FMCG product launches dry up in a tough market

24 Mar,2014

By Ratna Bhushan & Sagar Malviya

 

Consumer product companies drastically cut down on product launches in 2013 to avoid additional cost pressures in a year when sales growth slipped to a decade low. Growth in product launches in the fast moving consumer products (FMCG) segment dropped to just 5 per cent last year from 35 per cent in 2012, according to data shared by research firm IMRB. Consumer product companies confirmed the slowdown in product launches and said they will bring out new variants and products once overall market improves.

 

“This is not the best time to launch new products. We are waiting for consumer sentiment to improve, which we believe will be in the second quarter of the next financial year,” Sunil Duggal, chief executive officer at Dabur India, said. Dabur restricted its new products, Real drinking yogurt and premium chyawanprash Ratanprash, to select markets instead of a national rollout.

 

Companies want to keep their expenses low even as they increase ad spends to protect existing brands and roll out higher promotional offers or price cuts to mop up volume growth. “Any FMCG company will have to take into consideration the high expense of taking a new launch national. The second half last year was bad in terms of cost perspective,” said Anil Chugh, senior VP at Wipro Consumer Care and Lighting.

 

Consumer product companies have been facing relentless rise in the prices of raw materials such as crude and palm oil that went up by 19 per cent and 32 per cent, respectively, in the last 12 months. Consistent demand pressures weakening margins also resulted in the BSE FMCG Index underperforming Sensex by 10 per cent in the past six months. Some experts, however, feel marketers are making a mistake by not exciting a dull market with new launches. “It’s an irony that marketers take upon themselves to open consumers’ purse strings while they themselves tighten theirs,” Devendra Chawla, CEO at Future Group’s Food Bazaar, said. He said companies that continue to invest and innovate in a slowdown will benefit once the economy rebounds.

 

According to IMRB’s group business director Manoj Menon, categories such as tea, breakfast cereals, hair, washing powders and noodles drove the slowdown last year while skincare and oralcare products saw higher launches.

 

Several product launches in the past three years have been in the premium category – a space which slowed down the most as consumers cut back on discretionary spends.

 

Some companies said the slowdown in product launches is temporary and it will pick up in the coming months as raw material prices stabilise and food-inflation is controlled. That’s already happening in some cases. L’Oreal has introduced a hair care range called 6 Oil Nourish, ITC has launched Sunfeast Farmlite and Procter & Gamble has rolled out a shampoo for men -Head & Shoulders Men. A recent Goldman Sachs report said marketers expect things to improve after the general elections. “Most companies pinned hopes on improved consumer sentiment post elections,” it said.

 

Source:The Economic Times

Copyright © 2014, Bennett, Coleman & Co. Ltd. All Rights Reserved

Licensed to republish

 

Post a Comment 

Comments are closed.