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At a time when the economy and industry sectors such as automobiles, aviation and financial services are reeling from the global slowdown, the consumer goods sector in India has managed to buck the trend with most companies posting double-digit growth in net profits in the first half of fiscal 2009 backed by healthy sales According to the recent reports, India's fast moving consumer goods industry has so far been resilient to the slowdown in the economy and a dip in consumer sentiment. If we go by the numbers for the past few months, the growth only seems to have got better when compared to the earlier months. As very categorically said by the Amway India Enterprises managing director and chief executive, Mr. William Pinckney. " I am not saying that our company (sector) is recession-proof but it is recession-resilient.µ This statement on the whole stands strong for most the leading players in the FMCG sector. Adi Godrej, Chairman and MD of GCPL (Godrej Consumer Products Limited) and Chairman of Godrej Industries feels that the best policy would be to provide tremendous fiscal and monetary stimuli to the economy especially fiscal stimuli in the sectors which are not doing well. ´Especially the ones connected with consumer finance. Once that is done, the economic growth will come through and that will generally create multiplier factors. FMCG already seems to be doing quite well and FMCG sector will have its best year ever in 2009-10,µ he said. While a price hike was the first line of defense in a bid to protect margins, cost-cutting, a judicious product mix and new launches helped consumer goods firms buck the downtrend.
Role of HR
HR in fast moving consumer goods (FMCG) firms is progressively being pushed down the line, providing an opportunity to build partnerships and ensure business units exhibit a level of self-management when it comes to HR responsibilities. A recent survey of FMCG companies found that even in companies with several sites, HR still commonly remains a centralised function. As company size increases to more than 1,000 employees, HR tends to take on a more decentralised structure, often with site HR managers reporting into a
told Personnel Today it took longer for larger. A varied set of practices and innovative ideas have come up during these times to ensure the employer as well as the employee come out safe along with the organization. Redesign training and development programs. in response to the downtrend. Graphs of Manpower Cost and Productivity . To work on compensation benefits. GlaxoSmithKline. while 83% acknowledge that staff training is just as important during recession as when times are good. Julia Freeman. CocaCola Amatil. but to make the organization stronger and ready for the future growth. Lion Nathan and Unilever.It found that training and development was most common HR KPI for coming 12 months (45 per cent). Cadbury.central HR head office. Colgate-Palmolive. a key player of this sector. according to the firm's global HR chief.· The points being focused by HR management during recession are: To optimize the manpower strength. The role of the HR Management is not to minimize the costs for the time being. To take strategic initiatives to increase the productivity and efficiency of the entire y y organization. people capability and process director at the confectionary giant. A global survey examined the HR practices of 58 FMCG companies such as Cadbury Schweppes. An overwhelming 80% agree that cutting training budgets at this time causes more problems than it solves. there has been much focus on the effects of the current economic downturn and impending recession. y y The HR Management has to have priorities in mind and the strategic impact of the HRM Innovations in the recession time. Recently. culture change (21 per cent) and performance management (21 per cent). followed by staff retention (29 per cent). including streamlining businesses by cutting budgets. multinational firms to feel the true pinch of the credit squeeze and insisted the firm was committed to continuing employee development despite the financial backdrop. has ruled out slashing its training budgets in response to the global economic crisis.
Recipients of this information are expected to exercise their business judgment when using this information.Source: Zeus Consulting Disclaimer: Zeus Consulting or any of its employees or directors does not take any responsibility what so ever on any business decision being taken based on this information. .
