Last Updated : 24 October 2009 at 13:05 IST

FMCG to grow 20%: Rural market proves eminent

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NEW DELHI (Commodity Online): Buoyed with the across-the-board demand, country’s FMCG sector is no more an ailing one as the estimates suggest a double-digit growth in sales during the second quarter of the current fiscal.

Estimates put forward by Associated Chambers of Commerce and Industry of India (ASSOCHAM) show an impressive 18-20% growth for the FMCG sector in the second quarter of the current fiscal. The first quarter growth in FMCG sector was around 12%.

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The ASSOCHAM Financial Pulse Study titled “Prospects in the FMCG sector” stated that despite the negative impact of the scanty rainfall, demand from rural India is likely to remain robust complimented by a healthy rise from the urban areas going forward.

The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of USD 14.7 billion. The FMCG market is set to double from USD 14.7 billion in 2008-09 to USD 30 billion in 2012. FMCG sector will witness more than 50 per cent growth in rural and semi-urban India by 2010.

As per the analysis of the listed companies in FMCG sector by ASSOCHAM, Hindustan Unilever Ltd (BOM: 500696) and Dabur India (BOM: 500096) originates half of their sales from rural India.

While Colgate Palmolive India (BOM: 500830) and Marico constitutes nearly 37% respectively, however Nestle India Ltd (BOM: 500790) and GSK Consumer (BOM: 500676) drives 25 per cent of sales from rural India.

The financial analysis of these FMCG majors, the sector achieved the average growth in net sales by 16.71 per cent in Q1 2009-10, and despite the drought situation it is likely to grow by 18 to 20 per cent in Q2 2009-10.

Hindustan Unilever Ltd gained over 1.6% during past one quarter to Rs.280, while Colgate Palmolive surged by 8.5% to Rs.708.40 and Dabur India Ltd gained over 13% to Rs.151 during past one quarter.

HUL reported a drop of 2.7% in its net profit in comparison with the Q1 of 2008-09, besides the drop in net profits, the net sales of the company grew by 8%. According to the analysis done by ASSOCHAM Research Bureau the company would achieve 7% growth in its net profit and the net sales would grow by 9.3% in Q2 of FY’10.

Dabur India increased its net profit by 15.24%, while the net sales of the company grew by 23% in first quarter of 2009-10. In Q2 the company is expected to post 17% growth in net profit while the net sales is likely to grow by 24.2 per cent.

Colgate Palmolive India Limited, which covers nearly four major segments in FMCG sector, posted growth in net profit of 42.91% and net sales increased by 16.40% in first quarter of 2009-10 over the corresponding period last year. In Q2 2009-10, the company is expected to post a growth of 17% and 45% in net sales segment and net profit respectively.

Marico industries which is in two major segments of FMCG i.e. hair care and processed foods recorded growth of 58.30% in net profits and the net sales grew by 16.48% in Q1 FY’10. As per the analysis, in Q2 FY’10, the company would achieve 17.52% growth in net sales and the net profit is expected to grow by 63% as against the corresponding period of last year.

In Q1 FY’10, Nestle India, which is engaged in food business, beverages and processed foods products, recorded 33.80% and 19.70% growth in net sales and net profits respectively while in the second quarter the company is expected to post a growth of 21% in net sales and 35% in net profits.

The study also analyzes the growth of different segments of FMCG sector in the first two quarters of the current fiscal (FY 2009-10) vis-à-vis the corresponding period of last fiscal.

The demand of personal and fabric wash market including soaps and toilet soaps which witnessed a growth rate of 14.20% in Q1 of 2009-10 is likely to grow by 15% in Q2 FY’10.

HUL and Colgate Palmolive India are the two major companies in this segment. In these two product categories, HUL is likely to grow by 11.10% while Colgate Palmolive would register a growth of 17.30% in their net sales for the second quarter.