Fast moving consumer goods companies may have a solid reason to feel worried: Sales volumes of soaps, detergent cakes and washing powder are dipping fast.
Two of these categories — detergent cakes and washing powder — account for around 15 per cent of the overall FMCG market of Rs 80,000 crore, according to estimates made by analysts.
Leading market research firm A C Nielsen’s data for November 2008 show an across-the-category drop in sales volumes compared to the preceding month. Compared to November last year also, sales have either declined or grew only marginally. For example, urban consumers have reduced their consumption of detergent cakes by 2.5 per cent in November this year compared to the year-ago period. Washing powder, however, is the worst-hit category, with sales volumes declining in both rural and urban areas. At an all-India level, the overall decline is 2.9 per cent.
Analysts are concerned. Nikhil Vora, managing director of brokerage firm SSKI Securities said besides being indicative of a slackening pace of growth, the slowdown in volumes could be due to price increases effected by FMCG companies during the year.
Consumers have also reacted adversely to the common practice of FMCG companies to reduce the per unit grammage (net weight) of products while trying to maintain popular price points.
Amita Shetye, director, Client Service, The Nielsen Company, said the slowdown is more acute in mass categories. "The premium segment has registered volume growth over last year for all the three categories despite price increases. However the grammage decline in the mass category has not gone down well with consumers.
| CONSUMPTION IN VOLUMES OF SOAPS, DETERGENTS & WASHING POWDERS | |||
| Y-o-Y growth (%) | M-o-M growth (%) | ||
| Nov ’07 over Nov ’06 | Nov ’08 over Nov ’07 | Nov ’08 over Oct ’08 | |
| TOILET SOAPS | |||
| All India (U+R) | 1.8 | 1.0 | -6.6 |
| All India - Urban | 2.6 | 4.0 | -7.1 |
| All India - Rural | 1.0 | -2.2 | -6.1 |
| WASHING POWDERS | |||
| All India (U+R) | -0.1 | -2.9 | -2.4 |
| All India - Urban | 0.9 | -3.9 | -2.0 |
| All India - Rural | -1.0 | -2.0 | -2.7 |
| DETERGENT CAKES | |||
| All India (U+R) | 4.5 | 0.1 | -5.6 |
| All India - Urban | 3.8 | -2.5 | -8.0 |
| Source: AC Nielsen | |||
All popular mass-category brands such as Lifebuoy, Lux, Godrej No.1 and Cinthol saw reduction in sales volumes in November compared to the preceding month. Hindustan Unilever's (HUL's) Lifebuoy and Lux, which have close to 20 per cent and 15 per cent market share in the toilet soap market, recorded a sales volume decline of 7 and 9 per cent each respectively. Similarly, Godrej Consumer Products (GCPL's) Godrej No 1 and Cinthol registered a month-on-month drop of 7 and 6 per cent respectively.
"The declining volumes in these key categories are a cause for concern," says Anand Shah, FMCG sector analyst with Angel Broking. "Companies are obviously worried and I won’t be surprised if FMCG companies start cutting prices now," he said. Earlier this month HUL had reduced the price of Lifebuoy by Re 1. India's largest FMCG player also reduced the prices of some of its detergents and soap brands in the mass segment. According to market sources, Marico and other FMCG players are also planning to either reduce prices or increase the net weight of their products.