India-FMCG Sector - August 2021

Indian FMCG Industry
Research Report
On
By
August 2021
CARE Advisory Research and Training Limited.

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DISCLAIMER - Research
This report is prepared by CARE Advisory Research and Training Limited (CARE Advisory). CARE
Advisory has taken utmost care to ensure accuracy and objectivity while developing this report based
on information available in CARE Advisory’s proprietary database, and other sources considered by
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List of Abbreviations
Abbreviations Full form

BPL Below poverty line
CAGR Compounded Annual Growth Rate
FMCG Fast moving consumer goods
FRP Financial, Real Estate and Professional services
Fintech Financial Technology
FDI Foreign Direct Investment
FSB Food Security Bill
GDP Gross Domestic Product
GVA Gross Value Added
GNI Gross National Income
GST Goods and Service Tax
HUL Hindustan Unilever Limited
IMF International Monetary Fund
IIP Index of Industrial Production
F&B Food & Beverages
MNCs Multi-National Corporations
MOSPI Ministry of Statistics and Programme Implementation
PFCE Private final consumption expenditure
PSBs Public Sector Banks
SKUs Stock keeping Units
CAGR Compounded Annual Growth Rate
TRAI Telecom Regulatory Authority of India
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TABLE OF CONTENTS
1. ECONOMIC OUTLOOK ....................................................................................................................6

2. OVERVIEW, TRENDS & GROWTH OF FMCG SECTOR IN INDIA ........................................................ 13
3. KEY DEMAND DRIVERS FOR THE INDUSTRY .................................................................................. 24
4. MAJOR CHALLENGES FOR THE INDUSTRY ..................................................................................... 29
5. GOVERNMENT INITIATIVES .......................................................................................................... 31
6. KEY PLAYERS OF THE INDUSTRY ................................................................................................... 35
7. OUTLOOK FOR THE INDUSTRY ...................................................................................................... 39
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TABLE OF FIGURES
Figure 1: Quarter wise yearly growth in GDP at constant prices (in %) ........................................................ 9
Figure 2: GVA Growth in FY22 (in %)............................................................................................................. 10
Figure 3: Yearly growth in IIP (in %) .............................................................................................................. 11
Figure 4: Growth in per capita GDP, Income & Final Consumption ............................................................. 11
Figure 5: Segment wise breakup of FY19 revenue ....................................................................................... 15
Figure 6: Indian FMCG Industry revenue (in Rs crores) ................................................................................ 15
Figure 7: Urban-rural revenue breakup in FY19 ........................................................................................... 16
Figure 8: Rural segment market size (in USD billion) ................................................................................... 16
Figure 9: Quarter wise growth in index of non-consumer durables y-o-y (in %) ........................................ 17
Figure 10: Population in China & India (in billions) ...................................................................................... 24
Figure 11: Urban population as percentage of total population in India .................................................... 25
Figure 12: Internet penetration in rural & urban areas (million subscribers) ............................................. 26
Figure 13: Share of FDI inflows...................................................................................................................... 27
TABLE OF EXHIBITS
Exhibit 1:Global Growth Outlook Projections (in %) ...................................................................................... 6

Exhibit 2: Movement in CARE Ratings Economics Research forecasts for GDP growth (in %) ..................... 8
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1. ECONOMIC OUTLOOK
1.1 Global Economy
The world economy contracted by -3.3% in CY2020 owing to the global outbreak of Covid-19.
However, it is expected to grow by 6% in CY2021 and moderate to a growth rate of 4.4% in CY2022
on the back of vaccination inoculation drive and resumption of economic activities as pandemic
induced restrictions are eased across the globe.
Exhibit 1:Global Growth Outlook Projections (in %)
Country/Group 2020 2021E 2022E

World Output –3.2 6.0 4.9
Advanced Economies –4.6 5.6 4.4
United States –3.5 7.0 4.9
Euro Area –6.5 4.6 4.3
Japan –4.7 2.8 3.0
United Kingdom –9.8 7.0 4.8
Canada –5.3 6.3 4.5
Remaining Advanced Economies –2.0 4.9 3.6
Developing Economies –2.1 6.3 5.2
Emerging and Developing Asia –0.9 7.5 6.4
China 2.3 8.1 5.7
India* –7.3 9.5 8.5
ASEAN** –3.4 4.3 6.3
Emerging and Developing Europe –2.0 4.9 3.6
Latin America and the Caribbean –7.0 5.8 3.2
Middle East and Central Asia –2.6 4.0 3.7
Sub-Saharan Africa –1.8 3.4 4.1
Notes:
E-Estimate
*For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onward is based on
GDP at market prices with fiscal year 2011/12 as a base year.
**Includes Indonesia, Malaysia, Philippines, Thailand and Vietnam
Source: IMF – World Economic Outlook, July 2021
Advanced economies are projected to grow by 5.6% in CY2021 after a negative growth of 4.6% in
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CY2020. It is expected to moderate to a growth of 4.4% in CY2022. The growth forecast for the
advanced economies has been marked up by IMF from its April 2021 projections on the back of the
pace of the vaccine rollouts and additional fiscal support. Amongst the advanced economies,
United States is projected to grow by 7% in CY21 and moderate to a growth of 4.9% in CY2022.
Meanwhile, the projections for Japan has been downgraded due to strict restrictions in first half of
CY2021 and is expected to see stronger recovery in the second half of CY2021.
Emerging market and developing economies are estimated to grow by 6.3% in CY2021 after
contracting by -2.1% in CY2020. It is projected to decline to 5.2% in CY2022.The projections for
emerging market and developing economies were downgraded by IMF from its April 2021
estimates primarily due to markdowns carried out in the emerging Asian economies group. Within
this group, India was marked down on account surge in Covid-19 cases during March-May 2021.
Similarly, the ASEAN-5 group is also witnessing rise in cases which is in turn impacting the pace of
economic recovery. China’s forecast was downgraded too due to scaling back of overall
government support. Meanwhile, growth projections for other regions in general in the emerging
market and developing economies have been marked up depending on the vaccine rollouts and
government policy support which in turn has led to stronger than expected recovery in Q1CY2021.
IMF highlighted in its report that the economic recovery is highly dependent on vaccine access
across regions, hence economies will witness diverging recovery rates which may not remain
steady as long as people are exposed to the virus and its emerging variants. Close to 40% of the
population is vaccinated in the advanced economies while only around 10% of the population is
vaccinated in the emerging market and developing economies and only a tiny proportion of
population is vaccinated in low income group. Hence, the economic growth projections are
dependent on several factors such as access to vaccine, pace of its rollout, its ability to fight
emerging variants of the virus and the fiscal and monetary support provided by the governments.
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1.2 Indian Economy1
CARE Ratings Economics Research projects GDP growth to be in the range of 8.8% to 9% for FY22.
The growth rate should be viewed with caution as it is followed by a -7.3% decline in FY21.
The economic outlook for the economy for FY22 would seem to look better on almost all counts
than FY21 due to negative base effect. The pandemic induced lockdown pushed the growth down
to -7.3% in FY21. It was expected that subsequently growth would be rapid in FY22 with both the
negative base effect as well as the pent-up demand for consumption and investment helping to
accelerate the growth. However, the advent of the second wave of Covid-19 in the beginning of
the current financial year which led to state induced lockdowns has upended this assumption to
an extent.
Business, as seen ex post, has been better equipped to face the lockdown and while activity did
reduce across the country as well as sectors, the impact was less severe. The reverse migration
which took place in large numbers last year was of a lower magnitude this time. SMEs were again
under pressure in this phase, but as they were operating at less than normal potential, they were
not pushed back that severely. Therefore, while the projections made by CARE Ratings Economics
Research have come down significantly from March as can be seen from exhibit 2 below, the drop
is less damaging this time.
Exhibit 2: Movement in CARE Ratings Economics Research forecasts for GDP growth (in %)
Date of forecast GDP growth

