The scorching pace of growth recorded by shampoo and detergent companies last year is starting to slow down. While both categories had grown impressively in 2005, price hikes and in some cases, saturation is starting to take its toll on the categories.
Hindustan Lever, the market leader in both these segments, has seen its value growth rate go down from 13 per cent in April-May 2005 period to 5 per cent in 2006 and from 11 per cent to 9 per cent in detergent powders and shampoos respectively.
Despite this, companies aren't complaining. The fall in growth rate not withstanding, HLL has still maintained its market leadership in these categories.
Analysts point out that the slow down in growth is partly because of the base effect with 2004 being a bad year for the industry. As a result, while the growth rates for 2005 were far more impressive, the actual numbers for 2006 too are expected to be good.
Further, the price hikes implemented in the first half of the year across all product categories would have a positive effect on the actual numbers for the second quarter of 2006. Saturation in a category like detergents too has been responsible for the slow down in growth seen this year.
Interestingly, categories like soap and skincare, which posted a lacklustre performance in 2005 are in the limelight now, with the growth in both categories expected to be far better than that posted last year.
In soaps, there has been a fair amount of product innovation with the introduction of soaps catering to specific needs like an anti-ageing soap from Godrej as well as renewed marketing thrust behind the brands, which has resulted in growth of the category.
Ashok Venkatramani, vice president- Skin Care, HLL said, "The revival of the skincare category (which includes soaps) started in late 2005, partly due to the increase in agrarian income as well as higher spends in some categories because of the strong economy.
Additionally, there was increased media spend by most player, which is reflected in higher offtake." The category is seen to be growing at about 10 per cent as a whole.
Further, there has been an expansion of the market on the premium end, which is resulting in higher value growth for the segment. So despite some categories slowing down, as long as there are others to replicate the growth, FMCG companies should find no reason to complain.
