. This has led to a freeze in our collections. As a result, it is becoming very difficult for us to buy more products from FMCG companies,” said a distributor.

In these difficult times, FMCG distributors are hoping that companies give them some relief in terms of meeting targets.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Coronavirus outbreak: Here is how FMCG companies are coping with the pandemic 

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The coronavirus pandemic has hit global economies and businesses hard. India Inc. is gearing up for this major headwind and telling its employees not to put themselves or their respective organisation at risk.

Taking into account the seriousness of the outbreak in India, consumer goods companies have put in place stringent protocols to ensure the safety of employees.

Field Staff & Factory Workers

The consumer good companies rely heavily on on-field, factory and distribution centre staff. To ensure the safety of these employees, companies are encouraging rotation based shifts and minimal workforce in a bid to limit physical contact with one another.

“All of our sourcing units and distribution centres will apply specialist tiered protocols to protect our workers while supporting business continuity. All field sales employees should connect with customers virtually wherever possible and minimise the use of public transport if a customer visit is necessary,” said Unilever in a statement.

Work From Home

Consumer goods giants like Hindustan Unilever, ITC and Godrej have already implemented ‘work from home’ for roles that don’t require employees to be physically present at their workplace.

Hindustan Unilever’s 4,000 India employees will be working from home starting this week.

“All office-based employees globally should work from home. Any exceptions (which we expect to be few and far between, and most probably due to the need to access data-intensive systems) must be approved by the country General Manager,” said Unilever on its website.

The Godrej group has created a task force of senior leaders to closely monitor the situation. They have “requested team members to work from home if their role allows them to do so. Others who can work from home have been asked to do so as much as possible.”

Cigarettes to hospitality giant, ITC has said that “offices in some locations have been advised to put in place and execute contingency plans at the earliest including work-from-home arrangements.”

Meetings Via Video Conferences 

Organisations are also keeping in mind risks from business-related travel. Most companies have put in place blanket bans on travel to overseas plants and offices. GCPL which gets about 50 percent of its business from overseas has “suspended all business-related international and domestic travel and moved critical meetings to video conferences.”

The Godrej group has also requested any team member who has “travelled to China, Korea, Iran, Japan and Italy, in the last few weeks, to notify their manager and HR partner and work from home for two weeks post their return to India.”

ITC has issued an internal travel advisory “under which no international travel is permitted for official reasons till further notice and domestic travel is being limited to essential travel.” Organisations are also keeping in check the entry of external visitors who are not employees of the company. In times like these, companies are encouraging teleconferencing and video conferencing as much as possible.

Other Regular Measures

Social distancing, adequate use of hand sanitiser and maintaining personal hygiene are some general words of caution that organisations have communicated to employees.

“Business continuity plans are being put in place to address any potential contingencies and for social distancing. All Businesses have been advised to set up a Core Contingency Management Team. We are continuously monitoring the situation across all locations and are moving towards a state of preparedness to address any exigency as the health and safety of our entire workforce including salesmen and factory workers is of paramount importance,” said ITC.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Roundup 2019: Worst year for FMCG firms; Dabur, Nestle, among others, revenue growth falls

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With liquidity squeeze, a slowdown in the agriculture sector, and uncertainty over sustainable incomes and job stability, 2019 will be remembered as the year which saw the worst slowdown for the FMCG sector in over a decade, according to a report.

Noting severe demand crunch in the space, a Credit Suisse report released in September said that FY20 was likely to be the year of worst revenue growth for India’s FMCG sector since 2000-03. The liquidity squeeze, a slowdown in the agri sector, uncertainty over sustainable incomes and job stability have made people cautious about their consumption habits. Taking this into account, market research firm Nielsen revised the growth forecast for the Indian FMCG sector to 9 percent for calendar year 2019, from the earlier forecast of 11-12 percent.

A clear deceleration was seen in revenue growth rates for FMCG companies for the 9 months of 2019. For instance, HUL which had seen an 11 per cent revenue growth for the first 9 months of 2018, saw revenue growth slipping to 7.5 percent in the same period this year.

Chyawanprash maker Dabur saw revenue growth rate declining to 6 percent for the first nine months of 2019 from 10.2 percent year-on-year. Nestle also saw growth rates slip over 400 basis points.

“If I look at the last three quarters, I find a very sharp slowdown of growth, it has gone from a 14 to a 10 percent drop in growth between Q3 2018 to current… it is largely driven primarily by rural,” said Prasun Basu, President – South Asia, Nielsen.

Rural India, which accounts for 37 percent of overall FMCG spends, has historically grown at almost twice the rate of urban India. But in 2019, rural growth hit a seven year low. And, this was a cause of concern for several FMCG companies. “Market has witnessed a slowdown in the quarter particularly led by rural.. rural which was to grow 1.3-1.4 times, urban has only been growing 0.5x of urban,” said Srinivas Phatak, chief financial officer, HUL.

