Consumer goods firms face stiff competition

Consumer goods firms face stiff competition

January saw spiralling food prices and mounting raw material prices for most of the companies. There were a few small-ticket launches by consumer companies. The month also saw various pricing actions by consumer companies, following higher competitive pressure and rising raw material prices.

Lower liquid paraffin prices would benefit Emami Ltd and Marico Ltd.

Hindustan Unilever Ltd (HUL) entered the noodles segment under the Knorr brand. Nestle strengthened its leadership in wafer chocolates, launching Milky Bar Crispy Wafer. ITC Ltd relaunched the Sunfeast Fit-Kit Biscuit range.

Keener competition and higher raw material prices have led some to hike prices, while others to reduce them. HUL slashed prices of Lifebuoy by 6% and of detergents by 10-29%. Marico cut Parachute coconut oil prices by 5-16%. Britannia hiked prices of some premium biscuits by 10%. ITC hiked prices of Gold Flake king-size by 7%.

We rate ITC, Dabur India Ltd, Colgate-Palmolive (India) Ltd, Marico, Emami, Godrej Consumer Products Ltd, and GlaxoSmithKline Consumer Healthcare Ltd as buys. We have a sell on HUL, Nestle and Britannia.