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Tag: Sunil Duggal

  • FMCG revival only in Nielsen data, say CEOS of some majors

    Achche or Burre Din for FMCGs?

     

    By Sagar Malviya & Ratna Bhushan

     

    Chief Executive Officers of FMCG companies and market research firm are at loggerheads yet again, this time over what is an accurate measure of current growth in consumption.

     

    Nielsen data suggests the industry is experiencing a strong revival now, compared to last year which witnessed the slowest growth in a decade. It estimates that FMCG sales grew 11.8% in the first nine months of this calendar year compared to the 6.8% growth the industry experienced during the same months of 2014.

     

    But CEOs of FMCG companies dismiss these estimates as faulty. The market researcher is overestimating growth and is not capturing pricecuts accurately, they argue. “There are no signs of improvement and the market is not supporting demand revival,” said Sunil Duggal, CEO of Dabur.

     

    “We are well into the festive season and two weeks away from Diwali, but there’s no visible uptick in consumption. The outlook continues to look challenging,” he added.

     

    “Our sense is that demand revival is still a few quarters away,” the chairman of another leading foods maker said. “Nielsen is over reporting growth.”

     

    Dabur on Wednesday, reported a 5% domestic volume growth during the quarter ended September, but managed an 18.7% increase in consolidated net profit to Rs 341 crore.

     

    During the same period, HUL, Dabur and Jyothy Laboratories all reported sales growth that was substantially lower than the previous year. Godrej Consumer Products, with a slight improvement in revenue growth, was the only exception. Other companies are yet to announce their last quarter results.

     

    Sanjiv Mehta

    A fortnight ago, HUL’s CEO Sanjiv Mehta had said that Nielsen has failed to capture sales trend accurately for a year now. It is still showing price inflation when most companies are taking price cuts to post higher volume growth, not value growth, he had argued.

     

    Nielsen though is singing a different tune. “2015 has seen revival of conspicuous consumption. Positive macro environment, lower inflation and consumer confidence is leading to improved consumption across all key FMCG categories,” Vijay Udasi, senior VP, Nielsen India said. Nielsen said price growth rose 3.9% during last nine months ended September compared to 4.7% last year. However, companies including HUL, Procter & Gamble and Nestle have all taken average 10% price-cuts on most products from detergents and shampoo to dairy after commodity (crude oil and LAB) prices declined by 20- 50%. This, in turn, boosted growth for companies such as HUL and Godrej Consumers that saw last quarter performance entirely driven by volume growth.

     

    Consumer goods companies and Nielsen have had a love-hate relationship since more than five years, after HUL first disputed its data in 2009 when Nielsen contradicted the consumer product maker’s internal estimates as well as data from other research firms. Yet, most companies use their data regularly during presentations, especially when it shows an increased market share for their brands.

     

    But some are hopeful. “We remain optimistic that as the economy improves, the FMCG sector should see a gradual uptick in demand,” said Adi Godrej, chairman, Godrej Group, after reporting 9% increase in sales for the domestic market. The growth was entirely volume-led.

     

    Stockmarket analysts are enthused by growing sales, but they are trimming their profit estimates due to price-cuts. Still, the MSCI India Consumer Staples Index is currently trading at a 12-month forward price-to-earning ratio of 32.5x, a.29% premium to its 10 year average.

     

    “Despite sturdy commodity tailwind benefits, the sector’s margin expansion has not been striking. These elevated valuations warrant our cautious stance,” said Nitin Mathur, an analyst at French financial services firm Societe Generale.

     

    Source:The Economic Times

    Copyright © 2015, Bennett, Coleman & Co. Ltd. All Rights Reserved

    Licensed to republish

     

  • Market leaders like Gillette, Colgate, Dabur Real and Chyawanprash, Godrej's Good Knight and Jyothy Laboratories' Ujala have improved their market share in their core categories over the past one year

    Top FMCG brands gain market share during economic slump

    By Sagar Malviya

     

    Mondelez India, maker of the country’s top chocolate brand Cadbury, had been struggling to hold on to its market share over the past few years, but in the January-March quarter it managed to improve its share for chocolates by 2.5%. With new chocolate capacity in place in India, the company has been able to regain the share it lost in the first half of last year, Mondelez International CEO Irene Rosenfeld said in an earnings call for the quarter two weeks ago.

