16 Dec 2013
INDIA CONSUMER: Takeaways from Industry panel data and
feedback from company interactions/channel checks
We present takeaways from the Industry panel data for 9MCY13 v/s
9MCY12 and its implications on our FMCG universe performance going
9MCY13 panel data suggests broad‐based moderation in consumption
growth – across categories, geographies, income segments.
Relatively rural is holding up better v/s urban but even rural growth rates
Moderation is more prominent in Food & Beverages vis‐à‐vis Personal Care
and Household Care categories.
Our industry interactions with seven companies in FMCG suggest: a)
continuation of subdued volume growth even in 3QFY14, b) narrowing of
gap between rural and urban growth rates and c) lesser pricing power in an
environment of rising competitive intensity and RM inflation. Impact of
sticky inflation (especially in Foods) is playing truant with consumer wallets
as per most managements. Additionally, lagged impact of GDP slowdown as
well as poor consumer sentiments is also manifesting in consumption
There are exceptions to this broad‐based theme of consumption
moderation. Surprisingly, discretionary categories like Paints, Adhesives are
not witnessing any significant pressure and may continue to post double
digit volume growth. This could be owing to substantially better
performance in tier II/III towns.
Sector view: We maintain our cautious sector stance amidst weakening
fundamentals and rich sector valuations. While valuations have somewhat
corrected to 29.8x from peak of 33.9x, they are still expensive in our view
considering the long period average of 23.8x (BSE FMCG index
underperformed Sensex 21% in 4 months). We see downside risks to our
estimates ahead. Relatively we prefer Dabur, Marico and Britannia. Within
the large‐caps, we continue to prefer ITC v/s HUL.
Urban: Consumption slowdown is well entrenched and broad‐based
Industry growth has moderated sharply from 8% to 2%.
Foods & Beverages has seen maximum deceleration from 7% to zero
Household Care is still holding up well at 10% but Personal Care has
moderated from 10% to 5%.
Slowdown is widespread: a) across regions – North, East, South & West b)
across income categories – Sec A/B, Sec C/D/E and c) Across city based
classification – Metros, Mini Metros and Rest of Urban.