many consumers remain unable/unwilling to cook many meals at home. full-service restaurants such as VIPS. We are seeing some trading down but in some cases lower income consumers are choosing not to eat out all together and in many countries this was the group that was really boosting value for foodservice. ordering takeaways and trading down Elizabeth Higgins. namely McDonalds. In the Philippines. including a ½ price bottle of wine. operated by Wal-Mart are offering meal combinations for less than the price of a Big Mac Meal at McDonalds. drawing upon the expertise of Euromonitor International's in-house experts to highlight current and future scenarios in these industries. While trading down is quite apparent in some markets.FMCG and the recession ± how are consumers of food. In Mexico. CONSUMER FOOD SERVICE What's happening now? Cutting back. In Brazil this has benefited the Kilo restaurants where consumers can find affordable meals including many national specialities for a low price. fast food operator Jollibee launched a new lower priced concept. In other countries we're seeing consumers return to cheaper and familiar foods. often by eating at lower-priced fast food and takeaway locations. consumers are expected to eat out less often in times of a crisis.25. Euromonitor International's expert on consumer food service says: Consumers are cutting back on eating out and this is particularly hurting full service restaurants and cafe/bars. Other sectors that have benefited to date. sighting that during a six week period in January/February like for like sales increased by 15% as consumers traded down from restaurants to delivery. treating themselves occasionally to a midpriced meal rather than trading down to a lower quality fast food meal. yet increasingly look for ways to cut back on spending. Operators across all sectors have responded by emphasising their value positioning: Starbucks has introduced their own value offering. include the 100% home delivery/takeaway sector in the UK. drink and tobacco products responding? Author: Countries and Consumers Date published: 27 May 2009 In this article picking up on client interest in the impact of the downturn on consumers. called Manong Pepe which offers . which offers espresso based beverages starting at US$2. drink and tobacco. Full service restaurants are also offering a range of promotions. in some countries this might be turning to street stalls and kiosks. we offer a snapshot of the impact of the credit crunch on consumer purchasing attitudes and behaviours with regard to food. in others this is not always the case: In Italy. One of the key advantages during a downturn for any lower-priced operator is the trading-down effect . who have taken shots previously at their average priced beverage being priced around US$4 during their recent marketing of McCafe. where Domino's Pizza has seen strong growth attributed to the downturn. free entrees and even some independents in the UK asking consumers to name their own price for a meal. advertised as something good to eat for less than $4 in a response to others.
Fast casual chains could also receive a sales boost from lower-income families who may choose to forego the occasional luxury of a full-service restaurant for a less expensive fast casual meal. adding to its breakfast and snack selections and steadily rolling out 24-hour operations at outlets targeting traffic among consumer groups such as students and call-centre operators looking for a late-night meal. One potential bright side for operators is consumers' continuing demand for on the go options while consumers are cutting back. who remain quite willing to spend money at chains perceived as offering good value. from light snacks and indulgences to full meals. PACKAGED FOOD AND IMPULSE FOOD ITEMS What's happening now? . It's likely that consumers will be slow to return to previous eating out habits. without question. Meanwhile.home cooked meals similar to those offered by street stalls /kiosks. Jollibee has steadily expanded its core Jollibee brand. there are still many emerging markets with low levels of foodservice spending overall and as a result opportunities still do exist for growth. Thus. designed to capture sales at all times of day and all meal occasions. coupled with longer hours and broader menus. Global Consumer foodservice value growth: 2008-2011 2008 = 100 Source: Euromonitor International Note: Data compare Euromonitor International forecasts made in the first quarter of 2008 with updated forecasts revised in the first quarter of 2009. Outlook Slow revival of consumer eating out habits with faster demand for discounted. However. many fast food chains have been able to keep traffic growing with a selection of deeply-discounted items. on the go options Overall. the foodservice industry is not expected to pick up again until 2010 with a stronger recovery projected for 2011 and 2012 although a lot still depends on each country's recovery and the effectiveness of the various stimulus plans that have been passed. In more developed markets operators that can provide a convenient meal solution or those that can provide a unique experience will be the true winners as consumers become increasingly more sensitive when it comes to spending money on non-necessities. consumer foodservice remains a virtual necessity for working urban residents.
and even middle-class Waitrose all expanding the range and shelf-space of their budget own-label lines. and eating out. 2008 packaged food sales saw strong retail value growth in key markets like the US and UK. with premium chocolatier Lindt and Sprungli expecting its sales and profits to take a hit in 2009. Everyone has to eat. This trend is also good news for makers of lunchbox friendly food.Sustained consumer interest in packaged food. Sainsbury's. as consumers see them as a more affordable alternative to chilled processed food that also has a significantly longer shelf-life. life's little luxuries like chocolate confectionery are remaining somewhat recession-proof. are also faring well as consumers around the world look for affordable indulgences to offset their economic woes. the spectre of potentially catastrophic food inflation has been dispelled. and dairy products now stabilising since the volatility experienced between mid 2007 and mid 2008. manufacturers are doing whatever they can to cut costs and pass those savings on to increasingly cash-strapped consumers. Nestlé also achieved 8% organic growth in 2008 despite the global economic downturn. final retail prices should remain relatively stable. Indeed. However. Indeed. mass-market confectionery manufacturers like Cadbury. with UK retailers like Tesco. provided they cater to increasingly sophisticated consumers by offering greater product variety and flavours. by continuing to launch a variety of price promotions around the world. and with global food commodity prices for cereals. Impulse foods items. consumer electronics and other expensive household goods. the global economic crisis is prompting more people to prepare their own food rather than eating out. With more and more consumers opting to eat in rather than out. Private label offerings are also meeting consumer demand for value-minded packaged food offerings. a significant improvement on a virtually flat performance in 2007. Retailers are also doing their part. meat. Nestlé. Even though commodity prices are slated to increase slightly during 2009 as consumer demand for eating at home increases. at least for the time being. particularly confectionery. In particular frozen processed food sales are performing well in both countries. Asda. Moreover. Euromonitor International believes the packaged food industry is well positioned to weather the storm. the economic recession is also constraining the higher end of the market. and Hershey performed especially well in 2008: Cadbury exceeded its growth target of 4-6% and increased sales by 8% in 2008. Outlook Current trends for eating in and self-treating should keep consumers keen on packaged food . particularly value options and impulse food buys Global Packaged Food Market: 2008 % of world total Source: Euromonitor International from trade sources Despite the continued deterioration of the global economy. Hershey reported 2008 sales growth of nearly 4%. While the current climate has led consumers to cut back on holidays.