2020-21 (Actual) -8.0
2021-22: 24 March'21 11-11.2
2021-22: 5 April'21 10.7
2021-22: 21 April'21 10.2
2021-22: 12 May’ 21 9.2
1
Source: CARE Ratings Economics Research report titled ‘Economic Outlook for India FY2021-22’ dated 26 th July,
2021
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Source: CARE Ratings Economics Research
Some of the major economic indicators are mentioned below.
1.1.1 Gross Domestic Product (GDP)
GDP is the sum of private consumption, gross investment in the economy, government investment,
government spending and net foreign trade (difference between exports and imports). In FY19,
quarter wise growth in GDP remained in the range of 5% to 8% while in FY20 it declined and was
in the range of 3% to 6%. During FY21, it contracted by -24.4% in Q1FY21 to a growth of 1.6% in
Q4FY21.
Figure 1: Quarter wise yearly growth in GDP at constant prices (in %)
7.6
6.5 6.3 5.8 5.4 4.6
3.3 3.0
1.6
0.5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY19 FY20 FY21
-7.4
-24.4
Source: CMIE
1.1.2 Gross Value Added (GVA)
Gross value added (GVA) is the measure of the value of goods and services produced in an
economy. GVA gives a picture of supply side whereas GDP represents consumption. CARE Ratings
Economics Research expects GVA to grow by 7.8% in FY22 after declining by -6.2% in FY21.
Agriculture and Industry are expected to lead the economic recovery while a growth rate of 8.2%
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in services may not suffice as the lockdown imposed during the second wave of Covid-19 severely
affected sectors like hotels, restaurants, tourism and retail malls.
Figure 2: GVA Growth in FY22 (in %) Figure 3: Sectoral GDP Projections (in %)
13.1
9.4
8.2 7.8
3.6 3.4
7.3
6.4
5.6
Agriculture Industry Services Total GVA
-6.2
-7.0
-8.4
Q1 Q2 Q3 Q4 FY21 FY22E
Source: CARE Ratings Economics Research
1.1.3 Industrial Growth
During FY21, industrial output as measured by index of industrial production - IIP declined by -8.6%
as compared with a negative growth rate of 0.8% in FY20. This implies that industrial production
contracted for 2 consecutive years and the fall in FY21 has been the steepest in the series of 2011-
12. There has been a sustained decline in industrial production growth from FY17 and that has
been exacerbated in FY21 following the nation-wide lockdowns, state-wise restrictions to control
the spread of the COVID-19 infections. 8 out of the 12 months in FY21 have registered negative
growth with the highest growth of 4.5% observed in October 2021.
Further, in the last month of FY21, the index registered a growth of 24.2% followed by a 134.6%
growth in April-21 and 29.3% growth in May-21. For all the 3 consecutive months, the growth rate
was backed by the statistical push of low base.
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Figure 3: Yearly growth in IIP (in %)

