>HOUSEHOLD PRODUCTS - INDIA (MERRILL LYNCH)

Early signs of weak monsoon impact

■ FMCG sales grow 12.7% in July, much below trend
July sales growth of 12.7% is lower than the last six month trend of high-teens growth. Most companies showed a MoM decline. We believe this could be early indication of a weak monsoon impacting top-line growth for FMCG and we will watch out for the sales growth trend in coming months. Tata Tea, Godrej and P&G continue to do well. Nestle, Colgate, Marico and Dabur showed average performance. HUL, Nirma and Britannia disappointed with mid-to-low-single-digit growth in July.

■ HUL - Sales gr slows down further to 7% vs. 13% over last yr
Initiatives taken by HUL to improve sales growth are yet to show positive results, as sales declined for fourth straight month. Volume growth remains negative for Soaps, Laundry, Toothpaste, Tea and Coffee. Fastest-growing categories in terms of value growth were Laundry, Skin Care and Shampoos, while Tea and Ketchups had single-digit growth. Sales declined in July for Soaps, Coffee and Toothpaste.

■ HUL – Market share trend was a mixed bag
July was a mixed bag, with Laundry, Shampoos, Tea and Ketchups showing gains, while Soaps, Toothpaste, Skin Care and Coffee continued to lose market share. Over last one year, HUL has lost market share across all key categories – Soaps (570bps), Detergents (210bps), Shampoos (10bps), Toothpaste (220bps), Skin Care (420bps), Tea (260bps), Coffee (770bps) and Ketchups (160bps). We believe volume gr and market share recovery will be slow and expensive for HUL.

■ Nestle – sales growth weakens sharply
Sales growth decline continued for Nestle and growth in July was 12%. This is significantly lower than AC Nielsen reported YTD sales growth. Market shares showed mixed trends with gains in Coffee and Chocolates, while Noodles and Ketchups lost share. The trend over the last 12 months has been negative, with gains in Coffee, but declines in Chocolates, Noodles and Ketchups.

■ Colgate – sales gr holds up, with mixed market share trends
July sales grew 10%. Colgate was one of the two companies to show MoM improvement in sales gr. Market share trends were mixed with Toothpaste gaining 30bps but Toothbrush lost 40bps and Toothpowder lost 90bps in July. Toothpaste is running at all-time-high market share and further improvement looks difficult.

■ Dabur – sales gr stable, with positive market share trends
July sales grew 10%, marginally lower that growth reported by AC Nielsen for last one year. Market shares improved for Shampoos and Toothpaste, but there were declines in Toothpowder and Chyawanprash. Over the last one year, Dabur has gained market share in Toothpaste (90bps) and Shampoos (90bps), but lost shares in Chyawanprash (470bps) and Toothpowder (130bps).

To see full report: FMCG SECTOR