Godrej Consumer, which manufactures products like Goodknight and Cinthol, said that it was disappointed by growth in rural markets but was optimistic about recovery. “Rural has been marginally ahead of urban and so in that sense it has been a disappointment. Typically, we like to see rural at 1.4-1.5x urban growth … rural has been a challenge,” said Vivek Gambhir, Managing Director & chief executive officer, GCPL.

Even historical drivers of growth in the FMCG industry showed a decline during the year. Small packs, which make up 25-30 percent of overall sales for FMCG companies, showed a decline in volume growth on a year-on-year basis. Data sourced from market research firm Nielsen showed that three out of the top five high contributing categories for small packs have seen a decline in overall volume growth.

Small pack categories for segments such as biscuits, soaps and potato chips saw a decline in volume growth in the January to July 2019 period on a year-on-year basis.  In such a scenario, FMCG companies turned with relief to benign commodity prices, especially palm oil prices. They were happy to pass on any benefits they received from this corner to the consumer in the form of price cuts, if it would translate into higher volumes. For instance, HUL, GCPL, and Wipro Consumer Care cut prices between 4 and 6 percent in the soaps category. A few of the players even offered bulk pack discounts and promotions to drive volumes.

While most companies tapped promotions to entice consumers, many FMCG companies had to cut back on advertising and promotional spends in an effort to cut costs. For instance, Godrej Consumer Products cut advertisement spends by 13 percent and Dabur cut spends by 3 percent in the first nine months of 2019.

Meanwhile, HUL and Marico spent more in an effort to get customers to open their wallets. “Slowdown in growth rates does not mean that the skies have fallen. It means that there has been a blip. It is my hope that with the steps that are being taken, if there are measures that puts back money in the hands of consumers in terms of increased consumption expenditure then that should really help,” said Suresh Narayanan, Chairman and Managing Director, Nestle India.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Nifty FMCG falls 5% in one month, Nirmal Bang expects no visible signs of uptick before FY20

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The consumption sector is the crux of any economy but high valuations, slow demand, liquidity pressures and moderation in volume growth are not good signs for the long-term. Indian FMCG sector has been seeing the worst year so far as along with all the above reasons, the sector also went through erratic monsoons this year that has led to an increase in pressure on the companies.

The sector is again facing a rough patch since the beginning of November. Nifty FMCG has declined nearly 5 percent till now while in comparison the Nifty50 index has risen 1.52 percent during the same time frame.

Most companies from the sector this quarter reported a dip in volume growth. Dabur’s volume growth slipped to 8.1 percent from 21 percent sequentially. Meanwhile, GlaxoSmithKline Consumer and Hindustan Unilever’s slipped 2 percent each this quarter. The reason behind the dip in consumption slowdown in the rural market, liquidity crunch, and erratic monsoons.

With the subsequent de-growth in the consumption cycle, Nirmal Bang predicts that the slowdown will persist till the end of FY20 with no visible signs of an uptick.

In its report, the brokerage said, “The majority of the coverage consumer companies have delivered mid-single to high-single-digit growth in H1FY20, with growth in the premium segment higher than the mass market segment. While almost all the companies were able to hold on to growth during the last reported quarter (2QFY20), there were no real signs of demand improvement.”

It further added that full-year growth for FY20 is now going to be in mid-to-high single digits, with an expectation of a better second half compared to the first half. Nielsen had earlier revised its outlook for the sector to 9-10 percent growth for 2019 revised down from 11-12 percent.

Despite the de-growth in the sector, the brokerage continues to remain positive on a long-term perspective and remains bullish on stocks that play on the premiumization theme.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

This stock doubled investor wealth in 5 years. Should you still buy?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Tata Global Beverages has risen steadily in the last five years, doubling investor wealth. The stock rose from Rs 150 in 2014 to Rs 306 currently, gaining 103 percent in five years. To put in perspective, an investment of Rs one lakh in 2014 would have turned to Rs 2,03,000 today.

The stock hit its 52-week high of Rs 322.70 per share on BSE on November 1, 2019, and a 52-week low of Rs 177.50 on February 11, 2019. Its current market capitalisation stands over Rs 19,000 crore.

The FMCG sector, on a whole, has been a good investment for long-term investors. The Nifty FMCG index itself has risen over 54 percent in the last 5 years with only 2 of its constituents (Emami and ITC) in red for this period.

Tata Global Beverages’ peers have also performed well during this period. HUL rose 170 percent, Marico was up 123 percent, Dabur gained 101 percent, United Breweries added 59 percent, and United Spirits advanced 13 percent.

