House panel may rule against raising insurance FDI cap

Consumers are opting not to cut on household purchases despite the prospect of inflation staring in their face. According to data provided by market research agency IMRB, categories such as packaged foods, diapers, deodorants, skin creams, balms and rubs have all grown in excess of 10 per cent between January and April, compared to the corresponding period in 2010.

The study covers all of urban India, which includes all states excluding Jammu and Kashmir, the north-east and Himachal Pradesh.

The growth seen is in volumes, that is, in actual purchases made by households, which is significant, says

IMRB.For instance, in categories such as milk food drinks (MFDs), soft drinks, noodles, jams and soups, the growth in volumes has been 10 per cent, 18 per cent, 22 per cent, 23 per cent and 29 per cent, respectively for the period under review. The growth in skin creams and deodorants, for instance, has been 14 per cent and 16 per cent, respectively, while diapers have seen their volumes grow by 56 per cent.
 

WHAT DRAFT REPORT ON THE BILL SAYS

IT WILL BREACH the commitment given by the NDA government in 1999 that 26 per cent FDI cap will not be raised

THE GOVERNMENT has failed to tap domestic funds for the sector.

THE GOVERNMENT doesn’t know how much capital the sector requires

“Clearly, people are buying despite inflation,” says Manoj Menon, group business director, IMRB International.

Headline inflation, as measured by the wholesale price index (WPI), stood at 8.23 per cent in January, touching 8.31 per cent in February, 9.7 per cent in March and 8.66 per cent in April. In May, it was 9.1 per cent, more than twice as that in the US, four times than in Germany and higher than the 5.5 per cent in China. And now with the increase in the prices of cooking gas, diesel and petrol, headline inflation could even breach the 10 per-cent-mark, say analysts.

Despite this, consumers are buying essential products. In modern trade, for instance, the volume growth across household care, personal care and food and beverages was above five per cent. In particular, categories such as packaged foods, hair oils, shampoos, soaps, floor cleaners, edible oils, even coffee, registered double-digit growth in terms of volumes, says IMRB. “Modern trade accounts for 10 per cent of household purchases. But is growing at 25 per cent per annum,” says Menon.

So, what do the fast moving consumer goods (FMCG) companies have to say to the trend at hand? Says A Mahendran, managing director, Godrej Consumer Products Ltd, “The FMCG sector in an emerging market is inflation-inelastic. This data proves the point. That volumes are growing despite inflation is a good sign.”

Says Praveen Kulkarni, general manager (marketing) at Parle Products, the largest biscuit-maker in the country, “The fact that volumes haven’t dipped despite inflation is visible in biscuits as well. Volume growth, for instance, in the financial year 2010-11 was close to 12 per cent versus 2009-10.”

What has aided household consumption, says Kulkarni, is the drive by companies to push affordable packs across categories. “Whilst glucose biscuits are available at below Rs 5, now even creams and cookies are available at Rs 5 and below. These efforts help in driving volumes,” he says.

Almost all FMCG categories, that is, both food and non-food, have adopted the strategy of driving affordability with sachets priced at Rs 5 and below.