India Consumer and Retail- Off the Shelf:: JPMorgan

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Key developments in the Indian consumer space over the past month:
 New product launches. 1) P&G expands its skin care portfolio introducing
Olay Mens Solution range at the premium end. Male skin care market has
been witnessing a spate of prominent launches by the likes of L’Oreal
(Garnier for Men), Beiersdorf (Nivea for Men) and HUL (Vaseline for Men)
over the past two years, 2) HUL has gone for a major re-launch of its antidandruff
shampoo range under Clear brand. It has also relaunched Fair &
Lovely facewash, 3) Colgate launched Colgate Sensitive Pro-Relief
toothpaste to augment its portfolio for premium toothpastes with GSK’s
Sensodyne eyeing bigger share of this sub-category, 4) Emami launched
Navratna Coconut Cool Oil.
 Price hikes. Nestle India continued with price increases, undertaking price
hikes across some SKUs for baby foods (4-5%) and cup noodles.
 JPM Global Research. In a recent investor meet at Mumbai, L’Oreal
discussed their India growth plans extensively. It is aiming for €1bn sales
from India over next 10 years (from €170mn in CY10). Profitability, which
now stands in the mid single digits, should continue to improve as volumes
grow and as L’Oreal continues to focus on production and supply chain
savings. Nearly 70% of its portfolio is tailored to local taste and it expects to
develop the premium part of the mass market and grow ahead of the market.
To that effect, L’Oreal is opening a new research and innovation centre in
Mumbai this year. Enhancing distribution reach is another priority for the
company that is looking to double its reach from 0.55mn outlets currently.
 Key commodity trends. Palm oil prices declined 11% m/m implying relief
for companies like HUL, Godrej Consumer and Nestle India in our coverage
universe. There was further respite with crude oil and HDPE prices
softening by 4-5% m/m while LAB prices were flat m/m. While domestic
wheat prices were flat m/m, sugar prices moved up by 3% m/m. There was
significant decline in cotton prices which declined 10% m/m.
 Performance and Valuation. Over the past month, BSE FMCG Index was
up 2.7%, outperforming Sensex by 0.8%. Pantaloon Retail and Colgate
Palmolive were better performers, up 16% and 12%, respectively.