FMCG growth may be slow this fiscal

The report’s author, Nikhil Vora, senior vice-president (Research), says, ‘‘a major area of concern is high penetration levels for most necessities. While toilet soaps touch 100 per cent, washing soaps have risen to 98 per cent, washing powders and biscuits have penetrated 95 per cent, iodised salt is at 88 per cent, hair wash at 77 per cent and toothpastes are at 71 per cent’’.

Though emergence of new regional players has resulted in market expansion, it has also led to erosion of market value. While external factors such as lower inflation and saturated penetration levels have been unfavourable, pragmatic pricing strategy and value proposition from the new entrants have seen overall value growth remaining flat.

The report further states, ‘‘most smaller and regional players are willing to take on top-rung FMCG companies on their own turf. With fresh entrants, competition is not restricted to only known companies but to strong local competitors who have low-cost structures and are innovative.

So, while leaders such as HLL, Colgate, Britannia, Dabur etc. continue to grapple with further expanding core brands, focused companies such as Anchor (oral care), Himalayan Drugs (health care), CavinKare (personal care), Surya Foods (biscuits), Jyothy labs (home care) etc., have grabbed the market share. In an environment of promotions and freebies, consumers have started to demand value-for-money offers. The reluctance of major players to launch new products has made it relatively easy for new companies to capture a higher share of the consumer’s wallet, the report said. The report says that Indian FMCG companies have thrived on high growth and high operating margins due to distribution gains and pricing power. But these high margins have not been utilised to further market expansion.

To recoup lost ground, the report suggests that all FMCG majors should expand markets, re-define value-proposition, adopt a pragmatic pricing strategy, fight for enhanced share of disposable income and sharply focus on value-for-money offers.