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FMCG sales may fall 15% due to high prices in 2012

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A weak and rising input costs may force companies to increase prices of their products in 2012, which in turn is likely to hit sales during the year by about 10-15%, a study has said.

"The sector might take a hit of about 10 to 15% in sales including the semi-urban and rural market as the increase in cost burden might be shifted to the consumers," an study said.

Prices of regular items like biscuits, coffee, tea, toiletries and personal care are likely to be raised by about 10% or more by the first quarter of the next financial year, it said.

"Persistent rise in raw-material prices, fluctuation in the currency, weak industrial growth and slowing global economy coupled with an overall moderating consumer sentiment might lead to a slow volume growth of FMCG segment in 2012," Assocham Secretary General D S Rawat said.

All of these factors might pinch the FMCG industry which will go for a fresh round of price hikes as we usher in the New Year, he added.

The chamber has interviewed about 100 industry experts, analysts, economists and FMCG companies.
Over half of the respondents said FMCG companies are showing signs of consolidation and might not be able to sustain the strong volume and sales growth momentum, the study said.
Majority of the respondents cited weakening rupee against the as the primary reason that might hamper the growth of FMCG sector, it said.
In the calender year 2011, the rupee had crashed by 18.79%. On December 30, rupee shed a marginal three paise to settle a roller-coaster 2011 at 53.10/11 against the US dollar.
Rest of the respondents said the government notification on revised norms for packaging of FMCG products would propel the companies to increase their prices.
The new rules would come into effect from July 1, 2012, after which certain specified commodities under 19 categories would have to be packed for sale, distribution or delivery in standard quantities as prescribed in the government notification.
These categories include coffee, tea, baby food, weaning food, biscuits, bread, uncanned packages of butter and margarine, cereals and pulses, edible oils, milk powder, non-soapy detergent powder, powdered rice, flour, atta, salt, soaps, aerated soft-drinks, non-alcoholic beverages, mineral water and drinking water, cement in bags and paint varnish.

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