FMCG SECTOR IN INDIA

Group 4(LAL BAHADUR SHASTRI INSTITUTE OF

MANAGEMENT)

SUBMITTED BY:
ANAND CHAUBEY
GEETIKA NICHANI
NISHANT GUPTA
PRANAY PRATEEK
RESHAM GROVER
SAJAL JAIN
 INTRODUCTION

 Fast moving consumer goods are the products that are sold quickly
and have small shelf lives. It has wide variety of items that the
consumer consumes on daily basis. Main characteristics of FMCG
products is:
i) Used atleast once a month.
ii) Used directly by the end consumer.
iii) Non-Durables.
iv) Sold in packaged form.
v) They are branded.
 Fast-Moving Consumer Goods Sector in India is fourth largest
sector in India.
 It employs about three million people accounting for about 5% of
the total industrial workers in the country.
 There are three main segments in the sector, Household and
Personal care which has a sector share of about 50%, Healthcare
having sector share about 31% and Food and Beverages
comprising about 19% of the sector.
 Rural market having about 45% share in sector’s total revenue is a
very large contributor to the FMCG sector. Demand for goods and
services of good quality has been growing in the rural areas
because of improved distribution channels of manufacturing and
FMCG companies.
 The FMCG sector has been the mainstay of Indian capital market,
producing several big stocks like Asian Paints, Unilever, Marico,
Bajaj Consumer products etc.
 MAIN COMPANIES IN THE
SECTOR

▪ Patanjali Ayurved Ltd.

▪ Parle Agro
▪ Asian Paints Ltd
▪ Himalaya Healthcare Ltd
▪ ITC FMCG
▪ Amul
▪ Godrej Consumer Products Limited
▪ Jyothy Laboratories
▪ Guruji Products Limited
▪ Dabur India Ltd.
▪ Hindustan Unilever Limited
▪ Emami
▪ Nirma
▪ Zydus Wellness
▪ Britannia
▪ Pidilite Industries
▪ Wipro Consumer Care & Lighting Ltd
▪ Marico
▪ Future Consumer Enterprises Ltd

These are some brands in the

FMCG sector in India with
Hindustan Unilever, Dabur,
Imperial Tobacco Company,
P&G, Patanjali are some of
the leading brands in the
FMCG sector with market
shares as shown in the
picture.
 MAJOR PRODUCTS IN THE
SECTOR

There are three major segments in Indian FMCG sector:

 Household and personal care, it accounts for about 50% of the
sector. The segment includes oral care, skin care, hair care,
cosmetics and deodorants, perfumes, feminine hygiene, fabric
wash and household cleaners.
 Healthcare, it accounts for about 31% of the sector. This sector
includes OTC products and ethical.
 Food and Beverages, it accounts for about 19% of the sector. It
includes health drinks, staples, bakery products, snacks, chocolates,
ice creams, fruits, vegetables, tea, coffee, branded flour etc.
Some of the product types in these segments are listed below:

▪ HOUSEHOLD PRODUCTS: Fabric wash, synthetic detergents,

floor cleaners, toilet cleaners, upholstery cleaners, metal polish,
shoe polish, car fragrance, air fragrance etc.
▪ ORAL CARE: Toothpastes, sanitizers, mouthwashes
▪ SKIN CARE: Fairness creams, lotions, gellies, shower gels,
moisturizers, face wash, hand wash etc.
▪ HAIR CARE: Hair oils, shampoos, conditioners
▪ COSMETICS: Face creams, lipsticks, nail polish, talcum powder,
hair styling products etc.
▪ DAIRY PRODUCTS: Milk, curd, cottage cheese, yogurt etc.
▪ BAKERY PRODUCTS: Cookies, biscuits, rusks, breads, buns
etc.
▪ PAPER PRODUCTS: Tissues, diapers, sanitary pads etc.
▪ CONFECTIONARY: Chocolates, candies, cocoa, chewing gums
etc.
▪ FOODS AND BEVERAGES: Branded flour, cereals, corn flakes,
fruit juices, tea, coffee, carbonate drinks etc.
▪ INDUSTRIAL PRODUCTS: Enamel paints, waterproofing,
exterior paints, adhesives
▪ TOBACCO PRODUCTS: Cigarette, cigar, bidi, gutka, pan
masala
▪ NATURAL PRODUCTS: Processed fruit, fruit cane, beans,
maze, wheat, rice etc.
▪ HEALTH RELATED PRODUCTS: Ointments, balms etc.
 MARKET OVERVIEW

