Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (3744)	2/17/1999 11:37:00 PM
From: Mohan Marette	Respond to of 12475

<Sector Watch> The Beverages, Food & Tobacco Sector India's massive population provides a huge market for consumer products. The sheer size provides for economies of scale. At an average GDP growth of 5.5% until FY2007, the present consumer population of 80 m households can grow by 60% to around 130 m households. Most of the product categories (excluding popular products like salt, atta, edible oil) enjoy high levels of awareness. However penetration has been low due to distribution constraints or price positioning. Per capita consumption levels are abysmally low compared to other developing economies. As penetration of consumer goods rises and income levels increase, the consumption pattern will change from unbranded to branded products. While Indian income levels are rising, 85% of the consumer households have an income of less than Rs 5,000 (US$ 119) per month. This has resulted in markets growing mainly for low-value items. Rising income levels will fuel demand growth for this industry. The fact that income levels are increasing is proven by a study conducted by NCAER which concluded that share of houses in the low-income category has fallen from 65% in FY86 to 49% in FY96. The low-income category is expected to form only 33% of all households by FY2007. FIscalYear-98 Though one expected that consumer spending would be affected by the economic slowdown, continuous innovation, marketing strategies, and constant improvement in appeal of the products resulted in FMCG companies posting good growth. Current scenario and prospects The FY99 budget restricted the MODVAT available on inputs to 95%, which effectively means that excise duty on the manufacturing sector would rise by 5% of the duty paid on inputs. This will not have a significant impact as most of the raw materials are natural products, which do not attract excise duties. The imposition of additional 4% import duty is likely to increase packaging costs for the sector. Removal of 5% service tax on road transport operators will benefit the sector as bulk of finished goods movement is by road. Freight accounts for roughly 4-5% of sales. Excise duty on cigarettes was hiked by 6-11%. The excise duty hike averaged around 9.5%. Excise duty based on maximum retail price (MRP) was extended to chocolates, malted food drinks, and razors and blades. In line with India's commitment to the WTO, as agriculture is liberalised, farmers will get higher domestic prices for their produce. The consequent higher incomes for rural India will benefit corporates with larger rural penetration. As competition increases, advertising budgets will increase to sustain top-of-the-mind recall. Increased competition could also result in companies offering freebies along with products, which will add to the marketing costs. The FY99 budget provisions, higher ad spends and focus on expansion of distribution and supply chain will result in higher costs for the sector. Over a period of time, these costs will be passed on to the consumer. However companies which are able to contain costs internally will benefit over competitors. Availability of adequate storage, refrigeration, transportation, power, packaging and raw materials will largely influence the growth prospects in this sector. Companies may benefit by having a direct link with agro-foods producers. This will enable food companies to reduce cost, have better control over operations and upgrade quality. (Courtesy:EquityMaster)

To: Mohan Marette who wrote (3744)	2/18/1999 1:51:00 AM
From: Satish C. Shah	Read Replies (2) \| Respond to of 12475

No. Actually, the link you provided tells me more about him then I ever knew before. Thanks. I heard him today (2/17) on CNBC. He seemed to be an intelligent, unassuming sort of a person. He was frighteningly right about Dell's revenue, he must have an inside source. When CNBC guy (?) asked him about the inside connection, he just smiled and said it is one of those times when you come out really knowledgeable/intelligent and then went on talking about various published sources, IDC,....ETC. Regards, Satish