FMCG biggies HUL, Godrej, Dabur report higher sales growth numbers than estimated by Nielsen

09 Aug,2012

By Sagar Malviya & Ratna Bhushan


Market research firm Nielsen and India’s consumer goods companies are in sharp disagreement over growth rates in the sector. In the April-June quarter of 2012, sales growth in value terms of some of India’s biggest fast-moving consumer goods companies is higher than Nielsen’s growth estimate for the overall FMCG market, raising concerns over the world’s largest research firm’s accuracy in India.


Seven listed domestic companies, which control over 70 per cent of the FMCG market, have posted an average value sales growth of 19.28 per cent in the first quarter of fiscal 2013. A Nielsen spokesperson says their figure for this period is 17.6 per cent. Even in categories such as soaps, juices, oral care and hair oils, leading players, which contribute between 60 per cent and 75 per cent to each segment, have posted much higher volume growth than what Nielsen’s data suggests. When contacted, Nielsen did not validate the numbers that ET has obtained from the research firm’s FMCG clients.


For instance, Godrej Consumer Products Ltd saw a 24 per cent spurt in soap volumes even as Nielsen estimates growth for the overall segment at a sombre 5 per cent in the April-June quarter. “There is a bit of under-reporting by Nielsen. The issue lies with its statistical method,” said Adi Godrej, chairman of Godrej Group.


“We generally use Nielsen’s data for market share as there isn’t any other option for us. However, for category growth, we rely on our sales numbers and listed companies’ performance,” said Vineet Agrawal, president at Wipro Consumer Care & Lighting, which saw a 15 per cent jump in volume growth in soaps in the first quarter of the fiscal year.


It’s a similar story in toothpastes, a category that grew 9 per cent in volumes according to Nielsen; however, this doesn’t tally with internal sales data of Colgate and Hindustan Unilever Ltd (HUL), which together command roughly 80 per cent of the market. Colgate saw a 13 per cent rise in volume growth. For HUL also it was higher, said CFO R Sridhar at a recent financial results’ presentation.


In packaged juices, Nielsen says the category grew 18-19 per cent in the April-June quarter in value terms and that Dabur grew 24 per cent. But Dabur’s quarterly sales numbers show its juice business grew 34 per cent. Dabur leads the packaged juices market with the Real brand, which accounts for more than half of all juices sold.


Dabur CEO Sunil Duggal said: “Our quarterly growth numbers are generally ahead of what Nielsen reports. So we prefer to study Nielsen numbers as a longer-term trend – over a 12-month period – because that evens out errors.”


Nielsen counters that the retail audit cannot be compared with sales numbers that companies report. A Nielsen spokesperson said: “The retail audit is focused on sales offtake through a sample of retail stores that tracks sales to the end consumer. It is technically incorrect to compare it to the financial results of companies, which report sales to distribution channels.” The research firm also said sales reported by companies may include those beyond retail stores from institutions such as army canteens, restaurants and transport hubs, which are outside the scope of its retail audit.


An FMCG analyst points out on condition of anonymity that ignoring the Canteen Services Department (CSD), which caters to the Indian defence services, may be one explanation for the discrepancies.


After all, CSD can easily qualify as India’s largest retailer with some 3,500 outlets across the country. Nielsen is no stranger to controversy on the market share front. In May 2009, HUL disputed the researcher’s data that showed a steady fall in the company’s market share across segments, saying it contradicted internal estimates as well as data from household research firm IMRB. The issue snowballed into a crisis when Dabur, Godrej and Marico echoed similar doubts over Nielsen data. Dabur and Perfetti Van Melle even went so far as to cancel Nielsen’s subscriptions in categories such as hair oils, juices, candies and confectionery.


A year ago, Unilever CEO Paul Polman questioned the accuracy of Nielsen’s data for India, underlining that the country’s largest consumer product maker was still unhappy with the market researcher two years after first raising the issue. “I know you all like to write about it. But they (Nielsen) are not very accurate with what their numbers are,” Mr Polman had said while commenting on the performance of Unilever’s Indian arm.


Nielsen has increased its sampling size to 22,000 outlets from 16,000 over the past three years, included more modern trade outlets and uncovered channels in rural markets, prompting some companies to be optimistic about the research firm’s data. “We are worried, but the fact remains that at least it is not deteriorating. They have been changing panels and we have to pick up points where there are issues and work with them on it,” said Saugata Gupta, CEO of Marico, which saw its hair oil business grow over 15 per cent in volumes while Nielsen’s data shows a growth of 4.7 per cent for the category.


Also, companies are now slightly at ease after Nielsen decided not to share data with market analysts and investors who depend on the data to track the performance of consumer product companies and rate the stock accordingly. “While we are glad that analysts can’t access the data easily, even we have stopped taking the research seriously and rely on it just for trends. Nielsen’s numbers is not a bible to us,” said a CEO of a leading homegrown consumer firm who didn’t wish to be identified.


Source: The Economic Times

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