     

    Perhaps it’s not just about higher capacity. It seems that in a downturn consumers tend to lose their impulse to experiment and stick to established ones, as around a dozen market leaders including Gillette, Colgate, Dabur Real and Chyawanprash, Godrej’s Good Knight and Jyothy Laboratories’ Ujala, have improved their market share in their core categories over the past one year.

     

    “In a downturn, consumers might not want to risk and experiment buying new brands and generally stick to trusted or established brands especially in the health space even if it has a slightly premium pricing,” said Sunil Duggal, CEO at Dabur. The Delhi-based firm’s Real juice and Chyawanprash have gained around 200 basis points to improve their market share to 54% and 64%, respectively.

     

    While several small players could not hold their price lines in the wake of inflating input costs since last year, several large companies increased their marketing spends and focused on innovations to push growth amid weakening consumer demand for most daily products.

     

    The overall consumer goods market growth fell to nearly 6% during the January-March quarter compared to 18% in the same period last year. Top companies aggressively tried to develop mass-products that would be easy on consumer wallets. “We have continued to focus on launching some great innovations,” Vivek Gambhir, managing director at Godrej Consumer Products, said. “For instance, we have launched three innovations in home insecticides over the last 12 months — more than the previous ten years,” he said, adding that new products accounted for more than a third of the firm’s incremental growth.

     

    Top oral care brand Colgate claimed a 60 basis points gain in its toothpaste market share year-on-year at 53.8% in the March quarter despite increased competition driven by new entrant and global rival Procter & Gamble. Colgate launched newer products and stepped up its reach and advertising spends substantially on the face of heightened competition. “Strong communication and trade plans have helped drive these results,” it said in a global earnings call last month.

     

    Source:The Economic Times

    Copyright © 2014, Bennett, Coleman & Co. Ltd. All Rights Reserved

    Licensed to republish

     

  • Hike in allocation for National Rural Employment Guarantee Scheme would provide boost to FMCG

    NREGS allocation hike would boost buying

    By A Correspondent

     

    A hike in allocation for the National Rural Employment Guarantee Scheme and reliefs offered to a section of taxpayers would put more money in the hands of the consumer. This, in turn, would provide the much needed boost to the fast moving consumer goods (FMCG) industry, which is currently witnessing a slight slowdown in volume growth.

     

    More money in rural pockets and an improvement in the standard of living would help in escalating product penetration and improving per capita consumption. Even a small rise in the disposable incomes of India’s 350-million-strong middle income consumers will bolster growth. These middle income consumers form a vast majority and contribute 40-45 % to the revenues of the roughly Rs 1,70,000-crore FMCG sector.

     

    “I’m happy that excise duties and import duties remain unchanged. No price increases are expected,” said Rakshit Hargave, MD, Nivea India.

     

    However, given the fact that this year’s Budget comes against the backdrop of the slowest economic growth in a decade, experts believe the finance minister may have missed the opportunity to give that much-needed booster dose for growth.

     

    “While steps like Rs 2,000 relief to taxpayers in the Rs 2-5 lakh bracket and Rs 1 lakh additional relief on home loans of up to Rs 25 lakh would certainly put more disposable income – howsoever little – in the pockets of the common man, but these were much below expectations. Given the continued inflation, there is very little real relief and cheer for the common man,” said Dabur India CEO Sunil Duggal.

     

    Source:The Economic Times

    Copyright © 2013, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Seven listed domestic companies, which control over 70 per cent of the FMCG market, have posted an average value sales growth of 19.28 per cent in the first quarter of fiscal 2013

    FMCG biggies HUL, Godrej, Dabur report higher sales growth numbers than estimated by Nielsen

    By Sagar Malviya & Ratna Bhushan

     

    Market research firm Nielsen and India’s consumer goods companies are in sharp disagreement over growth rates in the sector. In the April-June quarter of 2012, sales growth in value terms of some of India’s biggest fast-moving consumer goods companies is higher than Nielsen’s growth estimate for the overall FMCG market, raising concerns over the world’s largest research firm’s accuracy in India.

