FMCG-On Very Shaky Legs (JPM)

More price hikes.

Stiff input cost environment led to consumer companies continuing to increase prices in the past month to mitigate margin pressures. Key hikes include: 1) P&G discontinued the promotional – 10% extra offer – on its key detergent brand Tide Plus, 2) Marico took more price hikes in Jan’11 amounting to 8-20% across various SKUs of Parachute Coconut Oil. Marico cumulatively hiked prices across Parachute SKUs by 20-40% since Sep’10, 3) HUL raised prices for some of the SKUs for its soap brands – Lux andLiril by 3-10% and increased price for Dove shampoo by 5%, 4) Colgate undertook a 17% price hike for Cibaca toothpaste, and 5) Dabur continued with more price increases across its toothpastes, hair oils and Chyawanprash portfolio.

ITC took further price hikes ahead of the budget and increased price for its leading brand Gold Flake by 8% and Wills Flake by 12%. It had earlier hiked prices for its low price brand Bristol by 12%.  

New product launches. 1) HUL has introduced a new variant Bru Lite to expand its coffee portfolio, 2) Dabur has forayed into professional facial market with launch ofOxyLife Professional Facial Kit.  

Global Research. L’Oreal reported 32% LTL sales growth in India in 2010 supported by new product introductions and increased distribution reach. This comes over strong 31.5% LTL sales growth witnessed in 2009 by the company.

Key commodity trends. Palm oil (+3% m/m), coconut oil (+12% m/m) and soybean prices were firm over the past month. Sugar (-1% m/m) and wheat (-3% m/m) prices were soft. LAB prices were up 4% m/m. Cotton prices rose sharply (+24% m/m).

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.