The overall slump in the economy, while impacting discretionary spends, hasn't spared the value pack categories in the fast-moving consumer goods (FMCG) sector.
According to the leading biscuits, bakery and dairy products manufacturer Britannia Ltd, the liquidity crisis and issues concerning the non-banking financial companies (NBFC), etc. aren't the ones impacting the non-discretionary product categories. It's what the consumer is feeling about where they are, that's affecting sales.
Varun Berry, managing director, Britannia Ltd, said the company controls one-third of the market and has gained almost 1.3% share in the June quarter. "However, we've grown only 6% and the market is growing slower than that. And that's a little bit of a worry, because even for a Rs 5 product if the consumer is thinking twice before buying it, then there is some serious issue in the economy."
SOGGY GROWTH
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- Britannia controls one-third of the market and has gained almost 1.3% in the June quarter
- The rural market has started to grow slower than urban, which has itself slowed down
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"Also, if you look at various investment vehicles be it real estate, stock market or any other vehicle, everything has been trending downwards. Consumers have been feeling stressed about the fact that they (investment vehicles) were used to be worth a certain amount and that has come down fairly dramatically," said Berry in an earnings call on Friday.
The biscuit maker was outpacing the market till now, but the growth numbers are not good enough to write home about. "Previously, what used to happen is that the market would grow 7% and we would grow 10-11%. But this quarter the market is growing at a very, very low pace and we are outpacing it by a mile, but still not able to get to a number that we aspire for. So that is what I would say is the issue," he said.
The slowdown is not going to go away, Berry said, until the feel-good factor comes back and the investment vehicles start to power back. "It might ease up a bit, it may not be as dark as we've seen it to be in the last two quarters. However, I don't think it's going to completely go away in a hurry," he said.
The FMCG players are seeing turmoil in the market, particularly in the rural markets, which is impacting the value segment, the main driver in the rural markets.
Berry said about a year ago the rural market was outpacing the urban market almost by one-and-a-half times. "What we've seen now is that the rural market has started to grow slower than urban, which has itself slowed down," he said.
On recovery, Berry said the market will continue to see a slowdown for two or three quarters after which it will start to come back slowly. "I think the issue with most companies, including us, is that while we've become very good at gaining share, we still haven't figured out the formula of showing growth in the category itself. But in this case, because the issue is looking tough at this point in terms of market growth, we will have to make sure that we take on that leadership position to get this market to grow again. I'm sure other players like Parle and ITC are also looking at the same and will do things to rejuvenate the market. I think in the next six to eight months, we will start to see this coming back," Berry said.