134.6
24.2 29.3
1.0 4.5 -1.6 2.2 -0.6 -3.2
-10.6 -7.1
-16.6
-33.4
-57.3
Source: CMIE
1.1.4 Per Capita GDP, Income and Final Consumption
India’s per capita gross domestic product (GDP) de-grew by -8.2% in FY21 from 3.0% growth in
FY20. Gross national income (GNI) dropped by 8.2% in FY21 from a 3.1% growth in FY20. The per
capita private final consumption expenditure (PFCE), that represents consumer spending, declined
by -10.1% in FY21 after growing by 4.4% in FY20.
Figure 4: Growth in per capita GDP, Income & Final Consumption
4.4
3.0 3.1
-8.2 -8.2
-10.1
Per capita GDP Per capita GNI Per capita PFCE
FY20 FY21
Source: CMIE
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2. OVERVIEW, TRENDS & GROWTH OF FMCG SECTOR IN INDIA
2.1 Introduction
The fast-moving consumer goods (FMCG) sector is a vital contributor to India’s GDP and accounts
for the 4th largest sector in the country. It is estimated to have grown from about USD 53 billion in
FY18 to around USD 104 billion by the end of 2020.2 The sector caters to the daily needs of
individuals which range from essential food items having an inelastic demand such as salt, sugar,
edible oil, etc. to home and personal care products such as soap, shampoo, detergent, etc. In
addition to these, the sector also manufactures value added products whose demand is
discretionary in nature such as ice-cream, hair oil, body moisturizer, etc. As depicted in figure 6,
the FMCG sector can be broadly classified into four segments, of which home and personal care is
the largest segment accounting for ~45% of the overall FMCG market.
Multiple players both in the unorganised as well as organised segments operate in the FMCG sector
in India. With manifold products manufactured, each product category has several brands and
varieties and low consumer switching costs which leads to intense competition among players
operating in this sector. Therefore, FMCG companies operate on low margins and sales volume
remains the key to survival.
The industry players focus on expanding their distribution networks and spend extensively on
marketing like sales promotion, discounts, advertising etc. Products sold in this industry are usually
low priced and largely homogenous in nature that can easily be substituted, which leads to
consumers spending minimal time in making a purchase decision.
Rural markets in India pose various challenges for FMCG manufacturers due to the existence of
multiple languages and dialects, diversities in cultures, small and distantly located villages, lack of
media penetration etc. Additionally, lack of proper infrastructure like roads, electricity, power, etc.
2
Source: CARE Advisory research
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distribution gets challenging. Rural consumers are majorly dependent on monsoon for their harvest
which leads to uncertainty in disposable incomes.
2.2 Segments of FMCG sector with examples
The household and personal care is the leading segment and accounts for around 50% of the
overall market. Healthcare accounts for the second highest share at 31%, followed by Food &
Beverage segment with a share of 19% of the overall FMCG market.
FMCG Industry
Household & personal Healthcare

care products Food & Beverages
(31%) (19%)
(50%)
- Over the counter (OTC) - Dairy products
- Oral care, skin care products & ethicals
- Soaps & Detergents - Tea/coffee
- Tooth powder - Sugar
- Hair Shampoo - Vegetable oils
- Toothpaste - Bakery products
- Hair oil, - Confectionery
- Creams & lotions - Processed foods
- Agarbattis, Fragrances - Branded flour, etc
& essentional oils, etc
Based on FY19 revenues, household and personal care segment accounted for a share of 45% in
the total revenues generated, followed by healthcare segment at 27% and F&B segment accounted
for 19% of the revenues. Lastly, tobacco products accounted for 9% share.
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Figure 5: Segment wise breakup of FY19 revenue
9%
19% Household & personal care

45% Healthcare
Food & Beverages
Tobacco products
27%
2.3 Revenue Growth
The revenue in the industry grew at a CAGR of 3.5% from Rs 1,96,303 crores in FY16 to Rs 2,25,475
crores in FY20 on the back of several demand drivers such as favourable demographics, increase in
disposable income, growth in online commerce amongst other enablers.
Figure 6: Indian FMCG Industry revenue (in Rs crores)
225,475
219,113
203,558
196,303 196,148
FY16 FY17 FY18 FY19 FY20
Note: Based on financial data of 161 companies operating in consumer food, household & personal care segment
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Source: Ace Equity
2.4 Sector Composition
Accounting for a revenue share of around 55%, urban segment is the largest contributor to the
overall revenue generated by the FMCG sector in India.
Figure 7: Urban-rural revenue breakup in FY19
Rural
45%
Urban
55%
The rural segment is growing at a rapid pace and accounted for a revenue share of 45% in the
overall revenues recorded by FMCG sector in India. In the last few years, the FMCG market has
grown at a faster pace in rural India compared to urban India. The rural segment of the FMCG
market in India is estimated to reach USD 220 billion by 2025 as show in the figure below, with
modern trade expected to grow at 20-25% per annum, which is likely to boost revenues of FMCG
companies.
Figure 8: Rural segment market size (in USD billion)
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220
110
2020 2025F

