NEW DELHI: Slowing consumer expenditure and down-trading to value brands will put increased pressure on FMCG companies in India to cut prices and introduce more value brands to keep their volume sales up, according to industry observers.
As Preeti Chaturvedi argues, the Indian FMCG market is a highly complex one, with a mixture of national and regional brands, and a wide variety of consumer demands on both price and positioning.
Figures from AC Nielsen from late 2008 show sales of products like detergent were down by 2.5%, with washing powder also posting a decline of 2.9%, as consumers scaled back their purchasing habits.
Hindustan Unilever has increased many prices by over 10% in the last 15 months, and while its net fmcg sales were up over 20% in the December quarter last year, underlying sales growth fell to 2%, compared with 7% in Q3 and Q2, and 10% in Q1.
By contrast, while Colgate Palmolive saw its volume sales rise by 14% in the final quarter of last year, figures from HSBC Global Research estimate gross margins over that period fell by 355 basis points on the same period in 2007.
Abheek Singhi, a director of the Boston Consulting Company, thus predicts that FMCG companies in India are likely to "increase their value offerings and promotions" and "effect large competitive price cuts" to increase their volumes sales.
Data sourced from Business Standard; additional content by WARC staff