Analysts say they have more product ideas, nimbler market responses than the giants. The dream run of mid-sized FMCG companies is continuing, and much of the robust growth they are enjoying is at the expense of the FMCG behemoths. Companies such as Marico, Dabur and Godrej Consumer Products (GCPL) have been growing at a compounded annual growth rate of over 20 per cent over the past three years, compared to HUL’s 14 per cent. The respective sales volume growth are 10-15 per cent and 5 per cent.
Analysts say their relatively smaller size is one reason why the mid-tier companies found it easier to respond to the market. For example, towards the end of 2008, raw material and packaging material prices started sliding as oil prices dipped, and these companies were quick in passing on the benefit to consumers by paring product prices. HUL also cut prices but took its own time to do so. Result: HUL’s volumes dipped four per cent in the quarter ended March 2008-09, while the mid-sized FMCG firms clocked a volume growth of over 20 per cent in the same quarter.
Innovative strategies are another reason. For example, Marico’s mantra is to find niches where MNCs are not present, making it easier for the company to dominate that space. The leadership position in products like Saffola and Parachute (over 48 per cent marketshare) is evidence of that. Last year, Marico launched ‘hot oil’, which does away with the need to heat the oil. Likewise, it forayed into services with Kaya clinics (a space vacated by HUL). Kaya clocked close to 60 per cent growth year-on-year in the last financial year.
Dabur, attributes the winning away of market share from established MNCs to the company’s new products and variant launches, and inorganic growth strategy (acquisition of Balsara and Fem). A large part of this growth was volume-driven; Dabur had the highest volume growth in the FMCG industry. In the shampoo market, for instance, Vatika has been the fastest selling brand for three years in a row. Dabur Red Toothpaste has become a Rs 100-crore brand within just five years of its launch. Its skin care portfolio, with Dabur Gulabari, saw a 40 per cent growth in the last financial year.
Most agree that price is not the only reason why the mid-sized firms have gained marketshare. Profits of mid-sized FMCG companies also grew at a faster clip than big competitors, due to their better rural focus.
In a seemingly unaffected-by-the recession consumer goods industry, some of these focused strategies and intelligent market moves will further strengthen this sector. Times ahead look positive and upbeat moreso for the formidable mid-sized players who are laying down the rules of the FMCG game !