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FMCG Sector Entering Into Recession

fmcg shelves filled with yummy goodsFMCG means fast moving consumer goods, if you were wondering what this acronym meant. And although it seems a little bit late to mention this, after the worst quarter into the US history, we at think that the timing is appropriate to do so.
The reality is that the main companies from this sector did not feel the consumer spending dwindling down. The reason is quite simple – they sell first-necessities products, the last ones which people tend to give up in their consumption habits.
Yesterday February 5, the consumer Anglo-Dutch giant Unilever announced that due to the economic crisis they were forced to scrap their forecasting. Even the 15% operating margin targeted for 2010 was abandoned. Unilever slid as much as 6.4 percent in Dutch trading. The maker of Lipton tea and Magnum ice cream also reported a 58 percent gain in the Q4 profit, helped by asset sales and price increases in emerging markets. Sales growth decreased to 3,7% year on year, due tot the fact that shoppers were cutting their purchases of branded goods.
Unilever is the world’s second largest consumer goods company, after its U.S. rival Procter & Gamble.
The disappointing news came after the market leader, P&G, who makes a host of entire brands (from the Tide detergent to the Pampers daipers and to the Crest toothpaste) announced one week ago that it is cutting its forecast for the incoming quarters. P&G is “comfortable” with an analyst consensus for earnings of $4.29 a share in 2009, around the midpoint of its revised range, the Cincinnati-based company said today in a statement.
The trends are worrying. Shoppers are buying cheaper brands, such as P&G’s Gain laundry detergent instead of Tide, as well as fewer cosmetic products, which are seen as an important part of the discretionary slice of the wallet. Revenue fell 3.2 percent to $20.4 billion, trailing the $20.7 billion average of analysts’ estimates compiled by Bloomberg. For the full year, the company forecast sales will fall as much as 4 percent, affected by foreign-exchange rates.
The only big gainer of the fourth quarter was Colgate-Palmolive Co., the world’s largest maker of toothpaste, which reported that the profit rose more than analysts estimated and said it is comfortable with their projections for earnings growth this year.
If you really want to dig into the financial details of the FMCG sector, one good overview is the one offered by the analysis of the consumer / non-cyclical goods, which most of the analysis companies offer. Compared to 6 months ago, the combined shares of the sector have already decreased with 20%, which is huge. Nonetheless, the consumer non-cyclical sector has decreased less than the S&P 500 index, which fell with almost 35% in the same period, showing that the sensitivity of the FMCG sector to the macroeconomical conditions is lower than the average of the market

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