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The Time For Personal Growth
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Hindustan Unilever, India's a largest household product and consumer goods maker witnessed a 20 per cent growth in the skincare and personal care products including soaps and detergents.
Similary, home-grown firms such as ITC, Dabur and Godrej Consumers have witnessed strong revenue growth in the personal care segment at 17 per cent, 19.4 per cent and 19 per cent respectively.
So does this mean that the people are buying more or the growth is just a result of the price hike, that most of the firms took in the last few quarters to maintain margins?
However, a few analysts and consultants, that we spoke to, have different take on the strong growth in the personal care category. While some said the growth came on the back of price hikes, few contradicted the fact saying that more products launches across sub-segments such as soaps, shampoos, conditioners, skin care and shower gels, and penetration into newer geographies drove the volumes.
"Most of the FMCG firms have further penetrated into new cities and have also acquired more customers in the cities they are already present. This has been through more product launches and introduction of new sub-categories also," said Devangshu Dutta, CEO and Founder of retail and FMCG consulting firm Third Eyesight.
HUL, the maker of personal care products like Dove, Sunsilk, Lux, Closeup and the largest consumer products firm, caters to only 60 per cent of the entire Indian market and hence there lies a huge opportunity for the company to enter new markets. This is one strategy the company is focusing on seriously and has been able to grow consumption in the new geographies, basically the smaller towns and tier III citties.
"As we look ahead the FMCG market will continue to grow," he said, referring to fast moving consumer goods. "However, input cost inflation will continue to remain high."
Another important factor that led to the growth in revenues was due to reduction in grammage and package, Dutta said adding that value growth is around 12-18 per cent for most of the companies based on this factor.
Commodity inflation continued to remain high and hence the companies were forced to pass on the burden to the consumers to some extent without impacting the consumption story.
However, hike in pay-packages and compensation of the people in Asia's third largest economy has also boosted consumption story and is likely to grow only.
However, the sector also witnessed some kind of down trading with people, in rural areas and with low income groups, opting for smaller value for money packs, mostly in the personal hygiene segment e.g diapers, sanitary napkins, shampoos, hair oil and even tooth pastes, according to Indiabulls Securities' Vice President, Anand Mour. "Most of the growth this quarter has come from a mix of volume growth and price hikes," he said.
Meanwhile, Dutta said that despite the government was worried about the consumption, the consumer confidence level has not been impacted but certainly will worsen if there will be further hike. However, he expects further price hike would lead to 'second thoughts' among the consumers.