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:

Digitization:

As with other industries, technology and digitization are expected to play a big role in
transforming the operations of FMCG companies. Realizing this potential, organizations are
not only leveraging digital technologies to change their front end (customer interfaces) but
also their backend (supply chain and distribution networks). On the customer-facing side,
FMCG companies are using predictive intelligence tools, including artificial intelligence
(AI), to delve deeper into end-customer preferences and offer innovative products. E-
commerce is also helping companies harness the power of Big Data and analytics to study
customer buying patterns.

Perhaps the biggest contribution of digitization will be in the way FMCG companies manage
their sales and distribution processes, and the way in which they interact with retailers. Given
India’s diverse demographic landscape and region-wise customer preferences, FMCG
companies will need to adopt intelligent distribution systems across the supply value chain.
This will not only streamline their operations and produce efficiencies of scale, but also
equip them to reach retailers directly instead of depending on a vast network of
intermediaries.

Lead Management System

Lead generation is an integral part of any FMCG company looking to find prospective
customers for their products. In most organizations, the lead management, and sales process
often goes through a hierarchy where team members are assigned tasks according to either
region, location, or specific products. The typical lead generation process goes through the
stages of finding leads, contacting them, setting up a personal meeting, presenting products,
and converting those leads into loyal customers.

With a digital lead management platform, the lead generation and conversion process can be
managed by a business development executive online. The lead management system can take
care of one-to-one or one-to-many meetings, fix time appointment schedules, and
subsequently enroll the contractor, or vendor onto the platform. 

An online lead management system saves time, eliminates miscommunication, and reduces
effort on the part of field sales officers who otherwise visit leads physically without knowing
the probability of conversion.

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 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.

a) 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.

b) 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.

c) 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:

Loverboy Sparkling Hard Tea is a beverage product classic flavored malt beverages
(FMBs) with their high sugar content and high calories. It starts with the perfect blend of
organic brewed tea, botanicals, juices and monk fruit combined with the smoothest tasting
gluten-free alcohol that we could find. This product is available in various flavors.

The best parts of hard tea, strip away the sugar and add the elements of a hard seltzer that
people are gravitating toward; light, refreshing, carbonated beverages with a nutrition label
offering transparency. The 90-calorie, zero sugar sparkling hard tea is a keto-friendly, 4.2
percent alcohol-by-volume (ABV) craft beverage is available in three flavors: Lemon Iced
Tea, Hibiscus Pom and White Tea Peach, hint of ginger, lime and lavender, respectively. 

This product focuses on current consumer needs. This product focuses on health and taste,
which is the combination which current consumers is looking for in product in FMCG
market.

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

Beverages have been going through a subtle evolution for the past five decades. We have
been seeing technological advancements where machinery was developed to replace manual
tasks throughout the chain.

Automation and the Internet of things (IoT) are helping drinks and food manufacturers reap
the rewards of the so-called 4th industrial revolution. The rapid increase in robotics and other
smart technologies have reduced production costs, improved productivity and enhanced the
safety of the staff.

Beverage packs can be filled in a range of sizes and switch formats on the fly with smart
sensors introduced on packaging lines. Beverage producers can monitor their supplies, as
well as track the filling equipment’s condition for predictive maintenance.
 Also, for drinks in transit, IoT-enabled solutions can monitor transportation conditions and
provide for a more detailed and accurate record-keeping, making sure products are in
compliance with safety regulations.

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 and it accounts for 50% of the total food products sold

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