     

    Seven listed domestic companies, which control over 70 per cent of the FMCG market, have posted an average value sales growth of 19.28 per cent in the first quarter of fiscal 2013. A Nielsen spokesperson says their figure for this period is 17.6 per cent. Even in categories such as soaps, juices, oral care and hair oils, leading players, which contribute between 60 per cent and 75 per cent to each segment, have posted much higher volume growth than what Nielsen’s data suggests. When contacted, Nielsen did not validate the numbers that ET has obtained from the research firm’s FMCG clients.

     

    For instance, Godrej Consumer Products Ltd saw a 24 per cent spurt in soap volumes even as Nielsen estimates growth for the overall segment at a sombre 5 per cent in the April-June quarter. “There is a bit of under-reporting by Nielsen. The issue lies with its statistical method,” said Adi Godrej, chairman of Godrej Group.

     

    “We generally use Nielsen’s data for market share as there isn’t any other option for us. However, for category growth, we rely on our sales numbers and listed companies’ performance,” said Vineet Agrawal, president at Wipro Consumer Care & Lighting, which saw a 15 per cent jump in volume growth in soaps in the first quarter of the fiscal year.

     

    It’s a similar story in toothpastes, a category that grew 9 per cent in volumes according to Nielsen; however, this doesn’t tally with internal sales data of Colgate and Hindustan Unilever Ltd (HUL), which together command roughly 80 per cent of the market. Colgate saw a 13 per cent rise in volume growth. For HUL also it was higher, said CFO R Sridhar at a recent financial results’ presentation.

     

    In packaged juices, Nielsen says the category grew 18-19 per cent in the April-June quarter in value terms and that Dabur grew 24 per cent. But Dabur’s quarterly sales numbers show its juice business grew 34 per cent. Dabur leads the packaged juices market with the Real brand, which accounts for more than half of all juices sold.

     

    Dabur CEO Sunil Duggal said: “Our quarterly growth numbers are generally ahead of what Nielsen reports. So we prefer to study Nielsen numbers as a longer-term trend – over a 12-month period – because that evens out errors.”

     

    Nielsen counters that the retail audit cannot be compared with sales numbers that companies report. A Nielsen spokesperson said: “The retail audit is focused on sales offtake through a sample of retail stores that tracks sales to the end consumer. It is technically incorrect to compare it to the financial results of companies, which report sales to distribution channels.” The research firm also said sales reported by companies may include those beyond retail stores from institutions such as army canteens, restaurants and transport hubs, which are outside the scope of its retail audit.

     

    An FMCG analyst points out on condition of anonymity that ignoring the Canteen Services Department (CSD), which caters to the Indian defence services, may be one explanation for the discrepancies.

     

    After all, CSD can easily qualify as India’s largest retailer with some 3,500 outlets across the country. Nielsen is no stranger to controversy on the market share front. In May 2009, HUL disputed the researcher’s data that showed a steady fall in the company’s market share across segments, saying it contradicted internal estimates as well as data from household research firm IMRB. The issue snowballed into a crisis when Dabur, Godrej and Marico echoed similar doubts over Nielsen data. Dabur and Perfetti Van Melle even went so far as to cancel Nielsen’s subscriptions in categories such as hair oils, juices, candies and confectionery.

     

    A year ago, Unilever CEO Paul Polman questioned the accuracy of Nielsen’s data for India, underlining that the country’s largest consumer product maker was still unhappy with the market researcher two years after first raising the issue. “I know you all like to write about it. But they (Nielsen) are not very accurate with what their numbers are,” Mr Polman had said while commenting on the performance of Unilever’s Indian arm.

     

    Nielsen has increased its sampling size to 22,000 outlets from 16,000 over the past three years, included more modern trade outlets and uncovered channels in rural markets, prompting some companies to be optimistic about the research firm’s data. “We are worried, but the fact remains that at least it is not deteriorating. They have been changing panels and we have to pick up points where there are issues and work with them on it,” said Saugata Gupta, CEO of Marico, which saw its hair oil business grow over 15 per cent in volumes while Nielsen’s data shows a growth of 4.7 per cent for the category.

