Entrepreneurial Opportunity in FMCG Industry

Fast-moving consumer goods (FMCG) sector is India’s fourth largest sector with household
and personal care accounting for 50% of FMCG sales in India. Growing awareness, easier
access and changing lifestyles have been the key growth drivers for the sector. The urban
segment (accounts for a revenue share of around 55%) is the largest contributor to the overall
revenue generated by the FMCG sector in India. However, in the last few years, the FMCG
market has grown at a faster pace in rural India compared to urban India. Semi-urban and
rural segments are growing at a rapid pace and FMCG products account for 50% of the total
rural spending.

The Indian food and beverage industry have grown by leaps and bounds over the past few
years and is constantly evolving. Exploring this dynamic market is both challenging and
interesting at the same time. The Indian food sector has witnessed development and
variations over time. The changing lifestyle, fast moving life and urge for healthy food are
the factors constantly influencing the trends in food and beverage industry.

Young brands and the booming trend of start-ups have motivated new players entering the
market, thanks to technology. When planning to explore a nascent market, it is important to
be strong.

Following are the factors that are significant and constantly changing with the time, which
led to open up the opportunities in FMCG Industry:

a) Technology:

Blockchain: 
The distributed ledger technology has started to revolutionise the entire consumer goods
supply chain facilitating transactions in a secure and transparent environment.
Consumers can quickly trace the source of their purchases, shippers can easily check if a
truck is fully loaded before scheduling a delivery, drug stores can verify if their creams or
shampoos are actually organic.
 
Blockchain also comes into play with loyalty rewards programs. A blockchain-powered
platform can connect loyalty programs through blockchain nodes, which enables it to collect,
exchange and redeem loyalty points amongst multiple organisations. This significantly
increases interactions without the need for multiple separate programs or a middleman.

Internet of Things (IoT):

IoT enhances the efficiency of back-end operations. Cameras and sensors track inventory
and, in the case of low inventory levels in a warehouse, smart sensors inform the operator
which products need to be ordered.

Digital Assistants:

Artificial Intelligence (AI) powered voice-based systems that support consumers to find
goods on e-commerce platforms are gaining popularity. Voice-activated assistants are now
one of the fastest growing consumer electronic devices. Trend watchers estimate that the 500
million people using voice-activated assistants today will be 1.8 billion by 2021 and that 30%
of browsing will be screenless by 2020. For FMCG companies, this would mean a shift from
traditional text searches (visual) to audio interfaces.

Digital Marketing:

One area that is transforming the industry is digital marketing which includes multiple
aspects such as search engine marketing, video marketing, social media activity and email
marketing. While several technologies come together for a digital marketing solution and AI
is a key component of the solutions, there are platforms that provide an end-to-end solution.

b) Demographic Changes:

As mentioned earlier, the consumer profile of the FMCG industry has changed to include
younger consumers who want to shop online. It also includes consumers in newer markets
made possible by e-commerce platforms. FMCG companies also have to cater to
consumers who are conscious about product quality, the environment and ethics. This
means they want to know where the products were grown or manufactured, their carbon
 footprints and generally want more traceability of the products they are purchasing. This
has led governments to come up with guidelines to protect consumer rights.

The global Ecosystm AI study reveals the top priorities for FMCG companies, focused on
adopting emerging technologies. It is clear that their key priority is to handle the
competitive market by focusing both on the consumer and the supply chain. Supply chain
optimisation through demand forecasting ensures that they are not managing extra stock,
and simultaneously not losing out on customers because of lack of stock. This just-in-time
inventory management includes initiatives such as pricing optimisation in response to
market demand, competition and – especially in the case of perishables – ensuring that
stock closer to the use by date is cleared.

c) Lifestyle:

Buoyed by strong economic growth, the new Indian consumer has markedly shifted
towards lifestyle and aspirational products, as indicated by the growth in this segment.
Nowadays, Consumers are getting health conscious. Consumers are willing to spend
money on healthy and safe product. Consumers want healthy product without sacrificing
on taste of food they eat.

The existing trend for ‘clean’ foods continues, inspired by greater awareness, interest and
understanding of wellbeing. There will be a greater emphasis on health and wellness
products, many of which combine research on nutrition and longevity with traditional,
ancient therapies.

