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Recent Developments in Fast Moving Consumer Goods (FMCG) Sector

FMCG sector is no doubt registering an up trend in growth. According to CNBC, FMCG sector growth story will continue because of the positive budget. Nevertheless, there are some barriers to the

growth of the sector. Indirect taxes constitute no less than 35% of the total cost of consumer products - the highest in Asia. Last year, Finance Minister proposed to introduce an integrated Goods and Service Tax by April 2010.This is an exceptionally good move because the growth of consumption, production, and employment is directly proportionate to reduction in indirect taxes.

Budget 2007-2008 for FMCG Sector

Reduction of duty on edible oil will have a positive impact on Marico.
Full exemption of excise duty on biscuits priced at 50 rupees or less per kg is positive for ITC, Britannia, and Parle.
Reduction of custom duty on food processing machinery and their parts from 7.5% to 5%.
Reduction of excise duty on food mixes from 16% or 8% to nil is positive for ITC.
Development of rural infrastructure is in focus, which is beneficial for FMCG companies because it is a big market for FMCGs. Better infrastructure will improve the supply chain.
Exemption of free samples and displays from the purview of FBT will be beneficial for FMCG companies because they spend huge amount of money on advertising and brand building. HLL, Dabur, ITC, and Marico will be amongst the most benefited companies.

Reliance Retail to Enter the Packaged Tea Market
Emami Set to Invest Rs 220 Crore for Expansion in FMCG Sector
Godrej Targeting FMCG Acquisitions in China, Indonesia, and Brazil
FMCG Sector on a Buying Spree

Corporate Social Responsibility
FMCG companies have now started taking Corporate Social Responsibility seriously. For instance, to encounter domestic violence, Ponds has tied up with the United Nations Development Fund(UNDF) for Women. Surf Excel is funding the education of children. Most brands link themselves with the social causes, thereby linking consumers with the brands and gaining goodwill in the market.