FMCGs regain speed in second quarter

The FMCG sector is living up to its ‘fast moving’ tag again, with the top 15 FMCG companies clocking net sales and net profits growth of 23% and 12% respectively.

This is the one of the biggest market in terms of the sale. This market has both organized as well as on-organized player. As the Indian consumer is very price sensitive this market is very competitive.

This is good news that the market is growing. This shows that the organized sector is capturing more and more market share. So consumer preference towards the branded products is increasing. But the increase in sale is also due to increase in export of these companies. So the credit of growth in sales does not solely goes to the Indian consumer.

The growth is not same for all the products under the FMCG category. For instance the branded food segment for ITC grew by 54% and for HLL it grew by 20%. The beverage category grew by just 6.5% for HLL and 14% for Nestles domestic market. But Nestle saw a good growth in its export. One of the reasons for growth is the rise of retail sector. The organized retail sector buys the FMCG goods in bulk. They usually tie-up with these FMCG companies. So the FMCG companies have a constant sale in these stores.

The input cost for the FMCG companies have increased. This is quite clear from the decreasing operating margin from 19% to 18%. The FMCG companies are the biggest spender in advertisements. They are trying to increase the awareness level of their products as well as they are branding themselves. Branding will help them to sell their product in high volume without sacrificing their margins.