FMCG Feb sales growth at 5-year high of 10.6%

All top 10 categories record growth, the only exception being packaged tea.

Spurred by high rural demand and retail sales, the fast-moving consumer goods (FMCG) sector posted 10.6 per cent growth year on year in February, the highest in the past five years, according to data provided by market research agency AC Nielsen.

The rise does not come on a low base since the sales growth in February 2005 was 8.1 per cent year on year. And what is more, the growth has been broad-based with all the top 10 categories growing, the only exception being packaged tea.

Besides, five of these categories have posted double-digit growth. And for the first time in four years, all the companies tracked by AC Nielsen have posted a growth in sales.

The revival in the sector has been evident for some time now and the December quarter saw strong topline growth.

For example, Dabur saw its revenue grow 26 per cent year on year, while Colgate's sales grew 21 per cent. Besides, most companies now have far more pricing power than they did a year ago, which is reflected in the better operating margins last quarter.

Colgate's margin, for instance, was up 10 percentage points at 23 per cent, while that of Godrej consumer Products was up 270 basis points at 23.8 per cent.

According to analysts, Hindustan Lever in February experienced the highest growth in five years while others such as Tata Tea and Dabur saw sales grow at a much faster pace compared with the December quarter. Tata Tea's sales rise, for instance, is the highest since June 2005 while Britannia's is the highest in 27 months.

Analysts believe that the pick-up in the larger categories such as biscuits, washing powder, detergent cakes, shampoos and tea indicates a rise in demand for such categories in rural areas.

This, they point out, is the main driving force behind the performance of companies such as Hindustan Lever, which recorded double-digit topline growth last quarter, the first time in six years. Very few segments in the FMCG space were now seeing a deceleration in growth and the momentum was expected to continue, analysts added.

Even as the sector continues its strong run, the BSE FMCG index hit an all-time high of 2,103.5 on Friday with three of its components, ITC, Nestle and McDowell hitting all-time highs.

ITC, incidentally, has the highest weight of 48 per cent in the index. The FMCG index has outperformed the Sensex for the better part of 2005 and has been a big outperformer so far in 2006.