INDIAN FMCG INDUSTRY

ABSTRACT India’s fourth largest sector is poised for

huge growth, increasing its contribution to

world trade every year. FMCG is India’s

high growth and high profit sector.

Swaroop Pandao swarooppandao@gmail.com

Indian FMCG Sector Date: 21/09/2015

Swaroop Pandao

Indian Fast Moving Consumer Goods Industry

FMCG sector is one of the most important sectors for each and every Economy. In their own

seasons, products heads higher and higher in sales but equally it is a 12-month sector

welcoming all seasons. It plays a vital role being a necessity and inelastic product which

touches life in number of aspects.

In the Economy, India’s FMCG is fourth largest. FMCG is growing at a CAGR of 16.2%.

FMCG is classified in Household Care, Personal Care and Food & Beverages. The overall

FMCG market is INR 182293 Cr. Current growth rate of FMCG is in double digit. Digging

more dipper, the sector is characterized by a well-established distribution network, low

penetration levels, low operating cost, low per capita consumption and intense completion

between the organized and unorganized segments

Top players contributing to FMCG

The top ten India FMCG

brands are:

1. Hindustan Unilever Ltd.

2. ITC (Indian Tobacco

Company)

3. Nestlé India

4. GCMMF (AMUL)

5. Dabur India

6. Asian Paints (India)

7. Cadbury India

8. Britannia Industries

9. Procter & Gamble Hygiene

and Health Care

10. Marico Industries

15.7 17.821.3

24.230.2

34.8

41.144.9 47.1

0

10

20

30

40

50

2006 2007 2008 2009 2010 2011 2012 2013 2014

FMCG Sector Revenue in $ billion

Revenue

Indian FMCG Sector Date: 21/09/2015

Swaroop Pandao

Segments of FMCG Industry

Food and Beverages

Food and Beverages are accounting for 52% of Indian FMCG sector. Food and

Beverages is the undisputed leader of FMCG sector in India. Segment is growing at

the rate of around 8-15%. Leading FMCG players of Food and Beverages segment are

Nestle India, Amul, Dabur India, Britannia Industries, etc.

Personal Care

Personal care products contributes for 20% of the overall FMCG sector in India,

growing at rate around 10% Market leaders of personal care products are Hindustan

Unilever Limited, P & G Hygiene catering the products like surf excel, pepsodent,

close up, vaseline, and many more.

Tobacco

Tobacco products are counting for 15% of the FMCG sector. 2015 is not good so far

for the segment due to few Government policies against tobacoo. The undisputed

leader for tobacco in India products is ITC.

Household Care

Household Care contributes for 10% in the Indian FMCG sector. The growth for the

segment is steady at CAGR of 9%.

Others

Other products accounting for 3% of overall FMCG sector, growing at 8-9% annually.

Food and Beverages, 52

Personal Care, 20

Tobacco, 15

Household Care, 10

Others, 3

% SHARE

Indian FMCG Sector Date: 21/09/2015

Swaroop Pandao

SWOT Analysis

Strengths

Low operational cost

Established distribution network in both urban and rural areas

Presence of well-known brands

Favourable Government policies, reduction in CST and excise duty

Weaknesses

Lower scope of investing in technology and achieving economies of scale, especially

in small sectors

Low export levels

Opportunities

Untapped rural market

Increasing purchasing power

Large domestic market

Export potential

High consumer goods spending

Threats

Removal of import restrictions resulting in replacing of domestic brands

Slowdown in rural demand

Tax and regulatory structure

Key Growth Engines

Rising per Capita Disposal Income

Increasing Discretionary Expenditure

Growing Rural Market

Growing Popularity of Modern Trade

FDI Support

Large Market with Wide Distribution Network

Changing Profile and Mind Set of Customers

Advertising and Media Coverage

Innovation in Core Products

Indian FMCG Sector Date: 21/09/2015

Swaroop Pandao

Key Growth Inhibitors

Inadequate Distribution Network

High Competition between large and small players

Taylor made products with attractive packaging

Collaboration and partnership do work

Reach and role of distribution

Attending consumers demand of low price with high quality

Competent front end sales force

Ineffective use of Technology

Recent Developments

Finance Minister, Mr. P. Chidambaram declared several tax sops for the FMCG sector

in India along with putting due emphasis on the infrastructure developments in the

same.

Government has reduced CST and Excise duty.

The usual growth drivers such as penetration, per capita consumption, population, and

household income were quite strong in the past years and also the consumption of the

FMCG products has been increased outstandingly.

Biscuits worth ` 50 per kilogram are fully exempted from excise duty, customs duty

on food processing machineries were reduced from 7.5% to 5%, excise duties on food

mixes were reduced from 16% to 8%, and taxes were reduced on edible oils. ITC,

Dabur, HUL and Marico were directly benefited.

Rural – set to rise

Rural areas expected to be the major driver for FMCG, as growth continues to be high

in these regions. Rural areas saw a 16 per cent, as against 12 per cent rise in urban

areas. Most companies rushed to capitalise on this, as they quickly went about

increasing direct distribution and providing better infrastructure. Companies are also

working towards creating specific products specially targeted for the rural market.

The Government of India has also been supporting the rural population with higher

minimum support prices (MSPs), loan waivers, and disbursements through the

National Rural Employment Guarantee Act (NREGA) programme. These measures

have helped in reducing poverty in rural India and given a boost to rural purchasing

power.

Hence rural demand is set to rise with rising incomes and greater awareness of brands.

Urban trends

With rise in disposable incomes, mid- and high-income consumers in urban areas

have shifted their purchasing trend from essential to premium products. In response,

firms have started enhancing their premium products portfolio. Indian and

multinational FMCG players are leveraging India as a strategic sourcing hub for cost-

competitive product development and manufacturing to cater to international markets.

Indian FMCG Sector Date: 21/09/2015

Swaroop Pandao

Thank You