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CNBC-TV18 Boston Analytics: Jul consumer confidence at 71.9

Published on Wed, Aug 05, 2009 at 12:27 | Source : CNBC-TV18

Updated at Wed, Aug 05, 2009 at 15:47

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Nifty

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Q: At Marico are you seeing any caution in purchase decisions at all, in terms of down trading? Has that caution led to any significant down trading that you have witnessed in the last one month?

A: It is not a one month trend but there has been down trading in lot of categories. Also, what is happening is that in the top urban metros the growth rates had plummeted and that is why if you see the entire FMCG industry a lot of focus is towards volume growth. It is a different matter that we have a much more relaxed cost structure because of the huge reductions in the kind of costs which we have witnessed in the first two quarters and going forward in Q3-Q4, that to an extent will get neutralized because the base will become lower.

Q; Along with down trading if there is a slip off in demand or there is an inflation impact, might FMCG companies have to start recalibrating price points as well?
A: I think in a lot of cases the calibration has happened. The change which has happened, instead of just giving price reductions a lot of us is giving out extra product or a promotion. If you go today to Super market or any other outlet a significant portion of the FMCG offering is under promotion. So what we are doing is we are passing on some of the cost reductions to the consumer, driving more value and driving more volume growth. The reason is it is easy to get back the margins but its difficult to get back lost consumer franchise if consumers actually down trade and go to either local brands or some other price warriors.

Q: This down trading that you are talking about is mostly for the urban space?
A: Currently its urban, the rural growth story is still intact, however, in certain areas I think the monsoon pattern shows that if there a deficient rainfall that could impact rural growth as of now there is no impact on the rural growth. I think we should keep in mind also the fact that just other than monsoon there has been a significant pumping through the National Rural Employment Guarantee Scheme (NREGS) or through bank loan waiver significant amount of money has been pumped into the rural areas. So far the rural story is still intact; we are not seeing any impact in the rural areas.

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