▪ The sector has grown from $31.6 billion in 2011 to $52.75 billion
in 2017-18 and is further expected to grow at a Compound annual
growth rate of 27.86% to reach a valuation of $103.7 billion by
2020. It is projected to grow at about 11-12% during 2019. Its rate
of growth was about 16.5% during June-September 2018,
supported by
moderate
inflation,
increase in
private
consumption
and rural
income. The
urban
segment of
the sector is
expected to
grow at a steady growth rate of 8% in fiscal year 2019 and rural
segment is expected to contribute 15-16% of total income in
coming fiscal.
▪ Final consumption expenditure will grow at a CAGR of 25.44 from
2017-2020 as per the expectations. It will reach to about $3.6
trillion in 2020 from $1.82 trillion in 2017.
 URBAN AND RURAL
MARKETS

 Accounting for about 55%

in total revenue, urban
sector is the largest
contributor to the overall
revenue generated by the
FMCG sector.
 Although rural sector is
having a lower 45% share
in the total revenue earned
by the FMCG sector but
the total spending has 50%
on consumer goods in
rural areas and thus it has potential to grow.
 In the last few years, the market for FMCG has grown on a faster
pace in rural areas as compared to the urban areas mainly because
of increasing income and changes in tastes towards brands and
quality products.
 In the fiscal year 2018, rural consumption rose by 9.7%
 The
FMCG
markets
in the
rural
parts of
the
country
is
expected
to increase from $220 billion by 2025 from $23.63 billion in 2018.
TECHNOLOGICAL SUPPORT
TO THE SECTOR

 India’s increasing availability of internet, growing infrastructure,

changing tastes of people towards online transactions has boosted
online sales.
 The online FMCG market is expected to grow from $20 billion in
2017 to $45 billion in 2020 that is mainly because internet users in
the country
are expected
to increase
from 90
million in
2017 to 200
million in
2020.
 By 2020, it is
expected that
about 40%
FMCG
consumption
would be
digitally
influenced.
 About 72%
consumers
are likely to
shop online for premium products because it gives them better
information of the product and most likely a better priced product.
 E-commerce segment is expected to contribute about 11% of the
overall FMCG sales by 2030.
 FDI INFLOWS IN THE
SECTOR

 100% FDI is allowed in food processing and single brand retail

while there is a cap of 51% on the multi brand retail.
 This would boost employment and would ensure high visibility of
brands in the retail outlets encouraging them to launch new
products and in turn higher consumer spending.
 There have been about $14.67 billion of inflows in the period from
April 2000 to March 2019.
 From all the investment most was done in food processing, about
62.03% of the total investment in FMCG.

 Investments related to FMCG sector, arising from soaps, toiletries,

paper pulp, sugar, food processing and Vanaspati, worth rupees
916.13 billion were done between April 2000 to December 2018.
 RP-Sanjiv Goenka is investing capital fund of $14.74 Mn in
FMCG startups
 Dabur is planning to invest Rs250-300 crores in FY19 for capacity
extensions and acquisitions.
 GST IMPACT

▪ The tax rate on the FMCG industry was about 22-24% before GST
but after GST the average tax rate on the industry has come down
to about 18-20%. The companies majorly impacted by this are
listed below:

PRODUCT PREVIOUSLY CURRENTLY IMPACTED

TAXED AT TAXED AT BRANDS
(%) (%)
Detergents 23 28 HUL, P&G,
Jyoti
Laboratories
Shampoos 24-25 28 HUL, P&G,
Dabur,
Himalaya
Sanitary Napkins 10-11 18 P&G Hygiene
and Healthcare
Skincare 24-25 28 HUL, Dabur,
Himalaya,
Patanjali
Hair dye 23-28 28 Godrej
Consumer
Products
Ayurvedic Medicines 7-10 12 Dabur, Emami

