Warc, 12 August 2013
NEW DELHI: Major brand owners and retailers are
rationalising their portfolios in India, as they prepare for a potential
slowdown in sales across many categories in the consumer goods industry.
GlaxoSmithKline, the healthcare group, is reducing its
emphasis on the mass market, a sector it previously targeted by rolling out
lines like Foodles, the noodles line, and Horlicks Chill Dood, a milk drink, in
2009/10.
"We don't want to play in mass segments, in 'me too'
segments. We will only enter segments where we can differentiate with
science," Zubair Ahmed, managing director, GSK Consumer Healthcare, told
Livemint.
By contrast, Sensodyne toothpaste, aimed at people with
sensitive teeth, assumed leadership of its category in just two years, while
malted milk drink Horlicks and health drink Boost yield over 70% of revenues.
Nestlé India, the local arm of the Swiss multinational, has
also announced plans to rein in marketing support for low-cost offerings like
packs of Munch wafers costing Rs5 and Nescafé coffee powder commanding Rs2 to
Rs5.
Ullas Kamath, joint managing director of Jyothy Laboratories
- the parent of brands including Ujala washing powder and Maxo insecticide -
also reported that its emphasis has shifted over the last six months or so.
"Earlier, the thinking was that we wanted to grow in
every category and every geography. Sales growth was important. Now sales
growth and EBITDA are important," he said.
The firm is currently focusing on seven "power
brands", boosting adspend behind these offerings by Rs150 crore. "We
have to decide how we want to grow and where to spend the money," Kamath
said.
One reason for the adoption of these strategies is the weak
forecast for the FMCG sector. "The outlook for the next 18 months is not
so good," said Rachna Nath, leader, retail and consumer,
PriceWaterhouseCoopers India.
Market saturation is another, with research firm Nielsen
reporting that 7,437 products were launched in the consumer packaged goods
sector in the 12 months to October 2012, versus 2,850 over the same period in
2010.
"In FMCG, only 20-25% of SKUs and new variants/launches
survive and success rate is thus at best 20-25%," said Devendra Chawla,
president, Food Bazaar, the grocery chain.
Retailers themselves are taking similar steps to brand
owners, with Shoppers Stop intending to phase out the IT and consumer durables sections
from its HyperCity hypermarket chain in the next 15 months or so.
"There will be some ups and down in the year ahead and
it's better to be prepared," Govind Shrikhande, managing director,
Shoppers Stop, said.
Data sourced from Livemint; additional content by Warc staff
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