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RNI. MAHMUL 01242/2011

VISION RESEARCH REVIEW

Half yearly Research Journal

ISSN 2250-169X
Vol. I, Issue . I, June 2011 to Nov. 2011

11

FMCG MARKETS TO CONTRIBUTE IN INDIAN RURAL ECONOMY PERSPECTIVE IN GLOBAL ERA

Suresh Bhagwat
Dept. of Commerce, P.W.S. College, Nagpur, Dist. Nagpur

Sahebrao Chavan
Dept. of Commerce, G.S. College of Commerce, Wardha, Dist. Wardha

Research Paper - Commerce

ABSTRACT As witnessed India has come up as one of the major emerging economies of the world in the recent years. Due to this enormous growth personal disposable income of consumers has increased to satisfy their lifestyle needs. The trend has proved to be beneficial to FMCG companies as they have been able to achieve high growth in their sales through increase in the penetration of personal products. The size of the Indian fast-moving consumer goods (FMCG) sector is close to Rs 600 bn. The northern and the western regions of the country account for more than half of the market for consumer goods. FMCG market is something no one can overlook. Increased focus on farm sector will boost income of the rural population and provide more growth prospects for the FMCG companies. FMCG companies are equipped with intense distribution network. They spend huge sums to maintain their distribution network. New entrants who wish to bring their product in the national level needs to spend huge sum of money for promoting brands.

RNI. MAHMUL 01242/2011

VISION RESEARCH REVIEW

Half yearly Research Journal

ISSN 2250-169X
Vol. I, Issue . I, June 2011 to Nov. 2011

12

Introduction FMCG sector is poised for further growth because of the emerging opportunities and strong fundamentals developing in the economy. Therefore, there is need for strong government action for helping the industry to achieve lower cost, improved quality and better performance in the competitive environment. In the past decade, the FMCG industry has witnessed a consumer boom. It has been due to liberalization, urbanization, and an increase in the disposable incomes, and altered lifestyles, especially a heightened level of awareness among the rural community, consequent to the onslaught of satellite television. Furthermore, the boom has also been fuelled by the reduction of excise duties, dereservation from the small-scale sector and the concerted efforts of personal care companies to woo the burgeoning affluent segment of the middle class through product and packaging innovations. FMCG sector is registering an upward trend in growth and this growth story will continue because of the positive budget. However there are certain barriers which curb the growth of this sector. It's being estimated that there will be arise in rural income in coming years, boosting purchasing power in the country side. FMCG Products which have quick turnover and low cost are known as fast moving consumer goods. These goods are also popularly named as consumer packaged goods. FMCG is the fourth largest sector in Indian economy having total market size of Rs 60,000 crores. A major portion of the budget of a household is reserved for FMCG products. Products like, hair care, household care, male grooming, female hygiene are and chocolates and confectionary segments are likely to be fastest growing segments. Research methodology The research methodology is based on the secondary data which include compilation of research article of the experts in the field and reflections of the various books & publications. The approach of the research is exploratory in nature. The research undertaken by the researcher adequately substantiates the claim made in this paper to capture the emerging issues in the field of FMCG Markets to Contribute in Indian Rural Economy Perspective pioneering contribution to the origin and development of Rural India in Global Era.

RNI. MAHMUL 01242/2011

VISION RESEARCH REVIEW

Half yearly Research Journal

ISSN 2250-169X
Vol. I, Issue . I, June 2011 to Nov. 2011

13

Objectives of the Study: The objectives of this study are: " To investigate whether FMCG Markets is being used for productive assets creation. " To examine FMCG sector is also likely to benefit from growing demand in the market. " To review the current status of implementation of FMCG Markets to Contribute in Indian Rural Economy. " To identify emerging strengths and weaknesses for wider dialogue for improvements. " To evolve strategies for affecting implementation of the FMCG Markets programme. Limitations: " This study is based on the secondary data obtained from various journals, magazines and websites. " This study is pertaining to the recent times. " Due to the rapid changes of great relevance in the present Indian context, some other instances of restructuring may not be taken into consideration due to paucity of data. Literature Review Rural India is vast with immense opportunities. 70% of Indian population resides in rural areas and these can bring in much needed volume and help FMCG companies to achieve higher growth. It should be a melody for FMCG companies who have reached saturation point in urban India. FMCG Product the high potential in the rural segment does not mean rushing with initiatives to capitalize on the opportunity. Greater emphasis should be given on indentifying the important products that have great significance in a rural consumer's life. Companies need to assess latent and emerging demand. Structural Analysis of FMCG Sector A consumer buys FMCG products at least once a month. The sector consists of wide range of products such as shampoos, soaps, detergents, food products and so on.

RNI. MAHMUL 01242/2011

VISION RESEARCH REVIEW

Half yearly Research Journal

ISSN 2250-169X
Vol. I, Issue . I, June 2011 to Nov. 2011

14

FMCG products main characteristics are as follows: The products cater to usually 3 aspects: necessity, comfort and luxury. They meet the demands of entire cross section of population. Price and income elasticity of demand varies across the products and consumers.Individual items are of small value although all FMCG products put together form significant part of the consumer budget. Consumer spends little time on purchase decision. He never looks at the technical aspects rather brand loyalty or recommendation reliable dealer / retailer drive the purchase decision. Limited inventory of such products are kept by consumer and prefers to purchase them frequently as and when required by the consumer. Indian FMCG Sector & High Growth Rate :FMCG sector is poised for further growth because of the emerging opportunities and strong fundamentals developing in the economy. Some companies setting up units in backward areas are: * Britannia Industries * Colgate Industries * Dabur Industries * Godrej Consumer Products * Hindustan Uni Lever * Marico Industries With 12.2% of the world population in villages of India, the Indian rural FMCG market is something that no one can overlook. Increased focus and improvement in the farm sector will boost rural incomes which in turn will provide more growth prospects for FMCG sector. The better infrastructure facilities will improve their supply chain. Some of the major companies of Indian FMCG Sector which will contribute to this high growth rate are as below: Recent Developments in the FMCG Sector FMCG sector is registering an upward trend in growth and this growth story will continue because of the positive budget. However there are certain barriers which curb the growth of this sector. Indirect taxes constitute no less than 35% of the total cost of the consumer products-the highest in Asia. Indian companies have presence across value chain of FMCG sector. It gives India more competitive advantage as below" Reduction of duty on edible oil will have positive impact on Marico. " Full exemption of excise duty on biscuits priced at 50 rupees or less per kg for ITC, Britannia and Parle.

RNI. MAHMUL 01242/2011

VISION RESEARCH REVIEW

Half yearly Research Journal

ISSN 2250-169X
Vol. I, Issue . I, June 2011 to Nov. 2011

15

Reduction of custom duty on food processing machinery and their parts from 7.5% to 5 % " Reduction on excise duties on food mixes 16% to 8% to nil is positive for ITC. " Development of rural infrastructure is on high which is essential for FMCG companies because it is a big market for FMCG. Better infrastructure will improve the supply chain. " Exemption of free samples and displays from the purview of FBT will be beneficial for FMCG companies because they spend huge amount of money on advertising and brand building. Indian Competitiveness and Comparison with World Markets :The factor's which make India a competitive player in FMCG sector are the following: Availability of raw materials Since India is blessed with diverse agro- climatic conditions; there s a large raw material base for food processing industries. India leads in the production of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat, fruits and vegetables. The availability of these raw materials gives India the location advantage.

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RNI. MAHMUL 01242/2011

VISION RESEARCH REVIEW

Half yearly Research Journal

ISSN 2250-169X
Vol. I, Issue . I, June 2011 to Nov. 2011

16

Labor cost comparison India is a labor intensive country where cost of labor is very low and is lowest in the world after china and Indonesia. Low labor cost gives the advantage of low cost production. Many MNC's have established their plants in India to outsource for domestic and export market. It should be a melody for FMCG companies who have reached saturation point in urban India. The focus is on rural sector is not only because they are large in number but also that they are becoming richer day by day. This is shown by statistics given by National Council of Applied Economic Research (NCAER):

Conclusion FMCG Product the high potential in the rural segment does not mean rushing with initiatives to capitalize on the opportunity. Greater emphasis should be given on indentifying the important products that have great significance in a rural consumer's life. Companies need to assess latent and emerging demand. They need to focus their efforts on empowering the rural consumer with the latest trends and technology and teach them ways to improve their standard of living.

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RNI. MAHMUL 01242/2011

VISION RESEARCH REVIEW

Half yearly Research Journal

ISSN 2250-169X
Vol. I, Issue . I, June 2011 to Nov. 2011

17

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