2.5 Production
The production of fast-moving consumer goods as indicated by the index of industrial production
(IIP) declined by 2.2% in FY21 as compared with a decline of 0.2% in FY20. The spread of Covid-19
and subsequent restrictions imposed led to a fall in the index in Q1FY21. The index recovered in Q2
and led to marginal expansion followed by steady improvement in the remaining two quarters in
FY21. Furthermore, the index grew sharply by 18.1% in Q1-FY22 however these growth rates
witnessed in Q4-FY21 and Q1-FY22 need to be viewed with caution because they come against the
backdrop of low base effect, the index had contracted by 7.7% and 16.9% respectively in the
corresponding quarters a year ago.
Figure 9: Quarter wise growth in index of non-consumer durables y-o-y (in %)
Q1-FY21 Q2-FY21 Q3-FY21 Q4-FY21 Q1-FY22
Source: CMIE
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The production growth in some of the categories of FMCG products in FY21 is detailed below:
a. Washing & Cleaning
Covid-19 led to increased awareness in terms of hygiene and sanitation which in turn contributed
to the increase in production of detergent powder and toilet soaps as they grew by 4.5% and 8.4%
respectively. Detergent and washing powder increased from 1,515 thousand tonnes in FY20 to
1,583 thousand tonnes in FY21. Furthermore, toilet soap (including liquid soap and foam) grew
from 761 thousand tonnes to 825 thousand tonnes in FY21.
b. Oral care
Production of toothpaste declined by 5% in FY21 to 134 thousand tonnes from 141 thousand
tonnes in FY20. As per the trend analysed from 2016-17, this category has been declining y-o-y.
c. Biscuits & Cakes
The production of biscuits/cookies increased by 4.3% as home consumption of food spiked due
to imposition of Covid-19 restrictions on travel, restaurants and hotels whereas the production
of cakes, pastries & muffins de-grew by 29.2%. Also, the y-o-y growth rates for cakes has been
declining from 2016-17. This fall could be driven by consumers becoming more conscious of their
health and weight gain, especially during lockdown.
d. Hair care products
While the production of hair shampoo grew by 16% on a year-on-year basis in FY21, the
production of hair care products like hair dye and hair oil fell by 8.8% and 2.5% respectively. This
decline could be attributed to the restrictions on social gatherings that possibly made people less
conscious of their physical appearances. Also, with most people working from home, the use of
grooming products witnessed a decline.
e. Creams & Lotions
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The production of creams and lotion for topical application decreased by 0.7% to 236 tonnes in
FY21 as compared with 238 tonnes in the same period last year, this fall was led by the
discretionary nature of the product. The consumers had curtailed their discretionary expenses
with reduced income in their hands. It is interesting to note that the production of this category
of products has been declining on a yearly basis since 2016-17.
f. Pharmaceutical products
The production of anti-malarial drugs increased by a record 127.2% from Rs 123 million in FY20
to Rs 279 million in FY21, this surge in production was led by recommendation of the ‘National
task force for Covid-19’ constituted by Indian Council of Medical Research (ICMR) to use anti-
malarial drug, hydroxy-chloroquine for the treatment of a select category of people infected with
Covid-19
g. Meat related products
The de-growth in all kinds of meat including that of fish, goat, shrimps/prawns and others was
due to apprehensions surrounding the spread of Covid-19 through consumption of non-
vegetarian food. Meat of goat (fresh or chilled) fell sharply by 99.7% in FY21 to 147.7 tonnes
compared with production of 54,077.1 tonnes in FY20. Similarly, fish meat and fillets
(frozen/chilled) fell by 49.2% y-o-y to 23,518.1 tonnes in FY21.
h. Vegetable Oils
Groundnut oil & soyabean oil: Contrary to expectations that soft oils experienced a spurt in
demand during lockdown as at-home consumption of food increased, groundnut and soybean oil
witnessed a decrease in production in FY21 by 41.7% and 40.9% respectively as compared with
the corresponding period a year ago. This fall was influenced by limited operations allowed for
airlines (major consumer), hotels & restaurants.
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Refined palm oil: The production of palm oil remained more or less constant at 3.5 million tonnes
in FY21 as compared with the corresponding period a year ago. During H1FY21, the demand for
the oil from the institutional segment remained muted as hotels and restaurants were completely
shut in April and May owing to Covid-19 induced lockdown. Even though hotels & restaurants
could resume operations with certain restrictions from June, they continued to witness soft
demand from consumers due to fears of Covid-19 virus. Most of the business was confined to
takeaways and home delivery.
i. Dairy Products
Milk Powder & Butter: Excessive procurement of milk during lockdown period in H1FY21 led to
conversion of milk into value added products like milk powder and butter as they have a higher
shelf life than liquid milk. The production of milk powder rose from 218 thousand tonnes in FY20
to 269 thousand tonnes in FY21, a growth of 23.3%. Also, butter’s production witnessed growth
of 13.2% to 110 thousand tonnes (earlier 97 thousand tonnes).
Ice Cream: Apprehensions surrounding consumption of cold products due to spread of Covid-19
led to a sharp fall of 41.6% in production of ice cream to 118 thousand kilolitres in FY21 as
compared with the earlier production of 202 thousand kilolitres in FY20. Also, the restriction on
movement of people for most of this period lowered the demand for ice cream. In the first two
months of the financial year there were restrictions on production as well as distribution due to
inter-state movement of goods which affected this industry. Similarly, sale of impulse category
products like yogurt, flavoured milk were also affected.
j. Beverages
Non-Alcoholic: The production of tea fell by -4.9% during FY21 whereas for instant coffee it rose
by 3.5%. Aerated drinks/soft drinks (including soft drinks concentrates) witnessed a decline in
production by -41.1% mainly owing to contraction of virus due to consumption of cold products.
Here too the limited operations of hotels, restaurants and airports/airlines affected demand and
hence production.
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Alcoholic: The production of different varieties of liquor witnessed a negative growth in FY21. It
is noteworthy to mention that the Government of India (GoI) had permitted sale of liquor albeit
with restrictions from May, 2020 as excise of liquor is one of the major revenue-generating
sources for state governments. The category of beer and other distilled and fermented alcohol
witnessed a decline of 47% to 684 thousand kilolitres in FY21 from 1,291 thousand kilolitres in
FY20. Similarly, production of wine declined by 7.9% to 35 thousand kilolitres from earlier
production of 38 thousand kilolitres in FY20. Therefore, even after opening up this segment due
to revenue compulsions, consumption was lower due to the restrictions on movement of people
as well as timings for the outlets.
Bottled water: Typically, consumption of bottled water should have increased as people became
more conscious of hygiene. Contrary to expectations, the production of bottled water fell by 64%
in FY21 to 301 thousand kilolitres as compared with 836 thousand kilolitres for the same period
last year. This decline was again attributed to restrictions imposed on travel and movement of
people in order to arrest the spread of Covid-19
k. Fireworks/Pyrotechnic articles
Its production fell by 23.6% in FY21 on a yearly basis due to restrictions on social gatherings such
as weddings and ban on fireworks during festive season of Diwali due to health risks associated
with air pollution that could worsen the symptoms of Covid-19. Further, this category has been
declining annually since 2016-17.
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2.6 Key M&A Deals in the Industry
Target name Acquirer Name Merger/Acquisition Year

