Impact of Budget 2013 on FMCG sector:
Reduction in the customs duty on dehulled oats is likely to have a favorable impact on the FMCG players. The Government’s increased focus to finance the construction of warehouses, cold storage units etc and road infrastructure will help in improving the overall supply chain infrastructure on the one hand, and removing the supply side bottleneck on the other hand. This will further enable the reduction in overall wastage of foodgrains, vegetables and fruits. The budget was negative for the FMCG sector. There was no major announcement for the sector. There was no rise ...view middle of the document...
ITC is left with no choice except to pass on the hike to consumer. Volume are expected to see dip initially, before recovering.
Slowdown in cosumer expenditure
Urban consumers are spending less in calendar year 2012 due to high inflation, muted salary hikes, and slowing economic growth that affected both real wages and sentiment. Ace of growth has slowed down . Private final consumption expenditure (PFCE), an official estimate of consumer spending, slowed to 3.68%, according to India Ratings, a part of the Fitch Group.
Emerging segments and trade channels
Channels including modern trade (comprising hypermarkets and supermarkets) account for 5-7% of the overall retail market and are expected to double to 10-12% in the next three years, according to a Mint estimate. Likewise, e-commerce, which accounts for close to 1% of the overall retail market, will also drive growth. With changing lifestyles, consumers’ focus on health and wellness will also see emerging categories such as nutraceuticals, health food and health services doing well. Sales of olive oil, for instance, exceed that of Saffola, a premium cooking oil from Marico, at grocery retail chain Big Bazaar.
Oats, which didn’t exist as a category until three years ago, are now a Rs.200 crore market. The high growth has persuaded companies such as HUL and Nestlé India Ltd to launch oats under their Knorr andMaggi brands, respectively, said a January 2013 report by Edelweiss Securities Ltd.