FMCG industry and the Economic downturn

What would one expect on the performance of FMCG companies and the economic downturn ?

A drop in sales (obviously for non-essential items) and hence a drop in profitability ?

Revelation, the profits of FMCG Co.s is rising at a rate of 17-20% in the first half of 2008-2009.

Wondering how? The sales have taken a hit ... but are still growing at a reasonable pace

But the bottomline is soaring .. majorly due to the various initiatives taken by various companies.

For example HUL clocked a 34% increase in this quarter. This was done majorly through price hikes of about 5-10% to compensate for the increase in raw material costs.

Nestle and Dabur have revisited their sourcing programmes and are now undertaking intelligent buying. Dabur is buying material on future exchanges for non-essential items to flank bulk buying.

Several Cold-drink and beer companies are using tin cans instead of metal cans to reduce the overall cost without significant impact on functionality.

Col-Pal has initiated an effort of cutting down on SKUs to reduce the packaging and and other costs.

Godrej Consumers has relooked its supply chain and transportation of materials to reduce about Rs10 crore per year.

Some consumer product companies not only reduced the weight of their product but also introduced newer re-engineered products of smaller quantity. Wipro Consumer launched a new soap at Rs 6 weighing 45gms, otherwise it would have cost Rs 16 for 100gms.

Similarly Coke has introduced a 350ml PET bottle for Rs15 for most of its brands.

Firms on the other hand could not cut down much on Advertising and Promotional expenditure due to fierce competition.