FMCG Sees Slow Business; Executive Movements Aplenty

Published: 24th December 2014 01:43 PM  |   Last Updated: 30th December 2014 12:32 PM   |  A+A-


NEW DELHI: They are called 'Fast Moving Consumer Goods' companies, but it has turned out to be a year of slow business for the FMCG sector, even as movements were quite visible in 2014 among those at the helm of affairs.

For the direct-selling segment of the FMCG space, it was almost a stand-still as head of market leader Amway India got arrested, resulting in louder demands for putting in place a clear-cut regulatory framework for this business to weed out illegal multi-level marketing schemes from genuine operators.

The year also saw change of guard taking place at various major FMCG companies, including HUL, Marico and Britannia.

Prominent among them, Varun Berry took over as Managing Director of bakery and dairy products maker Britannia, from the company's long-serving chief Vinita Bali upon her retirement.

On business front, FMCG firms continued to struggle with subdued demand as the economy is to get back on tracks.

Most companies, including Hindustan Unilever Ltd (HUL), Marico, Dabur, ITC and Emami reported increase in sales during the year but complained of headwinds that impacted growth.

High inflation led to drop in consumer spending, especially discretionary spending.

"There is a lag of 2-3 quarters between economic indicators such as GDP and inflation numbers improving and sale of FMCG products. We remain positive about our medium to long-term growth outlook," HUL's Chief Financial Officer P B Balaji had said in October.

While announcing results for the second quarter, Dabur India CEO Sunil Duggal also said that growth rates in most consumer products segments have witnessed a sharp fall due to low growth and challenging environment.

Even as they faced the challenges, there were also a few management level changes in the FMCG companies this year.

Marico elevated Saugata Gupta as the Managing Director of the company from April 1. Gupta, who joined Marico in January 2004 as Marketing Head, was elevated to become the CEO of the company's India business in 2007.

Harsh Mariwala, who was earlier Chairman and MD, will continue as the chairman of the company.

"This announcement reflects the next phase of Marico's growth journey. Under Gupta's leadership, Marico has had a track record of sustainable profitable growth... I am confident that we will achieve new heights under the leadership of Saugata and his team," Mariwala said on Gupta's elevation.

This year also saw resignation of Marico Group CFO Milind Sarwate. Sarwate was with Marico for the last 16 years and had joined the company in 1998 as the CFO. He was instrumental in driving Marico's inorganic growth agenda through acquisitions and alliances, in India and overseas.

HUL also announced a change in its board structure with Sridhar Ramamurthy elevated as Senior Vice President Finance at parent Unilever from July 1. Sridhar was HUL's CFO.

P B Balaji, working as Vice President, Finance, Unilever Americas Supply Chain Company, succeeded Sridhar as Executive Director Finance & IT and CFO of HUL.

HUL also appointed J P Morgan India CEO Kalpana Morparia as an independent director on its board.

For the direct selling space, the highlight remained the arrest of Amway India Chairman and CEO William S Pinckney in May by Andhra Pradesh Police on the charge of unethical circulation of money by the company through its operations. He was released on bail after two months.

This was his second arrest in less than two years, as he was taken taken into custody last year as well along with two other directors of the company by Kerala Police on charges of financial irregularities.

Pinckney was arrested in connection with a complaint against the direct-selling firm under the Prize Chits and Money Circulation Schemes (Banning) Act, (PCMCS). Amway contested the allegations.

Explaining the impact of Pinckney's arrest, Indian Direct Selling Association Secretary General Chavi Hemanth said: "This sent negative signals about the industry amongst public and direct sellers. Lack of regulations has impacted growth in the sector. However, we are hopeful that the government will take some measures."

Hemanth said the industry, which was reporting 20 per cent year-on-year growth before financial year 2012-13, reported mere 4.3 per cent in 2013-14 due to the impact of the arrest.

However, the industry is hopeful with the government considering a regulator for the direct-selling sector to safeguard interests of consumers by distinguishing genuine and 'fraudulent' players.

Earlier this month, Consumer Affairs Minister Ram Vilas Paswan had said: "We have recently formed an inter-ministerial committee to deliberate on the need and framework of regulations for the Direct Selling industry... I think the demand for regulator for direct-selling sector is quite relevant and legitimate. We are considering it."


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