Kottaram Agro Foods (KAF) Tata Consumer Products Acquisition 2021
Limited (TCPL)
Eveready Industries Dabur's Burman family Acquisition (19%) 2020
GlaxoSmithKline Consumer Hindustan Unilever Ltd. Merger 2020
Healthcare Limited (HUL)
Glenmark Pharmaceuticals Hindustan Unilever Ltd. Acquisition 2020
Ltd.’s Vwash Brand (HUL)
Eastern Condiment Orkla Acquisition (68%) 2020
Beardo Marico Acquisition (100%) 2020
Sunrise Food Private Limited ITC Ltd. Acquisition 2020
PepsiCo’s stake in NourishCo Tata Consumer Products Acquisition 2020
Beverages Limited Limited (TCPL)
Sunrise Food Private Limited ITC Ltd Acquisition 2020
Canway Corporation (South Wipro Consumer Care & Acquisition 2019
Africa) Lighting
Delectable Technologies ITC Ltd Acquisition (33.42%) 2019
Everstone Capital and Pan Haldiram Prabhuji (Haldiram Acquisition 2019

India Food Solutions Pvt Ltd group)
Splash Corporation, Wipro Consumer Care & Acquisition 2019
Philippines Lighting
GlaxoSmithKline Consumer Hindustan Unilever Limited Acquisition 2018
Healthcare (GSKCH India) (HUL)
Avadh Snacks Pvt Ltd Prataap Snacks Ltd Acquisition 2018
Bombay Shaving Company Colgate Palmolive Acquisition (14%) 2018
Brillare Science Emami Acquisition (26%) 2018
Beardo Marico Acquisition (45%) 2018

Future Consumer Limited Future Capital Investment Acquisition 2017
Private Limited
D&A Cosmetics Proprietary Dabur India Acquisition 2017
Ltd and Atlanta Body & Health
Products Proprietary Ltd
Helios Lifestyle Pvt Ltd Emami Ltd Acquisition (30%) 2017

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3. KEY DEMAND DRIVERS FOR THE INDUSTRY
a. Increasing Population
China’s (most populated country in the world) population grew at a rate of 12% from 1.25 billion
in 1999 to 1.4 billion in 2019 whereas India’s population increased by 32% from 1.04 billion to 1.37
billion during the same period. India accounts for the second largest populated country in the world
and rising population leads to increase in consumption for F&B, home and personal care and
healthcare products.
Figure 10: Population in China & India (in billions)
1.37 1.4
1.33
1.25 1.22
1.04
1999 2009 2019
India China
b. Favourable Demographics
The estimated median age in India is 28.7 years in 2020. This is the lowest when compared to the
estimated median age in other leading economies in the world. It is 38.5 and 38.4 years in USA
and China respectively. The increasing size of the young population in the country has led to a fall
in the dependency ratio (ratio of dependent people to working-age people, 15 to 64 years of age)
as it came down from 64% in FY2000 to 50% in FY19. This could lead to higher allocation for
discretionary expenditure and promote growth in demand for consumer goods.
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Also, the share of people in the age group of 15-64 years, which is the high consuming class has
risen from 36% in FY2000 to 50% in FY2019. All the above factors have enabled the growth in food
services industry, home and personal care products as young people are known to be more open
and adaptable to exploring new trends and embracing the advancements in technologies. Further,
the age group below 25 years is one of the highest spending age group, the current age dynamics
are expected to boost the sales of consumer goods.
c. Rapid Urbanisation
Urbanisation refers to the process of conversion of rural areas into urban areas as well as migration
of population from rural to urban areas. The country’s urban population accounted for a share of
30.9% in 2010 and is projected to increase to 34.9% in 2020 as against the estimated global average
of 56.2%. Numerous schemes and projects launched by the government such as the Smart Cities
Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Pradhan Mantri Awas
Yojana (Urban) among other initiatives has aided the growth in urbanisation. It is to be noted that
the global outbreak of Covid-19 and subsequent imposition of restrictions in the country led to a
temporary disruption in the form of reverse migration. However, the migrants returned to the
cities once the Covid-19 cases were brought under control and restrictions were eased.
Figure 11: Urban population as percentage of total population in India
37.4
34.9
32.8
30.9
2010 2015 2020E 2025E
Source: UN World Urbanization Prospects: The 2018 Revision
d. Growth in women workforce

Page 25 of 40

Increased awareness amongst other enablers has led to more girls in both urban and rural areas to
pursue education which has led to a rise in employment of women. In CY18, 112 million women
were employed and the share of working women grew from ~17% in CY2010 to ~24% in CY2018.
The increase in share of women in the workforce has led to double income households and lesser
time available to prepare home cooked meals which has driven the growth in food services
industry. Further, double income means more spending power which is spent also on eating out
and semi-luxury/luxury home and personal care products.
e. Internet penetration & technological advancements
The number of internet/broadband subscribers grew at a CAGR of 19.1% from 331.7 million
subscribers in Q3-FY16 to 795.2 million subscribers in Q3-FY21. The penetration of internet in rural
and urban areas grew at a CAGR of 22.4% and 17.3% respectively from FY16 to FY21 in Q3 as shown
in chart 4 below. The higher penetration of internet coupled with increase in the number of
smartphone users and affordable date plans has increased the accessibility of FMCG products and
online FMCG market is forecasted to grow from USD 20 billion in 2017 to USD 45 billion in 2020E.
Further, online grocery and retail channels have gained prominence especially during Covid-19
outbreak as people became cautious and avoided physical stores visits.
Figure 12: Internet penetration in rural & urban areas (million subscribers)
487.0
17.3%
308.2
22.4% 219.5
112.2
Rural Urban
Q3-FY16 Q3-FY21
Source: TRAI
f. Boost in FDI inflows

Page 26 of 40

In India, 100% FDI is permitted in food processing and single-brand retail while 51% is allowed in
multi-brand retail. This is expected to generate more employment, help create a more competitive
business environment and provide quality goods to consumers amongst other benefits. FMCG
industry witnessed FDI inflows to the tune of about USD 18 billion from April 2000 to December
2020. Food processing accounted for 56.8% share of the total FDI inflows as shown in the figure
below.
Figure 13: Share of FDI inflows

