Consumer goods firms cutting costs to lather up profits

November 14th, 2008 - 7:50 pm ICT by IANS  

Chennai, Nov 14 (IANS) Though the economic downslide has not really affected fast moving consumer goods (FMCG) manufacturers so far, two city-based companies - Henkel India and CavinKare - have started cutting costs to stay fit. The measures include paring production facilities, rationalising product pack sizes, reducing inventory and juggling advertisement spend to beef up their bottomline without slipping at the market place.

The Rs.4.3-billion Henkel that sells detergents (Henko, Mr.White, Chek) and cosmetic brands like Margo and Fa, is planning to cut the number of detergent and soap contract manufacturers.

“We have now 21 contract manufacturers across the country. We will be reducing their numbers based on their location and the market for our brands. The rationalisation will also take into account the warehousing facilities available,” R.R. Samuel Chandar, Henkel’s vice president (human resources and commercial) told reporters on the sidelines of a seminar here Friday.

The company hopes to cut by around 5 percent.

Henkel will also reduce the number of product pack sizes to focus on those that give better realisation as well as to optimise transport costs.

“If product pack sizes are uniform trucks can carry more,” Chandar explained.

On its part, CavinKare that owns brands like Chik, Fairever, Nyle, Spinz and Meera will bring down its inventory levels and also look at cutting packaging costs, said company executive director Ramesh Viswanathan.

“We cut two millimetre in the length of our shampoo sachets and saved Rs.20 million. We sell around 30 crore (300 million) shampoo sachets per year at 0.50 paise per packet.”

Earlier, in his address at the seminar on ‘Management in Challenging Times’ organised by Loyola Institute of Business Administration, Viswanathan said the FMCG companies are largely affected by inflation and are resorting to price increases on selective brands while juggling advertisement spends between brands.

“Companies can afford to increase prices of their deodorant sticks rather than shampoo sachets. In respects of advertising, companies cut down spend on brands that have strong equity as against other brands,” he added.

While the chemical prices are coming down, Viswanathan said manufacturers would pass on the benefits after looking at the exchange rates.

“The US dollar is on the rise against rupee thereby making imports costlier,” he said.

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