FMCG companies push product launches despite inflation

Font Size

Print

Feedback

Email

Discuss

Related Articles

Inflation may touch 10% by end MarchInflation up at 0.83% on higher food pricesHoarding drives food inflation by 16.32%Inflation a matter of concern: FM

New Delhi, Aug 25: The fast moving consumer goods (FMCG) companies are gambling on inflation with new product launches. Though the runaway rise in prices—with inflation romancing 13%—has come as a spoilsport, companies are going ahead with product launches planned months before.

Dabur, Nestle and Amul said they have new products lined up for launch. FMCG companies see 60% of their revenues coming from new product launches this year.

FMCG companies work on a long-term plan for their product launches. The planning and processing of the products takes about six months to a year before they arrive on the shelves of super markets. But an unexpected rise in inflation can turn all their calculations upside down. For, inflation pushes up raw material costs and squeezes the buying power of consumers.

But by constantly renovating and innovating, marketers say, FMCG companies can insulate themselves from inflation. With more products on offer the consumer is flooded with choice and thus chances of the product recording more volumes remains a possibility even during hard times.

In the first quarter of the financial year, Dabur India has launched eight new products in both the higher and lower price ranges. The company saw a 25.3% increase in its first quarter profits, year-on-year. Dabur officials said there are more products in the pipeline. As part of the price management strategy, the Rs 5.35-billion-turnover company is hedging on the commodity exchanges for its raw materials to beat high spot prices. Futures of several commodities are currently on a downswing.

Mayank Trivedi, general manager, dairy products, Nestle India, told FE, "New product launches is our top priority and focus.” Nestle has added flavoured milk to its product portfolio in the last two quarters. The company’s turnover was Rs 10.42 billion in June ’08. Its profit too climbed by 26.5% year-on-year in the same period.

Explaining the rationale of the new launches, C Ravishankar, manager, strategic and consumer intelligence, KPMG, said, “Even if there is high inflation currently, these companies will go ahead and introduce new products in the market as consumers expect a new product from a brand at regular intervals.”