The unprecedented financial crisis and resulting recession has impacted all the major economies of the world with the loss of 40 million jobs.  A large domestic market, resilient banking system and a policy of gradual liberalization of capital account helped India in the early mitigation of the adverse impact of global financial crisis and recession. However, Economic growth decelerated to 6.7% as compared to 9.7% in the last year and the agricultural sector growth fell from 4.9% to 1.6%. Though credit growth declined reflecting slow down of the Economy in general and the industrial sector in particular, investment remained relatively buoyant.   Increased plan expenditure, reduction in direct taxes, sector specific measures for textiles, housing, infrastructure through stimulus packages coupled with regulation and supervision of financial institutions and markets clearly contributed to soften the impact of the global financial crisis on Indian Economy. Revisiting the Agenda of pending economic reforms has renewed the growth momentum though it is too early to predict a time frame for a full-fledged revival of the Economy.

Indian FMCG market is estimated to be at around 94000 Crs. and is growing at 19.4%. Traditional retail chain accounts for 95% of the total FMCG sales while the Modern Trade while growing fast still accounts for a relatively smaller share of 5%. The year by gone was extremely challenging due to the difficult business environment and spiraling input prices in the first half of the year posing significant planning and market execution challenges. In the wake of spiraling input prices, the industry reacted with margin protection measures like price increases and lower size SKUs. This resulted in higher value increases although the volumes came under increasing pressure. In the recent past, doubts prevail over the short term growth of the rural economy which is coming under pressure with the significant drought conditions. However, the urban economy is showing signs of moving forward with confidence after a period of uncertainty and that is the only silver lining.

The focus on improving operating margins saw many FMCG Companies reducing their advertisement spending.  In addition to mass media marketing, Industry is also increasingly focusing on supporting activities viz., Door-to-door campaigns, In-shop promotions, local media etc. In the recent past with lower input prices, most FMCG companies have focused their attention gaining volumes by offering increased levels of promotion as well as increasing the pack sizes.  Your Company is also actively looking to increase its market share in key categories through consumer relevant innovation, as well as increased media and promotional spends. In addition to this, your company continues to actively exploit opportunities in other areas of the business namely supply chain in driving efficiencies across manufacturing locations, depots, distributors and retailers.

Finance: Your Company has recorded a turn over of  Rs.508 Crs. with Profit of Rs.4.19 Crs.  while the same was Rs.430 Crs. and Rs.14.52 Crs. respectively in the previous year. Consolidated group turn over is Rs.582 Crs. as compared to Rs.517 Crs in the previous year registering a growth of 12%.  For the first 8 months of 2009, your Company registered a sales growth of 16% with commendable improvement in the profit.  I assure you, on behalf of the Board that all efforts shall continue to be made to sustain the growth and margin.

Laundry & Home Care:  In 2008, the Laundry & HomeCare market valued at about Rs.11,728 Crs. posted significant growth @ 22% driven by price increase and packsize optimization. The flagship brand Henko Stain Champion was re-launched with innovative Oxygen Power claim delivering 15% value growth. Your Company also entered the Toilet Cleaner market with the introduction of the international brand Bref, evincing positive response from the consumers. Your Company’s innovation agenda continued with Pril liquid Utensil cleaner concentrate rolling out an antibacterial Neem variant and Bref introducing a Power Cleaner for surfaces, both voted by consumers as ‘Product of the Year’, a certification of the Company’s commitment in delivering superior quality products to the discerning Indian Consumers.

In 2009, two of the Company’s focus brands were relaunched.  Henko was relaunched with the added benefits of Germ Kill using anti-bacterial Neem.  Pril Perfect was relaunched with the triple benefit of grease removal, deodorizing and germ kill. Overall, the business is clocking strong double digit growth behind higher media investments and in-market activities.

Cosmetics & Toiletries: During 2008, the flagship brand Margo has gained further market share supported by a media campaign featuring celebrity Rani Mukerjee, coupled with below the line activities.  Fa brand managed reasonable growth despite intense market competition and heavy media investment by the Competitors.  Neem Active Toothpaste witnessed commendable performance in terms of growth in Export sales.

During 2009, Personal care market continues to witness robust growth. Toilet soaps - by far the biggest personal care market - has seen a strong 12% value growth, while the volume growth remains lower at 2%. The Deodorant market shows very strong growth with 48% in value, mainly driven by volume growth of 43% owing to intense marketing activities on new brand launches coupled with enhanced media spends. Your company’s new launch in the men deodorant segment, Fa Men Extreme, endorsed by celebrity Bipasha Basu received  encouraging consumer response. Margo, one of the fastest growing toilet soap continues its positive trend from 2008 crossing 1 million outlets distribution with over 1.25% all India market share.

Professional Hair Care: Despite the Professional hair care industry witnessing a stagnant phase after a steady growth, your Company has registered a marginal growth on sales with a significant turn around in the profit front.   It achieved break even for the first time since launch in India, the requisite mileage for the brand being provided by the drive in Hair dresser education, media coverage and fashion shows.   

Sales & Distribution: Despite the challenges in the competitive environment, the total  branded business grew in 2008 by 16% driven by Laundry and Homecare.  The Modern Trade business has witnessed stagnation resulting in expansion plans for all major players being put on hold while few stores faced the closure.  Your Company achieved highest ever growth since the commencement of the commercial production. The projections for the next year continue to be optimistic with increased focus on rural and small town penetration. 

Despite the challenges and stiff competition among all players in the FMCG domain, your company expects to continue its good performance through focused investments, better availability and a sharper consumer focus. Your Company has clearly identified the priority areas where it needs to build capabilities and plans are in place to close the identified gaps. Your company remains confident that with the plans already in place and with the focus on providing superior products to the discerning Indian Consumers, your company will achieve the desired goals.  

I, on behalf of the Company and the Board of Directors express my gratitude to Henkel AG & Co KGaA, Germany, Tamilnadu Petroproducts Ltd., various Govt. Authorities, Banks and other constituents for their valuable support and unstinted co-operation. We acknowledge the contributions of our distributors, advertising agencies and our suppliers for the success of the Company. Most importantly we also acknowledge the patronage of our valued consumers who have come to regard our brands as synonymous with quality and value and we thank them for their support.

Your Directors take this opportunity to acknowledge the immense contribution made by the employees of your Company through their dedication and commitment.  I would like to sincerely thank my colleagues on the Board for their wise counsel and continued guidance. The Directors are thankful to all of you and other Shareholders for their enduring confidence reposed in the organization and we look forward to your continued support and encouragement. 

Thank you.