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FMCG firms turn frugal

business Updated: Nov 14, 2008 21:13 IST
Saurabh Turakhia

It’s good to be lean and mean. And fast moving consumer goods (FMCG) companies are doing just that, albeit without resorting to radical cost-cutting measures or affecting their growth.

Frugality has always been a part of companies such as Marico, which began as family-owned business.

“Culturally, Marico has been a cost-efficient company- so we are looking at all areas where efficiencies can be had-ranging from travel to communication to processes. Our focus is to make long-term cost structures more efficient,” Saugata Gupta, CEO, consumer products, Marico told Hindustan Times. He added that these measures don’t tamper with long-term brand development and people costs.

Fluctuating commodity prices have made inventory management a critical aspect of FMCG business as companies such as Dabur and Godrej source raw materials through reverse auction—a process that enables them to purchase input materials at relatively low prices. “In addition to reverse auction, we also de-risk ourselves from commodity price fluctuations through futures trading in commodities,” said Jude Magima, executive director, (supply chain) Dabur India Ltd.

Ad-spends and recruitments are also being monitored. “There are no specific cost-cutting measures-but we are going a bit slow on recruitment,” said Mayank Shah, group product manager, Parle Products.

Emami, is planning to spend Rs 70 crore on advertising its new range of petroleum jelly, glycerine soap and cough syrup this winter. “Our ad-spends as a percentage of sales may come down, but that’s because of the surge in sales,” said Aditya Agarwal, director, Emami group.

However, analysts feel that the sector isn’t facing as much cost pressures as others. “The value growth in some cases may go down—as price hikes will be difficult in the wake of falling commodity prices,” said Nikhil Vora, managing director, IFDC SSKI Securities.