5.7% 1.9%
8.2% Food Processing
Retail Trading
9.4%
Soap, cosmetic & toilet

preparations
56.8%
Paper pulp
19.1%
Vegetable Oils
g. Growth in rural consumption
Immense opportunities exist for FMCG industry players to expand in rural areas due to low
penetration levels. FMCG products posted faster growth in rural markets as compared to urban
ones primarily during Covid-19 outbreak in CY2020 as urban areas were more affected. Though the
trend was reversed during the recent second wave of Covid-19. However, going forward, demand
from rural areas is expected to grow at a faster rate as compared to urban areas on the back of
favourable monsoon and growth in rural income. According to IBEF, rural FMCG market is expected
to grow at a CAGR of 14% from 2020 to 2025.
Page 27 of 40

Apart from the demand drivers mentioned above, several other factors such as increase in
disposable income, growth in modern retail, shift in consumer lifestyles and growth of organized
segment in FMCG industry is expected to drive demand in the future.
Page 28 of 40

4. MAJOR CHALLENGES FOR THE INDUSTRY
a. Managing availability in the complex distribution set up
The Indian FMCG sector comprises of a complex distribution chain that has multiple layers of
numerous small retailers between the company and the end customer. As the number of SKUs
(Stock keeping Units) have been increasing exponentially, just ensuring availability at the last
stage of distribution has become a nightmare for companies.
Standard solutions applicable in developed countries are not suitable for a country like India that
works with smaller pack sizes. In developed countries, larger pack sizes are sold which leads to
lower cost of production whereas in a country like India, smaller pack sizes are sold to penetrate
the markets which increases the distribution costs that cannot be passed on to consumers
completely in order to create demand and make products affordable. Eventually companies will
have to find innovative ways of balancing market penetration and logistics cost.
b. Inadequate Infrastructure
Lack of proper transport system and road infrastructure especially in rural areas leads to increase
in cost of production for FMCG players. Similarly, lack of adequate chilling infrastructure and
power shortage can significantly affect distribution and sale of varied products like milk, ice cream
etc. Most Indian cities face power problems in summers and ice-cream manufacturers have to
live with these problems in their distribution network. In general, FMCG companies have to take
these issues into account while planning their supply chains.
c. Highly competitive industry
The FMCG industry consists of domestic players with PAN India and regional presence as well as
MNCs which leads to intense competition amongst the players. The companies spend
aggressively on marketing and promotional activities as the switching costs for the consumer is
very low.
Page 29 of 40

d. Dealing with counterfeit goods
Counterfeit goods damage the brand reputation and also leads to loss of sales for the companies.
According to a recent study conducted, counterfeit goods lead to sales loss of more than Rs 300
billion every year in the FMCG industry. To prevent such losses, the industry players need to
exercise greater control over their distribution channels and not just leave it to the market forces.
Page 30 of 40

5. GOVERNMENT INITIATIVES
a. Production Linked Incentive (PLI) Scheme
In November, 2020, the government approved a production linked incentive scheme for 10 key
sectors to promote domestic manufacturing and exports. One of the sectors approved as part of
the scheme was food processing. With a financial outlay of Rs 10,900 crores for food processing
industry in particular, the scheme is expected to support and enhance the global presence of
Indian food product manufacturing companies.
The scheme will be spread over a six-year period from FY22 to FY27 and is expected to generate
employment for around 2.5 lakh people by FY27. It is also expected to aid the expansion of food
processing capacity and generate food output of Rs 33,494 crores. Further, this scheme is also
expected to provide remunerative prices to farmers which in turn will lead to higher income for
them and this augurs well for the FMCG industry.
b. FDI in organised retail

In India, 100% FDI is permitted in food processing and single-brand retail while 51% is allowed in
multi-brand retail. This is expected to generate more employment, help create a more
competitive business environment and provide quality goods to consumers amongst other
benefits. FMCG industry witnessed FDI inflows to the tune of about USD 18 billion from April 2000
to December 2020.
c. National Food Security Act
The National Food Security Act was introduced in 2013, aimed at providing food grains at
subsidized rates and up to 75% of the rural population and 50% of the urban population are
eligible under the Act. It is implemented across all the states and union territories in the country.
Page 31 of 40

Households covered monthly receipt of 35

under Antyodaya Anna kg of foodgrains per
Yojana (AAY) family
Coverage under Act
Household covered monthy receipt of
under Priority foodgrains 5kg per
households (PHH) person
Source: Department of Food & Public Distribution, Ministry of Consumer Affairs, Food & Public Distribution
As per the annual report FY21 of Department of Food & Public Distribution, out of the maximum
coverage of 81.35 crore people, currently 79.43 people are covered under the act to receive the
food grain subsidy.
It is expected that savings from receipt of food grains at lower rates will allow people 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.
d. Government's Measures to Boost Economy will boost Consumption3
The government announced a special economic package under Atma Nirbhar Bharat including
measures announced by RBI totaling to about Rs 27.1 lakh crores to combat the impact of Covid-
19. The package includes cash and in-kind transfers for households, increased allocation towards
MGNREGA, credit guarantee and employment provisions under Pradhan Mantri Garib Kalyan
Rojgar Abhiyaan amongst other measures.
The progress made is detailed below:
3
Source: press release by PIB dated 8th February, 2021
Page 32 of 40