resulting in highly damaging media exposure over much of 2008. ready meals.237 37. heart health. it may be fashionable right now to blame the economic climate for lukewarm consumer interest in novel products.308 11. If this were not bad enough for the industry. The California Pizza Kitchen frozen pizza website even offers US consumers ideas on suitable hors d'oeuvres and wines to serve with their product. noodles. a recent soft drinks comment article was entitled: Bottled water leaks volume as credit crunch bites. the credit crunch is squeezing the still bottled water category in two ways. It seems clear. Meanwhile. therefore.Looking ahead. and beauty foods.831 5.915 12. Still Bottled Water: Volume Performance by Region 2007-2009 Million litres Asia-Pacific Western Europe Latin America North America Middle East & Africa Eastern Europe Australasia 2007 43. fortified/functional food should remain robust as an ounce of prevention is worth a pound of cure. if not decline slightly. secondly. NON-ALCOHOLIC DRINKS What's happening now? Crunch biting into bottled water purchases Simon Maddrell. soup. if only for an occasional indulgence. many of the same trends insulating the global packaged food market should continue to protect it from the full brunt of a prolonged economic downturn: Retail prices should remain relatively stable as commodity speculation continues to wan and companies explore further ways to cut costs for cash-strapped consumers to maintain their margins. rice. likely to be more recession-proof as parents strive to offer their children the best). that the category's honeymoon renaissance of the past five years is over. Lee Linthicum.542 35.340 475 . which should be a boon for both the industry at large and specific product categories like frozen processed food. in the immediate future as consumers cut back on what they feel is superfluous expenditure (with the exception of baby food. points out that: Euromonitor research indicates that many health and wellness trends should remain viable despite the current downturn as the world becomes older and fatter. In the UK.021 459 2009 51. leading ingredients companies like DSM and Danisco which provide a growing range of functional ingredients to packaged food companies remain very optimistic about their future growth prospects. such meal solutions are still significantly cheaper than eating out.717 4. significant opportunities remain for packaged food companies offering a bit of luxury in otherwise austere times. According to Simon. Given the steady deterioration of consumers' culinary prowess in recent years particularly in developed markets meal solution products offering consumers ease of preparation and convenience should do particularly well.286 10. may have to wait until the economic climate improves. With consumers increasingly opting to stay in and nest . At present. Packaged Food Industry Manager at Euromonitor International. but the simple truth is that there is never a good time for follies like probiotic chocolate and omega-3 ice cream.538 442 2008 47. digestive health and immune system support among others. which are quite a novel concept in many geographies.234 38. Euromonitor's industry manager of hot and soft drinks stresses that bottled water is a key talking point for the industry at present. canned/preserved food.705 32. by inducing stronger demand for sweeter 'comfort' beverages. and sauces/dressings/condiments.249 28. PizzaExpress chilled pizzas have proved one of the fastest growing chilled pizza brands on the market in recent years while the same is true of California Pizza Kitchen frozen pizzas in the USA.099 29. by encouraging a shift into tap water and. Though more expensive than many competing offerings. They are continuing to develop new ingredients targeting weight management. Consumers are expected to continue to seek out more premium minded restaurant quality meal solutions. Consumers should also continue to eat more at home rather than eating out. While organic food will likely remain flat.178 37. pasta. Both are linked to popular full-service pizza restaurants and allow consumers to replicate the restaurant experience at home at a more affordable price than eating out.955 5. cholesterol/blood pressure reduction. bottled water has also fallen victim to environmental campaigners.934 29. brain/mental health.019 36. firstly.