     

    Also, companies are now slightly at ease after Nielsen decided not to share data with market analysts and investors who depend on the data to track the performance of consumer product companies and rate the stock accordingly. “While we are glad that analysts can’t access the data easily, even we have stopped taking the research seriously and rely on it just for trends. Nielsen’s numbers is not a bible to us,” said a CEO of a leading homegrown consumer firm who didn’t wish to be identified.

     

    Source: The Economic Times

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

     

  • The consumer goods companies said the next few quarters could be challenging if the monsoon is weak and the rupee continues to fall

    HUL, Dabur & Colgate Q1 sales up 20%, next few Qs challenging

    By A Correspondent

     

    Consumer goods companies Hindustan Unilever, Colgate-Palmolive and Dabur said the next few quarters could be challenging if the monsoon is weak and the rupee continues to fall after reporting about 20 per cent jump in their first quarter sales.

     

    Hindustan Unilever, the country’s largest consumer goods company, whose presence in a range of daily consumption items such as soaps, shampoos and food makes its performance a good proxy for consumer sentiment, said it has not seen any evidence yet of customers trading down for cheaper products but delayed monsoon, weak rupee and volatile raw-material prices remain a concern.

     

    “When we look into the medium term, we believe that the growth drivers for FMCG are really positive,” said R Sridhar, chief financial officer at Hindustan Unilever. “But when we look at the next 2-3 quarters, clearly there are few challenges-the final shape of how monsoon distribution happens, rupee has depreciated quite significantly and inflation continues to be at a very high level,” he said.

     

    Dabur CEO Sunil Duggal too said: “As of now, we have not witnessed any slowdown in rural consumption, but there could be some amount of demand contraction this (July-September) quarter.”

     

    HUL’s total income rose 20 per cent to Rs6,378.7 crore in the April-June quarter from Rs5,323.6 crore in the year-ago period, outperforming the broader FMCG industry that grew 16 per cent during the quarter. Profit after tax before exceptional items at the Indian unit of Anglo-Dutch Unilever rose 48 per cent to Rs855 crore in the three months to June. Exceptional items included sale of properties worth Rs607 crore.

     

    The company said it was able to increase its operating profit margins by 180 basis points. Its cost of goods sold during the period was 200 basis points lower than in the year-ago period.

     

    During the quarter, HUL’s sales of soaps and detergents-its largest business segment-rose 24 per cent to Rs3,163.05 crore, helped mainly by price increases. Double-digit volume growth drove up sales of personal care products by 17per cent  to Rs1,847.08 crore, while beverages sales were 7per cent  higher at Rs654.07 crore. New launches in brands such as Kwality Walls helped its packaged foods business grow 17 per cent to Rs436.98 crore.

     

    What pleased analysts the most about the results was the companies’ sustainable volume growth. HUL, Dabur and Colgate-Palmolive grew their volumes between 9-12 per cent as the makers of daily household products sold more goods despite increasing prices. “Across companies, margins have expanded and ad spends increased too. With sales of premium products growing, there isn’t even first signs of slowdown yet,” said Anand Mour of Ambit Capital. Colgate-Palmolive reported a 17 per cent jump in first quarter profit at Rs117 crore, while its sales grew 20 per cent at Rs736 crore. “In an inflationary environment, the company’s continuing efforts and focussed programs to enhance efficiencies and reduce costs continue to yield strong, positive results, helping to maintain margin and fund investments in building and strengthening brand equity and the business,” Colgate said in a statement. The company said prudent price increases and cost management helped it maintain its strong gross margin.

     

    Dabur reported 21 per cent jump in April-June sales at Rs1,461.9 crore, while net profit increased 17 per cent year-on-year to Rs149.4 crore, riding on categories like health supplements, shampoos and food. Faster network expansion in rural markets too helped the firm drive sales. Dabur CEO Duggal said the company was forecasting double-digit growth over the next two quarters although there could be some slowdown in demand.

     

    Source: The Economic Times

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