Category: PRODUCTS

By Samidha Sharma

Noodles, macaronis and soft-drinks made rapid inroads into the rural markets driving up growth in the fast moving consumer goods (FMCG) industry – 10% by volume and 12% by value – in the first ten months of 2011. The consumption story for most part of last year dispelled slowdown fears as Indian rural households piped urban counterparts in growth sweepstakes , said market research agency IMRB. Rural India had clocked a negative volume growth during 2010 (here volume growth is the increase in sales clocked over last year while value growth is volume growth plus price hikes).

The urban FMCG market, on the other hand, grew 4% by volume and 7% in value and was led by categories such as ready-to-eat mixes, deodorants , breakfast cereals and soups. Growth for personal care products such as toilet soaps, shampoos and household products stagnated compared to last year, while F&B space saw a healthy growth. The IMRB survey is conducted across 30 product categories.

Sector analysts said the F&B market witnessed hectic action in rural India with players like ITC and Hindustan Unilever (HUL) leveraging their distribution muscle to push products in this category. ITC’s Sunfeast noodles and HUL’s Knorr brand of soups have been able to penetrate the hinterland leading to increase in the category reach.

“In the F&B market we are seeing the share of rural markets grow. Packaged fruit juices have traditionally been a very urban market product, but with growing health awareness among rural consumers, we are witnessing a marked growth in demand. To cater to this demand, Dabur has already expanded the distribution footprint for juices to cover smaller cities,” said Mr George Angelo, executive director – sales , Dabur India, maker of Vatika shampoo and Real fruit juice. The FMCG biggie saw its personal, oral care and health supplements report strong growth in the rural markets.

While the low-penetrated products in the F&B space witnessed good growth, detergents , washing soaps stagnated volume wise. “Due to lower rural reach household care categories such as floor cleaners , household insecticides are showing faster growth. But foods especially staples such as cooking maida, atta/wheat which are driving the growth in volumes,” said Mr Manoj Menon , group business director at IMRB International. In the urban market emerging categories , noodles, macaroni, vermicelli grew 20% in terms of volume, while ready-to-cook mix products saw a whopping 64% growth and soups grew by 20%. In the personal care category , which largely remained stagnant in the urban market, deodorants saw a 31% growth.

There have been some concerns over consumer spending with price hikes being taken across the board by FMCG companies to offset the impact of rising input costs.

“Because of healthy disposable income growth and lower absolute spends on FMCG products it hasn’t impacted the consumption yet, however if there is uncertainty around income growth risks of downtrading exist,” said Mr Gautam Duggad, an analyst at domestic brokerage firm Prabhudas Lilladher.

Most industry players said they haven’t seen any palpable signs of downtrading yet. “Directionally there is no slowdown in the market but there could be some cut back in the next few quarters on discretionary items by consumers. The impact will be felt in the top-end product categories and non-essentials ,” said Mr Saugata Gupta, CEO, Consumer Products at FMCG major Marico.

Source:The Economic Times

Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

By Kala Vijayraghavan & Chaitali Chakravarty

Three of Hindustan Unilever’s top team of eight executive directors – Gopal Vittal, Shrijeet Mishra and Ashok Gupta – have quit in the past 18 months. There have also been more than a few exits in lower levels of the company.

And sources within and outside the marquee employer say managers are feeling stifled by paucity of growth options. The FMCG giant, once considered an impregnable vault of top-notch talent, is now beginning to look vulnerable.

What ails HUL? The cause for the simmering discontent among local managers can be traced back to a bunch of strategic changes CEO Paul Polman is rolling out to make Unilever more responsive globally, past and present HUL managers say.

First, Mr Polman has consolidated the global business into four divisions – personal care, home care, food and refreshments (like Ice Cream). Secondly, he is centralising much of the decision-making globally, stifling the role of local managers.

Thirdly, he is forcing the company to consider outside talent, upsetting growth aspirations of internal candidates. Mr Polman, who took over in January 2009, is the first outsider in 77 years to head Unilever.

And lastly, global postings in the Unilever universe, once a big draw for Indian mangers, are no longer as attractive. “While the company has become bigger, roles have become fewer,” a top HUL official told ET. “Jobs at HUL are becoming more functional and narrow,” other top officials with an inside line to the company added.

An insider points to Mr Pankaj Gupta, who quit Unilever recently to join Reckitt Benckiser as supply chain head for South East Asia. He is now managing many factories across countries. He has the freedom to strategise, change and make the system more efficient. But as category VP, supply excellence for Unilever in Singapore, he had limited operational freedom.

Insiders say HUL will not miss exits like Mr Gupta as they have an excellent knowledge management system which means managers are told how things are to be done. There is little room for initiative.

Mr Polman is also mandating longer tenures at each position for its top management including the CEO. He is doing this to ensure business accountability and continuity in the face of growing competition and volatility. But at HUL, which is used to quicker job rotations and promotions, this too, is being viewed as a disadvantage by internal staffers.

Moreover, Mr Polman’s view that outside candidates should also be considered for every senior management role to ensure diversity, is another reason for angst among internal candidates used to netting such roles, sources say.

“It is highly speculative and incorrect to draw such conclusions,” a HUL spokesperson said in an email response to an ET questionnaire. “The average age of our Management Committee is around 45 years. This is a reflection of our focus on identifying high potential talent and investing in them through exposure to big and challenging jobs early in their career.”

A young management committee could be another reason making the second rung of managers restless, an FMCG expert, who has worked in HUL for several years in the past, said. “The so-called number two gets impatient,” he said.

Sources point to examples like Mr Samir Jain, vice-president, laundry at HUL, who quit to join Bungee, an agro-trading company, as it’s second in charge. He has a better and quicker shot at becoming CEO, they point out.

“HUL has over 1,500 managers and attrition is significantly below industry level at 5% per annum for the past four years. Our approach for identifying and grooming top talent has established the company as a source of leadership talent,” the HUL spokesperson said in the email response.

Moreover, global posting, once an attractive carrot, is no longer effective. Highly placed sources say that both Mr Gopal Vittal and Mr Shrijeet Mishra (currently the chief operating officer of Bennett, Coleman and Co Ltd, the publisher of The Economic Times) were offered global postings, but found them unattractive.

There are more such instances even at lower levels, they added. “India is where the action is. Why would I want to move to Moscow or Poland,” a former HUL executive, who was offered one such posting, quipped.

Source:The Economic Times

Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved