The fast-moving consumer goods (FMCG) sector has apparently
decided to put its efforts on improving profitability in the
present demand constraint period, as it can do little more
to stimulate and push the consumer to pick up more of their
products off the shelves.
This becomes evident from
the results that have poured in during the first six months of the
current fiscal. The trend is very clear. While the growth in
revenues has been say X, growth in profits has been more than X.
Rise in profitability
would have been more but for the higher sales promotion expenses
incurred by these companies. A study of the working of a sample of
12 FMCG companies shows that while sales at Rs 5,819 crore is up
3.50 per cent, the net profit at Rs 900 crore has increased a
smart 19 per cent.
The growth primarily has
1) Cut in costs, and
2) Rise in other income elements.
The other income
component, in the six-month period ended 30 September 2001, shot
up 42 per cent to Rs 223 crore. The companies, which have been
part of the study sample, are Reckitt Benckiser, Smithkline
Beecham Consumer, Trent, Britannia Industries, ITC, HLL, Gillette
India, Colgate Palmolive, Nestle India, P&G Hygine and Cadbury
Look at how the figures
have worked for some of these companies. In the case of HLL,
while sales rose 7per cent to Rs 2,635 crore, the net profit
increased 21 per cent to Rs 399 crore. Without taking into
account other incomes, the
net profit shows an increase of 14 per cent.
Similarly, in the case of
ITC, while sales declined marginally to Rs 1,002 crore from Rs
1,004 crore, the net profit jumped 29 per cent to Rs 334 crore.
Here too other income is up 75 per cent to Rs 65 crore.