>RETAIL SECTOR (ICICI SECURITIES)

Driven by volume growth

‘Retail Counter’ is a quarterly update, in which we analyse domestic sales trend of FMCG companies based on ACNielsen’s retail audit data. ACNielsen’s FMCG retail-sales audit figures for April-May ’09 indicate 16.2% YoY growth, lower than 19% YoY growth in FY09. We believe this is due to sales growth being driven by volume growth on account of lower inflation, which led to fall in prices of many products. The sector witnessed robust volume growth as only three of the top-10 categories saw lower growth over April-May ’09 vis-à-vis FY09. However, only six of the top-10 FMCG companies grew >10% YoY. Hindustan Unilever’s (HUL) sales growth at 9.6% indicates reversal of the strong, double-digit topline growth in the past six quarters. Notably, this lower value growth is mainly due to volume dip in categories such as toilet soaps, washing powder and detergent cakes. Market share fall continued in key categories such as toilet soaps, shampoos, detergent cakes, toothpaste and skin creams. Nestlé India sustained its spectacular performance, with 20% sales growth.

■ FMCG sales growth slackens with fall in inflation. FMCG retail sales grew 16.2% YoY over April-May ’09, lower than the 19% YoY growth achieved in FY09. We believe this is on account of sales growth being driven by volume growth on account of lower inflation, which led to fall in prices of many products. The sector saw robust volume growth as only three of the top-ten categories witnessed lower growth over April-May ’09 vis-à-vis FY09. Robust volume growth in large categories indicates marked resilience in consumer spending on FMCG.

■ Six of ten FMCG companies see over 10% sales growth. Only six of the top-ten FMCG companies grew over 10% YoY in April-May ’09. Britannia Industries, Dabur, Colgate-Palmolive and HUL registered less than 10% growth. However, with ACNielsen shifting to a new, larger data panel, we perceive some anomalies in the data and believe the lower growth number may not be unreservedly accurate. Nestlé India maintained the sales growth momentum, rising 20%. On the back of sharp price increases, sales in Tata Tea grew a strong 28.3%.

■ HUL – Even new ACNielsen data panel indicates sharp volume & market-share dip in key categories. Sales growth at 9.6% indicates reversal of the consistent,, strong double-digit topline growth in the past six quarters. Notably, this lower value growth is mainly due to volume decline in key categories – Fall of 10.5% in Toilet Soaps, 5.7% in Washing Powder & 19.4% in Detergent Cakes. HUL lost significant market share in Toilets Soaps, Toothpaste, Skin Care, Detergent Cakes and Shampoos.

To see full report: RETAIL SECTOR