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Indian FMCG brands are hopeful

News, 22 December 2014

MUMBAI: The FMCG sector in India, which suffered during the economic downturn, should end the year on a positive note and can look forward to better trading conditions in 2015, industry executives and analysts have said.

After posting the decade's worst volume growth figures in 2014, FMCG brands are now expected to receive a lift from low inflation, falling energy prices and signs that spending is picking up in the cities, they told Livemint.

"The FMCG index usually reflects the consumer confidence index with a two-quarter lag. We will see consumption going up," said Piyush Mathur, president of Nielsen India, referring to the research firm's consumer confidence index of Q2 2014 which ranked Indian consumers as the most bullish in the world.

"By January, the trend will be more evident as we complete the six months' lag," he added, while noting that there was 10% value growth in October, up from 6% in the same period last year.

"There is hope now that the New Year will be better as the macro-economic factors have improved," agreed Pinaki [Ranjan] Mishra, a partner at consultancy firm EY.

Urban consumers, who Nielsen says account for $25bn out of the $37bn FMCG market, are likely to be the first to drive the revival with rural areas following up three to six months later.

Nielsen said in November that it expects FMCG market growth to increase to 10-11% in 2015, rising to 12-13% in 2016, and some industry observers believe food and groceries stand to gain as more consumers go shopping online.

"In the New Year, we will see the focus move to food and groceries in the ecommerce space as well as offline…66% of the total consumer spend is on food and groceries," said Arvind Singhal, chairman of Technopak Advisers, a retail consultancy.

C K Ranganathan, MD of CavinKare, the Chennai-based conglomerate, summed up the more buoyant mood among India's FMCG executives by saying 2014 is ending positively.

He said: "It was one of the worst years with growth rate being the lowest in the past decade. But it is ending on a positive note. The growth rate is picking up and costs are coming down. We can't ask for anything better."

Data sourced from Livemint; additional content by Warc staff