 Under Pradhan Mantri Garib Kalyan Package valued at Rs. 2.76 lakh crore, free food grain for
80 crore people, free cooking gas for 8 crore families, and direct cash transfer to over 40 crore
farmers, women, elderly, the poor and the needy were provided. As on 3rd February, 2021, a
total of 323.19 crore person-days have been generated in the current FY 2020-21 under
MGNREGA.
 Under Pradhan Mantri Garib Kalyan Rojgar Abhiyan, 50.78 crore person-days of employment
was generated incurring an expenditure of Rs. 39,293 crore.
 Rs. 3 lakh crore Collateral-free Automatic Loans for Businesses, including MSMEs: Under
Emergency Credit Line Guarantee Scheme (ECLGS) 1.0, Rs. 2.14 lakh crore has been sanctioned
to 90.57 lakh borrowers of which Rs 1.65 lakh crore has been disbursed to 42.46 lakh borrowers
as on 8th January, 2021.
 Rs. 45,000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs are being provided. Purchase
of portfolio of Rs. 27,794 crore has been approved by PSBs and Rs. 1400 crore are currently in
process of approval/negotiations as on 4th December, 2020.
 Rs. 30,000 crore Additional Emergency Working Capital Funding for farmers through NABARD
is being provided. Rs. 25,000 crore has been disbursed so far as on 4th December, 2020. Under
balance Rs. 5000 crore Special Liquidity Facility for smaller NBFCs and MFIs, Rs. 130 crore has
been disbursed as on 4th December, 2020.
The Union Budget 2021-22 has also announced a number of measures to revive economic
growth. All these measures are expected to indirectly boost consumption of FMCG products and
also aid companies combat Covid-19 induced challenging business environment.
e. Relaxation of license rules
Industrial license is not required for almost all food and agro-processing industries, except for
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.
Page 33 of 40

e. Goods and Services Tax (GST)
GST has simplified the tax structure in the country. Tax refunds on goods purchased for resale
implies a significant reduction in the inventory cost of distribution. Elimination of the cascading
effect of taxation has led to lower input costs and improvement in profitability. GST has been
beneficial for the FMCG industry as many of the FMCG products such as soap, toothpaste and
hair oil now come under 18% tax bracket against the previous 23-24% rate.
Page 34 of 40

6. KEY PLAYERS OF THE INDUSTRY
Some of the major key players operating in the FCMG sector in India are as follows:
a. Hindustan Unilever Ltd
Unilever, a global company with presence in more than 190 countries and close to 2.5 billion people
use their products every day. The company has more than 400 household brand names. Hindustan
Unilever Limited (HUL) is a subsidiary of Unilever and has a heritage of 85 years in the India. It
manufactures and markets products under the following categories:
1. Home care: Surf excel, Wheel, Rin, Vim and Sunlight
2. Beauty & personal care: Lifebuoy, Glow & Lovely, Dove, Pond’s, Clinic Plus, Lakmé, Lux and
Closeup
3. Foods & refreshments: Brooke Bond, Horlicks, BRU, Boost, Kissan, Knorr and Kwality Wall’s
*Note: The above list of brands is not exhaustive in nature
The net sales of HUL grew by 18.4% in FY21 from Rs 38,273 crores in FY20 to Rs 45,311 crores in
FY21. This was backed by a 39% growth in revenue of beauty & personal care category, followed
by 30% growth in home care segment and 29% rise in foods & refreshments segment coupled with
2% growth in other segments. Also, its operating profit and net profit grew by 18% each on a yearly
basis in FY21.
Furthermore, keeping in line with the shift in consumer behavior and lifestyles due to Covid-19
outbreak, HUL launched new products such as Lifebuoy laundry sanitizer, Surf Excel Active Hygiene
and anti-bacterial variants of Vim.
Particulars (in Rs. Crores) FY20 FY21
Net Sales 38,273 45,311
Operating Profit 9,600 11,324
Net Profit 6,738 7,954
Source: Ace Equity
Page 35 of 40

b. Ruchi Soya Industries Ltd
Ruchi Soya commenced its operations in 1986 and manufactures & markets edible oils in the
country. It owns 22 manufacturing plants and has a refining capacity of more than 11k tonnes per
day. The seed crushing capacity stood at 11k tonnes per day and packaging capacity was 10,000
tonnes per day. Its products range from vegetable oils such as Ruchi Gold oil, Ruchi star soybean
oil etc to Nutrela Soya food among other product categories. The Patanjali Group acquired the
company in 2019 through insolvency process.
The company reported a 24.4% growth in net sales in FY21 on a yearly basis while its operating
profit grew at a record 138% from Rs 401 crores in FY20 to Rs 954 crores in FY21. Meanwhile, its
net profit declined by a sharp 91%. However, after excluding exceptional items, its net profit rose
by 3 times.
Particulars (in Rs Crores) FY20 FY21
Net Sales 13,118 16,319
Operating Profit 401 954
Net Profit 7,672 681
Source: Ace Equity
c. Britannia Industries Limited
With a presence in more than 60 countries across the globe, Britannia Industries is one of India’s
leading food companies with a 100-year legacy and annual revenues in excess of Rs. 90 Billion.
Britannia’s product portfolio includes Biscuits, Bread, Cakes, Rusk, and Dairy products including
Cheese, Beverages, Milk and Yoghurt. It manufactures and markets its products under the brands
Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold to name a few.
The company’s products are sold across 5 million retail outlets with a reach of more than 50% of
Indian households. The business operates with 13 factories and 4 franchisees, in more than 100
cities and towns of India.
Page 36 of 40

The company registered a 12% growth in net sales in FY21 from Rs 10,821 crores in FY20 to 12,114
crores in FY21. It continued to dominate the biscuit market share and its operating profit grew by
32.8% while its net profit grew by 18.6% y-o-y in FY21.
Particulars (in Rs Crores) FY20 FY21