With more consumers leading an on-the-go lifestyle, the demand for convenience is a big
trend in 2019. A greater appetite for convenience food and drinks that are ready-to-
consume and a desire for restaurant-quality foods at home will drive growth in this sector.
This creates opportunities for FMCG sector to cover its market.

d) Market:

Market is changing constantly with the passage of time. In India, FMCG industry is huge
industry with lots of opportunities. FMCG market is one of most profitable market in
india. It is also competitive but it is having potential in sector that are undiscovered. It is
 been seen increase in disposable income in rural india and low penetration levels in
market offers room for growth. Due to pandemic, The people are having need of
ayurvedic products in FMCG market.

e) Government Policies:

 Automatic investment approval up to 100 per cent foreign equity for NRI and overseas
corporate bodies. These investments are allowed in food processing segments such as
coffee and tea
 FDI in organized retail: India currently allows 100 per cent FDI in Cash & Carry
segment and 51% in single-brand retail, which is expected to be further increased to
100%. India is also expected to allow 51% FDI in multi-brand retail, which will boost the
nascent organized retail market in the country
 Priority Sector: The Government of India recognizes food processing and agro industries
as priority sectors
 Relaxation of license rules: Industrial licenses are not required for almost all food and
agro-processing industries, barring certain items such as beer, potable alcohol and wines,
cane sugar, and hydrogenated animal fats and oils as well as items reserved for exclusive
manufacturing in the small-scale sector
 Statutory Minimum Price: In October 2009, the government amended the Sugarcane
Control Order, 1966, and replaced the Statutory Minimum Price (SMP) of sugarcane with
Fair and Remunerative Price (FRP) and the State Advised Price (SAP).
GOODS AND SERVICE TAX
 Implementation of GST from April 1, 2016.
 The rate of GST on services is likely to be 14 per cent and on goods is proposed to be
20 per cent.
 FMCG sector wants an early rollout of the Goods‐and‐Services tax (GST) so as to
reduce supply chain constraints, improve competitiveness of FMCG companies
against unorganized players

EXCISE DUTY

 Excise duty on instant tea, quick brewing black tea, and ice tea would be decreased to
reduce the retail price by 30 per cent.
 Excise duty on other beverages and lemonade would be decreased to reduce retail sale
price by 35 percent.

RELAXATION OF LICENSE RULES:

 Industrial license is not required for almost all food and agro-processing industries,
barring certain items such as beer, potable alcohol and wines, cane sugar, and
hydrogenated animal fats and oils as well as items reserved for exclusive manufacture
in the small-scale sector.

STATUATORY MINIMUM PRICE:

 In October 2009, the government amended the Sugarcane Control Order, 1966, and
replaced the Statutory Minimum Price (SMP) of sugarcane with Fair and
Remunerative Price (FRP) and the State-Advised Price (SAP)

FDI IN ORGANIZED RETAIL

 The government approved 51 per cent FDI in multi-brand retail in 2006, which will
boost the nascent organized retail market in the country
 It also allowed 100 per cent FDI in the cash and carry segment and in single-brand
retail

FOOD SECURITY BILL (FSB)

 FSB would reduce prices of food grains for Below Poverty Line (BPL) households,
allowing them to spend resources on other goods and services, including FMCG
products • This is expected to trigger higher consumption spends, particularly in rural
India, which is an important market for most FMCG companies.

TELECOM REGULATORY AUTHORITY OF INDIA(TRAI)

ADVERTISING RUGULATIONS
 FMCG companies, which are top advertisers on television (above 50 per cent share),
are likely to face the twin risks of reduced inventory to advertise, which could be cut
by 25–30 per cent, and increased prices as broadcasters hike prices.

SETU SCHEME
 Government has initiated Self Employment and Talent Utilisation (SETU) scheme to
boost young entrepreneurs. Government has invested USD163.73 million for this
scheme.
1. New Products and services that these change make possible:
FMCG e-Commerce

The share of sales coming from e-commerce is increasing exponentially. The outbreak of

the COVID-19 pandemic has further shifted consumers’ shopping habits towards online
channels. Brands are now building their online presence to boost their engagement with
consumers. Social media also plays a significant role in the world of e-commerce as more
items are sold via social platforms such as Instagram. To this end, FMCG startups actively
incorporate diverse social traditional and media, leveraging mobile and headless commerce,
to market their products.

Big Data & Analytics

FMCG companies actively leverage Big Data to innovate and compete in the industry. As
data is becoming more and more accessible with consumers shopping online, brands explore
new ways to increase relationships with their customers and gain insights from their behavior.
Data analytics explores customer preferences and behavior to provide FMCG companies with
a deeper understanding of their customers. Big data solutions allow brands to optimize
communication with their customers and offer more personalized experiences.