reflecting downward pressure from the global economic crisis. One of the defining issues in the UK is that black tea has a broad socio-economic consumption base. Premium spirits will suffer most. This is because an ageing population means. encouraging greater knowledge about the different variants of leaf tea as well as countries of production. Consumers in advanced economies like the USA. UK and Spain are forecasted to continue cutting back on drinking the most as the economy worsens. thus strengthening the supply chain. a strategy that has worked effectively for the coffee sector. is experiencing a decline as cash-strapped consumers are going out less. with high demand coming from lower-income households. This consumption shift is less to do with macro-economic conditions and much more to do with fashion. while volume growth in Western Europe is projected to fall below 2%. ALCOHOLIC DRINKS What's happening now? Beer buoyant as consumers buy alcohol to drink at home and are trading down Consumer drinking in bars.Source: Euromonitor International from trade sources Note: Western Europe includes Turkey Western European consumption of black tea is forecast to decline in 2009. This is compounded by a growing rejection of black tea among younger consumers. Global alcoholic drinks' value growth throughout the crisis years will be affected more dramatically than volume in the short to medium term as most consumers are switching to cheaper alternatives. One possible answer is to increase penetration of sustainable tea products. a shrinking consumer base. two tea bags per pot instead of three or one bag to brew two cups. for example. such as Fair Trade and Rainforest Alliance. according to the latest available data from Euromonitor International. This could. That type of consumption manipulation can have significant implications on volume sales at a national level. in reality. But it would also benefit the tea consumption culture going forward. however as this recession is unprecedented. while those in emerging economies like China and India will be better placed to weather the economic storm. Beer will remain the fastest growing category in volume terms. Domestic lager is expected to perform better than imported beer. Outlook Ethical consumption the route to boosting consumer appeal As the credit crunch tightens in 2009. Global alcoholic drinks volume growth is slowing down due to the global economic downturn but significant contraction is not expected in the short to medium term. quite literally. The demographics also work against the black tea industry in Western Europe. Starbucks might even be the one to rescue leaf tea. Outlook Belt tightening will trim sales but consumers should start buying more at the end of 2010 to compensate The quantity of alcohol consumers drink has proved to be broadly resistant to past economic crises. Black tea is vulnerable because cashstrapped consumers can save money by using. the coffee sector has been far more innovative and dynamic in its on-trade development over the past decade. In short. drinking in their home cocoons. Ironically. with its roll out of a new range of black tea choices this year. its effects on the alcoholic drinks market are already markedly distinct from previous crises. pubs and restaurants etc. who might aptly be described as the Starbucks Generation . Economy lager brands will attract consumers in off-trade. As unemployment climbs and recessionary fears escalate. with spirits and wine prices suffering the most. Meanwhile. what seems clear is that leading leaf tea producers across Western Europe need to ring the changes and entice consumers back into the category. symbolised most visibly by the growth of coffee houses as day time social meeting places. consumption of still bottled water is forecast to contract in North America for the first time in over a decade. there is little doubt that poorer households will look at ways to trim their weekly supermarket expenditure. be a lifeline for the hot tea industry because it would enable many vulnerable growers to stay afloat. For .
1 3.e.5-1% 1-2% Source: Euromonitor International from trade sources Note: Initial forecasts were made in July/August 2008. Meanwhile.1 2.3 2011: Old 2011: New projected projected growth growth 7.1 4.3 1.6 7 4.3 . unlike previous economic downturns.3 5. it quickly became apparent that the current global downturn required a revisit of forecast consumption patterns for beer. Eastern Europe and North America.5 4. improving the proportion of premium brands in the sales mix. On the other hand.1 7. Another major concern is that the emerging markets which have been shoring up global volumes in recent years will suffer more than developed markets in 2009. Second. while the majority of spirits volume corrections are expected in Australasia and North America.2 Cigars Smoking Tobacco Tobacco Products 5 5. i. Third. compensating for consumers' belt tightening period. selling tobacco products is intrinsically profitable and the business is a legendary cash flow generator.9 3 2.5 3.8 5.3 3. But there are some new elements in the equation in 2009 such as the impact on price of tobacco restrictions and bans. consumers do not tend to smoke less in times of trouble and stress. and consumers trim their spending.2 2. According to Marlous Kuiper.5 4. Major financial disruption could affect these markets in ways that it will not affect developed markets. the current recession comes at a time when tobacco control has the industry in its grip as never before in terms of multiplying public smoking bans and steeply rising prices in many markets as a means of 'de-normalising' the practice of smoking.8 7. by premiumisation.Sector Forecasts