The country's fast moving consumer goods (FMCG) industry has so far been resilient to the slowdown in the economy and a dip in consumer sentiment. In fact, if we go by the numbers for October and estimates for November, the growth only seems to have got better when compared to the earlier months. H K Press, executive director and president, Godrej Consumer Products, tells Sapna Agarwal the reasons. Excerpts:
The FMCG industry is recording buoyant sales despite a dip in the consumer sentiment...
To understand the impact of the current crisis, let's go back to 2004, when the FMCG industry was going through a rough patch. During this period, the spending on FMCG products had reduced as white goods, auto and real estate/ housing became affordable. To come back to the current scenario, consumers are holding on to their monies due to the uncertainties in the markets. However, they are spending, but on small purchases. Hence, the volumes and growth in the FMCG sector has not seen a dip.
Does this mean the FMCG sector is not affected by the current economic slowdown?
We are seeing an interesting paradox where the slowdown has affected the corporates and is more evident at the macro level. However, the common man has not been affected. For him the worry continues to be inflation and, now, job loss. In fact, in October, the soap and colours categories recorded a 22 and 27 per cent value growth respectively. The estimates for November are also good, whereas in September, the growth was 12-13 per cent.
Despite the drop in commodity prices in the last month, FMCG companies are still increasing prices...
It is an interesting period as demand is perking up and raw material prices are falling. However, we still have commodities in the system that were bought during the peak prices. As such, when the prices of raw materials were increasing, FMCG companies never passed on the full price increase to the consumers. We had absorbed part of it and this has resulted in pressures on our operating margins in the past. We now hope to see the pressures on our operating margins easing off.
So, will there be a price reduction in the future?
No. There will be no price reduction. However, you can expect more activities in the market. We will increase our spends on more trade offers, consumer offers, advertising and product launches.
What's happening on the modern retail trade front?
Revenues from modern retail trade account for 7-8 per cent of our overall business. The falling footfalls and credit squeeze are reasons to worry. But, it is not possible for us to relent to the demands of modern trade retailers. We have our terms and conditions according to which we work. If the retailer extends the credit period and does not pay within the specified period we will stop supplying fresh stocks to them.