Blockchain
The competition within the FMCG industry is increasing and brands invest in Blockchain to
gain a competitive edge. Smart contracts and Blockchain traceability allows FMCG
companies to understand their supply chain bottlenecks and make necessary interventions.
Blockchain also increases transparency for consumers by allowing them to track the source of
their purchases. Additionally, Blockchain platforms offer cryptocurrencies and loyalty
programs that allow consumers to collect, exchange, and redeem points thereby increasing
customer engagement.

 The outbreak of COVID-19 pandemic has further shifted consumers’ shopping habits
towards online channels. Brands are now building their online presence to boost their
engagement as more consumers. Consumer’s behavior is shifted towards health and
hygiene. Consumer wants to eat tasty and but want to be healthy. Consumer even
want to restaurant quality food at home. Consumer preference is changing towards
shopping online (E-Commerce). Product, which are focuses on health and wellness,
has huge potentials. In addition, E-Commerce as a service has huge potential.

2. New production processes that they allow firms to use.

I. ARTIFICIAL INTELLIGENCE:
 Artificial intelligence is a core element of the Industry 4.0 revolution and is not
limited to use cases from the production floor. AI algorithms can also be used to
optimize manufacturing supply chains, helping companies anticipate market changes.
 This gives management a huge advantage, moving from a reactionary/response
mindset, to a strategic one.
 AI algorithms formulate estimations of market demands by looking for patterns
linking location, socioeconomic and macroeconomic factors, weather patterns,
political status, consumer behavior and more.
 This information is invaluable to manufacturers as it allows them to optimize staffing,
inventory control, energy consumption and the supply of raw materials.

II. Data Analytics:

 In an increasingly global and interconnected environment, manufacturing processes

and supply chains are long and complex. Efforts to streamline processes and optimise

supply chains must be supported by the ability to examine every process component

and supply chain link in granular detail. Data analytics gives manufacturers this

ability.

 With the right analytics platform, manufacturers can zero in on every segment of the

production process and examine supply chains in minute detail, accounting for

individual activities and tasks. This ability to narrow the focus allows manufacturers

to identify bottlenecks and reveal underperforming processes and components.

Analytics also reveal dependencies, enabling manufacturers to enhance production

processes and create alternative plans to address potential pitfalls.

III. Internet of Things:
As IoT evolves, its applications gain popularity in the FMCG sector. IoT sensors and
devices are automated and affordable, enabling FMCG companies to employ them in
brick & mortar stores, warehouses, and manufacturing facilities. One example of IoT
device implementation is to provide targeted messaging to consumers while they are
shopping. Another one is inventory management, both in stores and in warehouses,
for which IoT is widely used. In combination with related emerging technologies
including ambient intelligence and smart objects, IoT creates new consumer
interaction channels and revenue streams for FMCG brands.

3. New Market open up for FMCG Industry

 Due to Covid Pandemic, the rise in certain product categories is been seen. There is huge
market potential in those product categories. This is not open up the one market
dimension but many more dimensions of market. As consumers’ buying pattern is
changing rapidly. The product categories that opened up the market are as follows:

fortified goods andit accounts for 50% of the total food products sold through FMCG
beverages  chains in India
dietary growth is driven by vitamin and mineral supplements, with an
supplements  increasing interest for ayurvedic products.
it represents approximately 17% of the entire food market and more
natural products  and more companies have started using 100% natural, fresh and healthy
ingredients
BFY (better forthey are represented by snacks, soups, beverages, biscuits and other
you) products similar packaged goods

4. New ways of organizing that changes would lead to:

The changes are inevitable in FMCG industry. The changes in FMCG market will make
consumer conscious about what they consumes and why they consumes. This changes
further leads manufacturer to make more quality products from the consumers point of
view. This will further leads to win – win situation between the consumers and the
manufacturers. These changes are healthy for the FMCG Market. Sometimes, Some
changes may not in the favor of manufacturer but there is always a way to cop up with
this kinds of situation. Eventually, the market might come to an stable situation.
5. New Raw materials that they make possible:
The raw material that is been used by FMCG market should be replaced by natural and
organic raw materials. The raw material should be safe and quality certified by
authorities. The raw material should be from the trusted sources and the quality of raw
materials used will have impact on finished products.