The southward journey of crude and currency is expected to give fast-moving consumer goods (FMCG) companies
the leeway to launch products.
The flurry of launches, say experts, will grow as input cost pressures reduce thanks to lower volatility in crude and the rupee-dollar rate.
Already, brand-building and advertising work by FMCGs has increased, visible in the latest list of top ten advertisers released by the Broadcast Audience Research Council of India (BARC). The list, for the week ending November 23, consists only of FMCGs with Hindustan Unilever (HUL), Reckitt Benckiser and ITC in the top three (see chart).
The week before (ending November 16) saw a mix of advertisers across FMCG, media, and political parties.
What is interesting is that the ad insertions, that is, the number of times an ad of the company appeared on television is 126,482 for HUL, 69,309 for Reckitt Benckiser and 37,322 for ITC in the week under review. This is higher than the previous week (ending November 16), when HUL and Reckitt Benckiser, who were leading advertisers (top two) had lower ad insertions at 114,141 and 64,157. The number third advertiser for the week ending November 16 was Procter & Gamble with ad insertions of 23,136 only.
Naveen Trivedi, research analyst at HDFC Securities, says the acceleration in brand-building is also on account of the stability in the FMCG
market following disruptions such as demonetisation and a new tax regime.
“The last two years were tough for companies
as they adjusted to demonetisation and GST.
New launches suffered as a result. However, there should be a pick up now buoyed by lower crude and currency rate as well as a stable market environment,” he said.
Nielsen's forecast for the FMCG
market is it will grow by around 12-13 per cent in the three months ended December 2018. Analysts say it could be higher for the period since Nielsen had not factored in a steep drop in crude and currency in the last month and a half. In six weeks, crude has fallen by over 30 per cent to $59.16 a barrel (from $86.09 a barrel earlier), while the rupee is down nearly 6 per cent to 69.70 to a dollar versus nearly 74 earlier.
G Chokkalingam, founder and managing director at Equinomics Research & Advisory, said new launches would be most pronounced in rural areas, where demand has been improving in recent quarters. "FMCG companies
will try and capitalise on the momentum in rural areas and line up launches there,” he said.
Dabur India's Chief Executive Officer Sunil Duggal hinted at the same, saying new launches would be more in rural areas than urban areas, owing to the latent demand in these markets. Duggal declined to indicate the new products the company was working on for the coming months.
But most companies are expected to follow this blueprint of targeting rural ahead of urban, coming at a time when most have been expanding rural distribution aggressively.
HUL, for instance, has unleashed a distribution drive to better serve Uttar Pradesh, where nearly 78 per cent of consumers reside in rural areas. It now plans to drive sales of various products, including ice creams, by expanding distribution in smaller town and rural markets, against the top 25 cities the company focused on earlier, analysts at Antique Stock Broking said.
ITC, on the other hand, has been steadily adding field force, taking its overall direct distribution to 2.5 million outlets. Much of this, say industry experts, has been added in rural areas, where penetration of FMCG products is lower than urban markets. Dabur, on the other hand, has not only been strengthening its field force in rural areas, but also dividing its team into healthcare and personal care specialists to drive more sales in rural markets.
New launches, say experts, is expected to add much-needed excitement in the marketplace and drive overall growth for companies.