Net Sales 10,821 12,114
Source: Ace Equity
d. Dabur India Limited
With a legacy of 137 years, Dabur India has emerged as one of India’s leading FMCG companies in
the country. It has a portfolio of more than 250 herbal ayurvedic products and its product offerings
include hair care, skin care, home care, health care and food items. It manufactures and markets
its product offerings under brands such as Dabur Chyawanprash, Dabur Honey, Vatika, Real etc.
The company recorded a 13.9% yearly rise in net sales from Rs 6,310 crores in FY20 to Rs 7,185
crores in FY21. Around 62% of the company’s consolidated revenue in FY21 is generated through
consumer care segment and 9.3% is through F&B segment. Meanwhile, 26.4% share is through
revenue generated via international business. 2.3% share is through other segments. The company
launched several immunity boosting products such as Dabur Pure Herbs range and Dabur Vedic
Suraksha Tea.
Particulars (in Rs crores) FY20 FY21

Net Sales 6,310 7,185
Source: Ace Equity
e. Marico Limited
Page 37 of 40

With a presence in more than 25 countries across emerging markets of Asia and Africa, the
company is headquartered in Mumbai, India and has 8 factories in India. Its product offerings
include fabric care, male grooming products, healthy foods, edible oils and hair and skin care.
Its brands include Parachute, Saffola, Saffola FITTIFY Gourmet, Coco Soul,
Parachute Advansed, Hair & Care, Nihar Naturals, Livon, Set Wet, Set Wet Studio X, Veggie Clean,
Kaya Youth, Travel Protect etc. The international consumer products portfolio contributes to about
23% of the Group’s revenue, with brands like Parachute, Saffola, Parachute Advansed, Mediker
SafeLife, Just For Baby, HairCode to name a few.
The company reported an 8.3% growth in net sales in FY21 from Rs 5,853 crores in FY20 to Rs 6,337
crores in FY21. Also, its operating profit grew by 3% and net profit recorded a growth of 9.8% in
FY21 as compared with the corresponding period a year ago.
Particulars (in Rs crores) FY20 FY21

Net Sales 5,853 6,337
Source: Ace Equity
Apart from the companies mentioned above, several other players operate in the domestic FMCG
industry such as ITC, Nestle, Johnson & Johnson, Amul, Colgate Palmolive, Procter & Gamble,
Emami, Godrej Group, Parle Agro and Jubilant Foodworks to name a few.
Page 38 of 40

7. OUTLOOK FOR THE INDUSTRY
The recent surge in Covid-19 cases during February-March 2021 and consequent imposition of
state wise restrictions from April 2021 onwards within the country has impacted the demand-
supply dynamics in the FMCG industry in Q1-FY22.
The rural demand that had outgrown the urban demand during the first wave of the pandemic in
FY21 seems to be hit more severely in the second wave. Although restrictions are being eased
gradually across states from June-July 2021 onwards, discretionary products are estimated to
witness soft demand in FY22. The second wave caused significant financial distress to households
who are expected to become prudent in terms of spending on discretionary products and focus on
savings instead. The demand for hygiene products is likely to see continued traction due to
increased awareness with regards to Covid-19 and apprehensions surrounding the third wave of
the pandemic.
A favourable monsoon is forecasted to aid the rural demand. However, the rural economy
comprises farm and non-farm sectors and therefore prospects of good monsoon will not
necessarily imply higher demand from the whole of the rural economy. Besides, the second wave
coincided with the sowing season and unlike urban areas, testing and health infrastructure is poor
in rural regions. Hence, it is difficult to assess the impact of the pandemic on rural India and the
propensity to spend during the festive season.
Globally, the Indian market is one of the fastest growing markets for FMCG industry although the
per capita consumption of FMCG products is amongst the lowest. Hence, immense growth
opportunities exist in the market. The long-term outlook for the sector remains positive on the
back of growth in e-commerce industry, favourable demographics, increase in disposable income
amongst other enablers. Rise in the share of women workforce is expected to lead to double
Page 39 of 40

income households and thereby increasing the household’s propensity to spend and is also
expected to lead to increase in demand for ready to eat food items.
The share of unorganised players is likely to decrease following higher demand for branded
products from smaller towns and cities through online portals. Further, a change in perception of
health and hygiene following the pandemic will ensure that the demand for immunity-boosting
and hygiene products sustains even after the pandemic.
Page 40 of 40

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Indian FMCG Industry

Indian FMCG Industry

CARE Advisory Research and Training Limited.

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Abbreviations Full form

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1. ECONOMIC OUTLOOK ....................................................................................................................6

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Exhibit 1:Global Growth Outlook Projections (in %) ...................................................................................... 6

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1.1 Global Economy

Exhibit 1:Global Growth Outlook Projections (in %)

Country/Group 2020 2021E 2022E

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1.2 Indian Economy1

Date of forecast GDP growth

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Source: CARE Ratings Economics Research

Some of the major economic indicators are mentioned below.

1.1.1 Gross Domestic Product (GDP)

Figure 1: Quarter wise yearly growth in GDP at constant prices (in %)

1.1.2 Gross Value Added (GVA)

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Source: CARE Ratings Economics Research

1.1.3 Industrial Growth

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Figure 3: Yearly growth in IIP (in %)

1.1.4 Per Capita GDP, Income and Final Consumption

Figure 4: Growth in per capita GDP, Income & Final Consumption

Per capita GDP Per capita GNI Per capita PFCE

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2. OVERVIEW, TRENDS & GROWTH OF FMCG SECTOR IN INDIA

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2.2 Segments of FMCG sector with examples

Household & personal Healthcare

Source: CARE Advisory research

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Figure 5: Segment wise breakup of FY19 revenue

19% Household & personal care

Source: CARE Advisory research

2.3 Revenue Growth

Figure 6: Indian FMCG Industry revenue (in Rs crores)

FY16 FY17 FY18 FY19 FY20

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Source: Ace Equity

2.4 Sector Composition

Figure 7: Urban-rural revenue breakup in FY19

Source: CARE Advisory research

Figure 8: Rural segment market size (in USD billion)

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Source: CARE Advisory research

Figure 9: Quarter wise growth in index of non-consumer durables y-o-y (in %)

Q1-FY21 Q2-FY21 Q3-FY21 Q4-FY21 Q1-FY22

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