Compared % market value growth 2009: Old 2009: New 2010: Old 2010: New projected projected projected projected growth growth growth growth Cigarettes 7. forecasts were revised down in Q1 2009 TOBACCO What's happening now? Trading down and global tobacco bans may bite into the traditional resilience of this industry during recession The tobacco industry's reputation as a resilient sector in times of recession is based on past performance and unique qualities. Industry Manager of Alcoholic Drinks at Euromonitor International: On the whole advanced economies will see a more dramatic decline in volumes of alcohol consumption as the economy worsens.1 7. cigarettes will not be overtaken by new technology. Global alcoholic drinks forecast by sector: 2009-2010 % volume growth 2009 Initial Forecast Beer 4% Wine Spirits 2% 2% 2009 Correction 2-3% 0. It has been consumers in emerging markets who have made them the prime contributor to the tobacco industry's income growth. unlike many other products. a slowdown in the consumption of wine is mostly expected in Australasia.5-1% 0. Fourth. but it is expected that these declines will be short lived and the market will start recovering at the end of 2010. even in markets where volumes are declining. It is possible that 2011 could see steeper growth than originally forecasted.4 2. This is because much of the resilience of the tobacco stocks is based on the industry's ability to continue to raise profits. The primary fears for the industry in the present economic crisis are not the effect on volumes of falling consumer confidence but the spectre of consumer down-trading. Global Tobacco Products Market Values . The defensive qualities of tobacco companies have been based on a number of factors. as has been the case in previous global recessions. the traditional strength of tobacco brands means that prices generally tend to remain robust. First.example.8 2.5-1% 2010 Initial Forecast 4% 2% 2% 2010 Correction 1-2% 0.
Source: Euromonitor International Global Tobacco Products Market Volumes Sector Forecasts Compared % volume growth 2009: Old 2009: New 2010: Old 2010: New projected projected projected projected growth growth growth growth Cigarettes 2 1 2 1 Cigars Smoking Tobacco Source: Euromonitor International 2 0. charcoal and other innovatory filters such as triple and recessed filters plus 1mg tar products with reduced risk appeal. What is the emerging market outlook? The last global financial crisis began in 1998 and was triggered by loss of confidence in Asian economies. The main forecast conclusion realigned in the light of the downturn.8 Outlook Smokers expected to be responsive to new products from trusted brands All indications are that the industry will continue its current premiumisation strategies to woo consumers but with an intensification of new product development which it sees as the best means of keeping prices robust.1 2011: Old 2011: New projected projected growth growth 1. Inflation caused major local currency price increases and widespread consumer migration away from international brands. global cigarette volume growth will fall by one percentage point from 2009-2011.4 1. about 3-4% in this period. This is a process with attendant dangers. as the situation evolves. is that due to the recession combined with the increasing effects of tobacco control. or worse. However the companies will also continue to build pricing safety nets to catch consumers down-trading from premium bands by means of medium price band and price value band offers. particularly amongst mid-price brands.1 1. Price rises plus recession could bring this pricing dilemma to a head in a number of markets in 2009.1 1. pricing strategies will become ever more important.9 1 1. The company wishes to offer an alternative product to a down-trading consumer but does not want to provoke a large scale exodus from premium band to mid-price band. Smokers have demonstrated a clear appetite for a succession of new products which are brand extensions of global flagship brands. rather like seeking to keep a herd of elephants balancing on a tight-rope one slip and where does it stop.5 2.9 1 2. These are coming from innovations such as super slim cigarettes for a more elegant look (originally targeting women but now also targeting men). In addition there are a range of product re-launches aimed at increasing the prestige of certain brands and extensions in order to persuade smokers to pay more without shifting price bands. and a range of menthol brand extensions. shorter cigarettes for a quicker smoke in public smoking ban markets. but by a wider margin in value growth. from premium band to low price band. with legislation having more of an impact than recessionary pressures in the short-term.6 2 1. and manufacturers will try to maintain brand loyalty by offering cheaper alternatives to premium and mid-priced brands . It happened several years ago in the UK when Lambert & Butler overtook Benson & Hedges and today all the leading brands in the UK are in the mid price sector. In the long-term. This dilemma comes into focus when prices reach a level where consumers will not sustain a premium brand as brand leader. The effect on tobacco markets in a number of major emerging markets was profound in terms of volumes and in terms of the impact on international brands. The general view is that the major emerging markets are far stronger economically now than they were in 1999 although tobacco volumes overall will continue their previous declining rate of growth.7 1. These are all means of keeping prices robust by improving perceived value and following the traditional marketing precepts of generating consumer interest and belief in perceived value.