FMCG cos expect strong topline growth

NEW DELHI: Despite rising input price rises and high inflation, fast-moving consumer goods FMCG companies are expected to post a strong topline growth in the second quarter of the current financial year (2008-09). According to industry projections, the sector is expected to post a 15-17% topline revenue growth in the July-September quarter, riding on price hikes and higher focus on value-for-money products.
PepsiCo MD, food division, Gautham Mukkavilli says, "Our toplines are strong but the margins have been impacted due to inflationary pressures and high commodity prices. As of now our offtakes have been strong and there is no empirical data to suggest that there has been a negative impact. But going forward, we need to exercise a degree of caution. We will have the right mix of innovation and value, redo our distribution strategy."
Dabur India, CEO, Sunil Duggal, adds, "Demand in the fast moving goods may get impacted if there is a prolonged liquidity crisis but as of now we are not witnessing any dip in sales. The current financial scenario does not have an immediate relevance to the FMCG sector, as the sector is, to some extent, insulated."
Nestle, however, admitted that spike in commodity prices have put some pressure on Nestle but that is not passed on to the consumer. Nestle SA chairman, Peter Brabeck, who was in India recently, says, "We have accelerated cost saving measures as we were early to detect that the price increases in commodities were coming. So we could soften the blow."
Cadbury India ED for marketing and international sales, Sanjay Purohit, however, feels there is no cause for worry at the moment. But the impact may be felt later on due to high price of coca and sugar. We need to have a base plan ready to offset that.
PwC analyst Amrit Pandurangi says that as of now this sector is insulated from the downturn as it is dependent to some extent on the agri-sector and is not very capital-intensive. But margins will continue to be under pressure due to rising commodity prices. While soap manufacturers face margin pressure from rising vegetable oil prices, for hair oils, escalating copra prices are the problem. Additionally, packaging costs have gone up 20-25% in one year.