However, the stock has outperformed all its peers in the last 1 year and in 2019 despite the consumer demand slowdown. It has risen 42 percent in the last 1 year and 40 percent in 2019.

Among peers, HUL has gained only 20 percent in 1 year, Dabur is up 16 percent and Marico added 1 percent, while United Breweries and United Spirits have given negative returns in this period, down 6 percent and 3 percent, respectively.

In YTD as well, Marico, United Breweries and United Spirits were in red, down between 3-10 percent. HUL was the only gainer up 1 percent.

In a recent report, Motilal Oswal said that Tata Global Beverages’ India tea business is its breadwinner and is one of the strongest tea franchisees in India, a leading market player and amongst the only two brands with a national presence. It’s India tea business’ revenue/EBITDA has clocked 10 percent/13 percent CAGR over the past decade, impressive for a category where the penetration is more than 90 percent.

It added, “We believe that a business-specific earnings approach appropriately captures the company’s potential. Further, the company offers much potential as it is concentrating on the high return on invested capital India business once again. The company has already exited/plans to exit loss-making businesses and focus on cost control and scalable business opportunities.” The brokerage has an upside on 16 percent for the stock for a 12-month basis.

Tata Global Beverages (TGB) is a natural beverage company with an interest in tea, coffee, and water. It is the second-largest branded tea player globally with operations spanning over 40 countries. Branded products represent 90 percent of its consolidated sales, of this, tea accounts for 80 percent.

Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Government tasks field formation to give sectoral updates to help form policies for economic revival

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a bid to catch the pulse of the economy, the finance ministry has asked filed formations of both direct and indirect taxes to keep on sharing a sectoral update to North Block which will help in coming up with better policies to revive the slowing economy.

According to senior government officials, “Field formations have already started sharing updates on the economic activity to the government.”

“Field formations have shared that during the period of October sectors such as FMCG, Consumer goods, auto, cement and steel have continued to show poor sales. However, exports are likely to pick up, especially exports of handicrafts are showing a sign of revival,” government officials added.

“The entire idea of getting this update is that the government wants to keep sectoral analysis to help in making recommendations for upcoming Budget and policies to improve GST revenue collections,” sources added.

According to a recent survey on fast-moving consumer goods (FMCG), the FMCG manufacturers would witness even softer growth in the October-December 2019 period. Projections by market research firm Nielsen indicate that growth in Q4CY19 could be in the range of 6.5 to 7.5 percent. This can be compared to the 7.6 percent growth that the FMCG sector saw in Q3CY19. Nielsen has retained its annual growth forecast for 2019 for the FMCG market at 9-10 percent. In the last quarter, Nielsen had revised lower its earlier growth forecast of 11-12 percent.

Rural India, which contributes 36 percent to overall FMCG spends, has had its worst performance in seven years. Rural which was growing at 20 percent in Q3CY18 has grown only 5 percent in Q3CY19, according to data from market research firm Nielsen.

On the other hand, when it comes to exports, Director-General Export Promotion Council for Handicrafts  (EPCH), Rakesh Kumar said, “The sentiment is picking up when it comes to handicraft exports. Recently, we had conducted a fair and the response was exciting than last year. Around 7300 overseas buyers and their representatives visited from 110 countries, the show was also visited by over 2000 domestic volume buyers.  The fair generated business inquiries to the tune of Rs 3,750 crores. Orders have been booked, which is a good sign.”

Revenue Secretary Ajay Bhushan Pandey recently told CNBC-TV18, “During the last two months, we have also seen a few sectors such as cement, automobile and steel have not performed well.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Expect 2-3% volume growth in Q2 for Dabur and Colgate, says Abneesh Roy of Edelweiss Securities

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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We are expecting 2-3 percent volume growth in Q2 for Dabur and Colgate, said Abneesh Roy, executive vice president -Institutional Equities, Edelweiss Securities.

“We are expecting market share gains for a lot of these companies, for example, Dabur will gain against Patanjali and some of the regional players. Similarly, Colgate now seems to be broadly growing in line with the market. Therefore, most of the companies in my space — I would expect 2-3 percent volume growth. Laggard like Emami will be flattish to minus 1 percent number in terms of volume growth,” Roy said in an interview with CNBC-TV18.

HUL reported better than expected numbers for the second quarter.

On HUL’s Q2 numbers, Roy said, “It was challenging for most consumer companies in Q2. Therefore, we do expect companies like Dabur and Colgate which have higher rural exposure to see muted volume growth in this quarter. We do not expect 5 percent volume growth, which HUL has done, for some of the rural-focused companies.”

“Therefore, investors should stick to Hindustan Unilever, Marico, Britannia and Godrej Consumer Products (GCPL) kind of companies in the current context and once the rural recovery starts then investors can also have a look at Dabur and Colgate kind of companies,” he further added.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow