FMCG in India

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The fast-moving consumer goods (FMCG) industry or consumer packaged goods
(CPG) industry is mainly responsible for producing, distributing and marketing fast-
moving consumer goods. The FMCG industry is the fourth largest sector in
the Indian economy.[1] Household and personal care products accounts for 50% of
the sales in the industry, healthcare accounts for 31-32% and food and beverage
accounts for remaining 18-19%.[1]

Contents

 1Most commonly sold FMCG

 2Market size and projected growth rate
o 2.1Driving factors leading to growth rate
o 2.2Market share (by revenue)
 3Characteristics
o 3.1Technology
o 3.2Marketing drive and research
o 3.3Low capital intensity
o 3.4High initial launch cost
 4Evolution
 5Trends
o 5.1Increase in number of government initiatives
o 5.2Changes in lifestyle and traditional culture
o 5.3Changes in policies and regulations
o 5.4Rising advertisement cost by FMCG
companies
 6See also
 7References

Most commonly sold FMCG[edit]

A self-service stop that provides toiletries, cosmetics, household products, packaged food product, plastic
goods and many more.

 Toiletries
 Cosmetics
  Household products
 Electronic goods
 Packaged food

Market size and projected growth rate[edit]

In the last 10 years, the revenue in FMCG industry in India has been growing at the
rate of 21.4%.[2] There was a drastic change in revenues in FMCG sector growing
from US$ 31.6 billion to US$ 52.8 from 2011 to 2017-2018 respectively. [3] FMCG
industry in India is expected to grow at the rate of 27.9% CAGR (Compounded
Annual Growth Rate) to sum to US$103.7 billion by 2020. [1] Additionally, the rural
FMCG market is projected to grow at a CAGR of 14.6% to reach US$100 billion by
2020 and US$220 billion by 2025.[1] The rural setting accounts for 45% revenue
share while the urban setting dominates with 55% revenue share of the total revenue
of the FMCG industry.[4] More than 65% people in India stay in rural places and those
people spend around 50% of their total expenditure on FMCG products. [5] The
number of people buying consumer goods online in India is projected to reach 850
million by 2025.[citation needed]
Driving factors leading to growth rate[edit]

 Increased population of working women

 Increased disposable income and growing per
capita expenditure
 Increased purchasing power of the customers
 Increased awareness of online shopping
 Higher brand recognition and consciousness
 Constant change in consumer preference
 Banking policies and government's regulations
 Growing interest for foreign investors[2]
Market share (by revenue)[edit]

Nestlé logo

ITC Limited Logo

Company’s Name Market Share (%)[6]

ITC 14%

Hindustan Unilever (HUL) 12%

Nestlé 3%

Britannia 3%

Patanjali Ayurved 4%

Dabur 2%

Godrej Group 2%

Marico 5

GlaxoSmithKline (GSK) 1%

Colgate-Palmolive 1%

Characteristics[edit]
Technology[edit]
Since the emergence of internet, people have adopted the Research online,
purchase offline (ROPO) method. As a result, FMCG companies have installed
advantaged manufacturing machines for better quality purpose and have decreased
their profit margin to match with their competitors.[7]
Marketing drive and research[edit]
Indian customers prioritise getting the best deals possible and as a result are less
likely to stay loyal to a brand. Thus, FMCG companies are constantly trying to
influence customers with their promotional deals and many firms offer combo deals
to attract customers to buy their product.[8]
Low capital intensity[edit]
Most of the companies operating in FMCG require relatively less capital for
investments in manufacturing plants, machinery, equipment and other fixed assets.
[9]
 The turnover is typically about five to eight times the invested capital at fully
upgraded manufacturing plant.[10] Companies have low capital intensity as
transactions in businesses are still carried out on credit and cash basis.
High initial launch cost[edit]
Unlike FMCG industry in US which is dominated by few big companies, India's
industry is highly fragmented.[11] Increasing the market share for companies is getting
more challenging due to increase in number of competitors. [12] Promotions and
advertisements, cost of product development, testing market compatibility, market
research and mainly, the launch of the product to create awareness requires high
initial costs.

Evolution[edit]
Between 1950 and 1980, there was limited investment in the FMCG sector. Local
people had lower purchasing power, which meant that people opted for necessity
products rather than premium products. Indian government was inclined towards
favouring the local shops and retailers. Between 1980 and 1990, people wanted
more variety of products which encouraged FMCG companies to increase the
availability of products. FMCG Industry started getting traction and other companies
started entering the industry. Media industry in India also boomed during the same
time which gave new companies even more incentive to make their business
profitable.[citation needed] Prior to 1991, when globalisation and liberalisation occurred in
India, western apparels and foreign food products were not available to local
customers. Common people weren’t very aware of brand recognition. After 1991,
FMCG industry was inspired by the international companies which also allowed
government intervention to incentivise foreign FMCG companies to operate in India. [2]

Big Bazaar store in Ahmedabad, Gujarat

The Indian FMCG industry generates massive employment opportunities and

currently employs more than 3 million people.[13] Departmental stores, grocery stores,
and super markets are the places where consumers buy the necessary products for
daily consumption.[14] In the 21st century, people don’t want to move across different
stores to acquire the common household goods. Hence, the introduction of
supermarkets, where customers have variety of choices for different household
products, into localities are proving to be extremely convenient to the customers.
Some of the most common stores in India are: Reliance Retail, Big Bazaar, D-Mart,
Easy day, MORE, Spencer’s, Spar, HyperCity, and Star Bazaar. Although the
operations of supermarkets are profitable, local grocery stores are suffering due to
lack of variety of products.[15] Unlike other emerging FMCG industry around the world,
FMCG sector in India is still quite conventional. Despite street markets are still one of
the most visited places for shopping in urban and rural settings, online platforms are
leading the way to buy FMCG products.[16]

Trends[edit]
Increase in number of government initiatives[edit]
In the past few years, there are increasing number of initiatives like farm loan
waivers, Direct Benefit Transfer (DBT) and development of infrastructure in rural
areas.[17] Under the Union budget 2019-2020, the focus has been shifting towards
education, agriculture, healthcare, infrastructure, tax rebate and micro, small and
medium enterprises (Ministry of Micro, Small and Medium Enterprises).[18] These
initiatives are projected to have an impact by increasing the minimum wages of
common people, especially in rural areas.[17] Thus, any increment in income will be
directly proportional to demand in FMCG products.
Changes in lifestyle and traditional culture[edit]

Document for Goods and Service Tax (GST)

Change in lifestyle and traditional culture is also having a positive impact on the
FMCG industry.[8] The population in urban areas are diverging towards premium
products as opposed to essential goods because of rise in income of the middle
class people.[19] This has also lead to FMCG companies to rethink strategies as
people as willingly to pay high prices for premium products. [citation needed]
Changes in policies and regulations[edit]
Many global companies operating in the FMCG industry are eyeing Indian market
due to government’s policies and regulations. [12] Government’s introduction of
Relaxation of licence rules and approval of 100% foreign direct investment (FDI) in
single-brand retail stores and 51% in the multi-brands stores are some of the
investing opportunities for global companies to establish their base in India.
[6]
 Regulatory frameworks like Exercise duty, National Food Security Act, and
Telecom Regulatory Authority of India (TRAI) advertising regulations are some of the
main changes in policies and regulations directly affecting the Indian FMCG industry.
With the implementation of Goods and Services Tax in FY18 (July 1, 2018), GST
council has reduced the tax rates down to 5% on most of the processed food items,
increasing the consumption of food products. [7] Other personal care products have
also seen a reduction in GST to 18% against the previous 23-24%. [citation needed]
Rising advertisement cost by FMCG companies[edit]
FMCG companies in India have increased their expenditure cost for sales
promotions and advertisements by 10-20%.[20] Every year, these companies invest
more and more in advertisement to establish a strong customer base and also as a
strategy to reduce market competition.

See also[edit]
 Final good
 Product/process distinction

References[edit]
1. ^ Jump up to:        "FMCG Industry in India: Sector Overview,
a b c d

Market Size & Growth | IBEF".  www.ibef.org.

Retrieved 2019-10-15.
2. ^ Jump up to:a b c "India FMCG Market | Opportunities and
Upcoming Projects | India Retail
Market|". www.mordorintelligence.com. Retrieved  2019-
10-15.
3. ^ "Indian Consumer Products Industry Report - Fast
Moving Consumer Goods -
Equitymaster". www.equitymaster.com. Retrieved 2019-
10-15.
4. ^ "Indian FMCG sector gaining momentum with changing
lifestyles: Industry experts". Moneycontrol.
Retrieved 2019-10-15.
5. ^ "Indian FMCG sector"  (PDF). HDFC Bank Investment
Advisory Group. December 26, 2018.
6. ^ Jump up to:a b "Fast Moving Consumer Goods"  (PDF).  Hem
Securities Ltd. September 2018.
7. ^ Jump up to:a b Sabnavis, Madan. "FMCG Industry
Performance Review and Outlook - FY19"(PDF). CARE
Rating Professional Risk Opinion.
8. ^ Jump up to:a b "Re-Imagining FMCG in India"  (PDF). The
Boston Consulting Group and Confederation of Indian
Industry. December 2015.
9. ^ "Nielsen India lowers 2019 FMCG industry growth to 9-
10% from 11-12%".  Moneycontrol. Retrieved 2019-10-18.
 10. ^ "FMCG sector might not grow as fast as it has - here is
why".  Moneycontrol. Retrieved 2019-10-18.
11. ^ "Global Research and Analytics
Firm".  www.aranca.com. Retrieved 2019-10-18.
12. ^ Jump up to:a b "The Indian FMCG
sector"  (PDF). PricewaterhouseCoopers India. February
2013.
13. ^ "Outsourcing in Indian FMCG Industry"  (PDF).  Guires.
2015.
14. ^ Singh, Jyotica (June 2014). "An Overview. FMCG (Fast
Moving Consumer Goods)".  International Journal of All
Research Education and Scientific Methods
(IJARESM). 2  (6) – via ISSN: 2455-6211.
15. ^ "10 Largest Retail Chain of Hypermarkets in India".
Retrieved 2019-10-15.
16. ^ Success, Insights (2018-10-03). "Notable Trends in the
Indian FMCG Industry". Insights Success.
Retrieved 2019-10-18.
17. ^ Jump up to:a b "FMCG Sector - Steady growth on the
cards?". www.indiainfoline.com. Retrieved  2019-10-15.
18. ^ "Indian Fast-Moving Consumer Goods (FMCG)Market –
Industry Analysis and Forecast (2018-2026)". MAXIMIZE
MARKET RESEARCH. Retrieved 2019-10-18.
19. ^ Shah, Parimal (2019-09-09).  "How Digitization and
Technology Power the FMCG Sector's Future Growth in
India". Entrepreneur. Retrieved  2019-10-18.
20. ^ Khanna, Dr. Priyaka (2016). "Social Innovations for
FMCG Sector".  The International Journal of Social
Sciences and Humanities Invention. 3  (9): Page no.
2747–2757 – via ISSN: 2349-2031.
Categories: 
 Industry in India
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