Consumer goods sees slow inventory movement in Mumbai: Report
Moneylife Digital Team 22 December 2011

Average inventory dated back 2.5 months as on 30th November, as per a research report

The festive season seems dim for the FMCG (fast moving consumer goods) sector. A report by Emkay Global Financial Services has revealed that inventory in the consumer goods sector is piling up. On an average, the market’s inventory is two-and-half months old, as observed on 20th November.

The report says, “Relatively new/fresh inventory was seen in milk and food-noodles—dated back one-and-half to two months. Relatively old inventory was seen in hair oils and toothpastes. With inventory dating back two-and-half months—sales momentum seems moderating in the modern retail channel for FMCG categories.” The report finds that Dabur and Bajaj have suffered due to their hair oil products; and Nestle, Marico and Britannia have fresher inventory by virtue of their food products.

“Inflation, price rise across product categories and rising uncertainty about employment may have deterred the consumers. We have seen reduced sales in beauty products, domestic pesticides, stationery and other household products. But milk and milk products, chocolates, etc are seeing strong sales thanks to Christmas,” said a spokesperson of a retail chain. He said that the situation may be worse in non-metropolitan cities and rural areas.

If the Diwali season (October 2011) was any indication, Christmas and New Year is going to be a dull sight. Diwali saw average footfalls in malls and retail outlets, and the sales momentum was not so great.

The inventory pile up can be partly attributed to strong volume growth for the second quarter—which was the focus of most FMCG companies. Colgate reported a 13% volume growth during the second quarter while Hindustan Unilever reported 9.8% of volume growth. However, input costs have been high, and most companies raised prices across sectors.

On the other hand, Marico and Nestle, who are placed above HUL, Proctor & Gamble and Colgate—had managed their costs better; though had also focused on volume growth during Q2. Overall, food items have fared better than personal care and home products in inventory movement.

An analyst with a brokering firm said, “Adding to the concerns is the weakening of the rupee. Also, companies have to take into account agricultural productivity. Till at least the next quarter pressures will not ease up.”

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