FMCG cos stay in shape, eye 13% growth

THE July-September quarter for the FMCG sector is expected to post healthy 12-13% topline growth riding mainly on margin expansion and companies pushing volumes. Delayed monsoons and increased commodity prices is not likely to impact sector sales this quarter and may have a lag impact over the October-December and January-March quarters, say analysts.      Godrej group chairman Adi Godrej said: "The economy has done exceedingly well and we expect healthy growth. The delay in monsoons has not had much impact on our sales which continue to be robust."According to analysts tracking the sector, a combination of demand coming from rural India, companies pushing volumes at key price points to retain consumers, and new product launches mainly in the form of variants have been the key highlights of the July-September quarter.      Increased ad spends, higher levels of localised promotions, price-offs and freebies are also expected to aid volume growth in the period.      That apart, companies ranging from Hindustan Unilever, Godrej Consumer Products, Nestle, Dabur, GlaxoSmithKline, ITC, Marico and Colgate have all stepped up investments in distribution infrastructure. Analyst firm IDFC SSKI Securities MD Nikhil Vora said: "We expect the July-September quarter to be fairly resilient, and we don't expect any pressures on either volumes or margins." Dabur India EDD Rajan Varma said: "Business has been good and there has been no major impact on consumption by way of delayed rains." In fiscal 2008-09, most companies had hiked prices to protect margins towards year-end. But off late, prices have stabilised. In fact, in the January-March '09 quarter, most FMCG companies had benefited from increased operating profit margins, riding on declining raw material prices.  And in the April-June '09 quarter, companies had posted gross margin expansion, aided by the lag impact of price hikes.      Angel Broking's FMCG analyst Anand Shah said: "The corresponding July-September period last year had seen pressure on margins. But we expect the same      growth as the previous quarter."      Under pressure from smaller B-brands and private labels, companies across categories such as soaps, detergents, shampoos, toothpastes, biscuits and snack foods have introduced multiple pack sizes and convenient price points of Rs 2, 3, 5 and 10. Apart from pushing volumes, the companies believe low-priced packs will prevent consumers from switching to other brands.