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Indias Fmcg

19 August 2008 Buoyant topline growth and easing input cost pressures bode well for the sector
This update is an attempt to take stock of the strong topline growth momentum and easing raw material cost pressures in the FMCG sector. Strong growth momentum continues The sector continued its strong topline growth momentum with 20% yoy and 5% qoq growth in 1QFY09. The growth was led by both price hikes (5-7%) and volumes (13-15%).
Table 1: Quarterly sales growth Company Rs mn Colgate-Palmolive/India 4076 Dabur India 6040 Godrej Consumer Products 3616 Hindustan Lever 42157 ITC 38997 Marico 6009 Nestle India 10356 Tata Tea 11347
Source: Company
ALCHEMY EQUITY RESEARCH Nitesh Momaya 91-22-6639 9181 nitesh.momaya@alchemyonline.com

FMCG SECTOR

yoy (%) 16.2 16.0 26.3 21.1 18.4 28.1 23.5 12.3

qoq (%) 4.2 -0.4 33.0 11.1 -0.9 28.5 -5.1 -3.6

In 4QFY08, the sector has reported 19% yoy growth in topline. In addition, growth has been broad based with both rural and urban markets growing over the last two years.
Chart 1: FMCG market growth rate (Rural + Urban) %
15 10 5 0 CY01 CY02 CY03 CY04 CY05 CY06 CY07 1QCY08 2QCY08 -5

Source: Industry

(Please refer to disclaimer at the end of this report)

Alchemy Equity Research
19 August 2008

FMCG Sector We believe the sector is poised for sustained growth considering the following growth drivers: The favorable demographics, higher incomes, low penetration and growing per capita consumption. India’s per capita consumption remains the lowest in the world across categories (refer annexure for details). Strong rural growth backed by higher agricultural incomes and increase in the value of land which is leading to more money in the hands of farmers. The recent revival in monsoon augurs well for the sector as it would help keep rural growth intact. Increase in pricing power as most companies have passed on the cost push inflation to consumers via a judicious blend of price hikes, package size reduction and change in...