India Consumer -Wallet Watch – Vol 1/11:: Anand Rathi

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India Consumer
Wallet Watch – Vol 1/11
Consumer companies launched various products in Dec ’10. Raw
material prices are rapidly rising, impacting consumer
companies and wallet share for consumer products. Consumer
companies have resorted to price hikes to pass on higher costs.

 Raw material prices. Most raw material prices were higher in
Dec ’10. Prices of most agro products were +2% higher mom.
Following higher crude oil prices, prices of crude oil derivatives
have also increased. We expect HUL and Marico to be hit by the
higher raw material prices.
 Notable launches. There were various new launches in Dec ’10.
Among the major launches were ready-to-eat breakfast mixes by
Britannia. HUL launched Astra Gold, a table-top margarine.
Nestlé introduced Neslac infant food. Emami launched Boroplus
intensive skin therapy cream and Godrej Consumer Products
(GCPL) re-launched FairGlow soap.
 Pricing action. Dec ’10 saw an increase in pricing action, with
most consumer companies hiking prices to pass on the rise in raw
material prices. Major pricing actions were a 10% price hike in
select cigarette brands by ITC. Nestlé India hiked prices of
Nescafe and Dahi by 3% and 10% respectively.
 Stock calls. We maintain Buy on ITC, Asian Paints, Colgate,
Marico, GCPL, GSK-CH and Emami; and Hold on Dabur. We
recommend Sell on HUL, Nestlé India and Britannia. Among
mid-caps, we recommend Buy on Agro Tech, Zydus Wellness and
VST Industries; and Hold on Bajaj Corp and Jyothy Labs.