Toothpastes, Soaps 22-24 18 Colgate-

and Hair oils Palmolive,
HUL, P&G
▪ Companies such as Patanjali, HUL, ITC and Marico either are
slashing prices of their products or are increasing the dispatch
volumes of their products to extend the benefit of GST regime to
their customers. For instance, HUL slashed the price of its Rin Bar
soap from Rs.18 to Rs.15 for 250 gm soap and increased the
weight of its 90 gm Surf Excel pack to 105 gm.
▪ Companies having edible oils and hair oils will definitely benefit
from these taxes as both these products have a reduced tax.
▪ On the other hand, dry fruits majorly given as gifts in our country
will become expensive because the tax on dry fruits has increased
from 4-5% to 12%. Also, tax on milk products such as ghee, butter
and cheese has increased from an average of 4-5% to 12%. As a
result of this companies like Amul and Nestle have to increase the
prices of their products.
▪ The tax on aerated drinks, sweetened water and other bevarages
has also increased post GST from an average of 12% to 28% now.
Giving a big hit to the beverage industry. Also, according to Indian
Beverage Association, this move of the government will have a
ripple effect and will hit farmers, bottlers, distributers and retailers.
 ECONOMIC FACTORS
▪ SUPPLY: Abundant supply of products from physical stores
across the country and also, through e-commerce network.
Although distribution networks are being strengthened in the rural
areas. Also, because of possibilities of capacity extensions in the
long run, the price elasticity of supply in the sector is fairly elastic
in the long run.
• DEMAND: With food and daily care products being items of
frequent consumption, demand is relatively inelastic and is not
much affected by slowdowns. Rising participation of women in the
workforce and rising nuclear families led to higher demand for
convenience foods, especially in urban areas. Also, due to
unavailability of closed substitutes in the market people could not
shift from products of FMCG industry to others. Thus, there is
Inelastic
demand for its
product
relative to
price. Also,
with
increase in
income
people start to
consume more of packaged daily products than the loose ones,
hence, income elasticity of demand is moderately high.
• BARRIERS TO ENTRY: Huge investment is required to make
brand value and distribution network.
• BARGAINING POWER OF THE SUPPLIES: Suppliers being
small and fragmented and have limited bargaining power.
• BARGAINING POWER OF THE BUYERS: Rising
competition and span of e-commerce industry has given some
amount of bargaining power to the consumers.
• COMPETITION IN THE INDUSTRY: Internal competition in
the industry is very high with huge number of companies in the
sector, which makes the FMCG industry structure more inclined
towards to the competitive market structure.
 ADVANTAGES IN
INDIA

▪ GROWING DEMAND: Increasing incomes and changing

demographics towards the use along with the changes in tastes and
preferences of the population towards brand value is aiding the
FMCG sector. India will contribute about 5.8% in the global
consumption at the end of FY20 as per the expectations.
▪ ATTRACTIVE OPPORTUNITIES: Low market participation in
the rural offers very high potential for growth. Also, with rising
disposable income in rural sector due to direct cash transfer
schemes by the government helps in increasing demand for FMCG
products. In urban areas with advent of technology, people have
started using e-commerce more and are relying on online payments
giving FMCG companies need to alter their distribution networks
into more cost-effective ones.
▪ INVESTMENTS: FMCG sector attracts investments from big
domestic players as well as from foreign players in the segments.
For instance, Dabur is investing Rs. 250-300 crore in the sector,
similarly, R.P. Goenka is investing and also, Roots venture is
investing big amounts in the sector.
▪ POLICY SUPPORT BY GOVERNMENT: Initiatives like Food
Security bill giving direct cash transfers to households, covers
about 40% of the Indian households is helping in growth of FMCG
sector. Also, the FDI policies of India, requiring minimum of $100
Mn as capitalization from foreign, is aiding the FMCG sector to
grow.
 DRIVERS OF GROWTH

 SHIFTING TO ORGANIZED MARKETS, with increasing

brand consciousness, the share of unorganized sector is
decreasing. New channels of retail will augment growth in the
sector. Post GST the total revenue of the FMCG sector having
part of modern trade grew by 10%.
 INCREASE IN PENETRATION, low penetration in the
segments like instant foods indicate the scope of volume
growth. Investment in the sectors attract more investors as
FMCG products have demand throughout the year. Increased
capacity of food parks, food processing factories and food labs
to 13, 1.141 million and 42 respectively has led to an increased
penetration and guaranteed enough supply to fulfill the demand
of the consumers.
 EASY ACCESS, accessibility to internet and product
availability on the internet has made it easier to get any product
anywhere any time. The e-commerce giants like Flipkart and
Amazon along with grocery apps like Grofers and Big Basket
has helped in this.

 RURAL CONSUMPTION, increasing income and high

aspirations has led to higher brand awareness in rural areas and
thus, higher demand for FMCG products. Rural market is still
untapped has an ability to give high growth volumes.
STRATEGIES TO BEAT THE
COMPETITION

 PROMOTIONS AND OFFERS, companies are attracting

customers by giving them special offers like ITC often gives its
customers combos deals on its various products like soaps.
 NEW PRODUCT LAUNCHES, keeping in mind the changing
tastes and preferences of the people, companies need to
introduce new products in the market, like, ITC limited in FY19
launched more than 60 new products in the market. Also,
Britannia announced that it will launch 50 new products in the
market in FY19.
 EXPANSION, in terms of investment can lead to newer
technologies in the country which can make production more
cost effective and business more profitable, like, in February
2019, HUL received $22 Mn for its expansion from Convergent
Finance LLP. Also, companies like Dabur are investing capital
to increase their production capacity and to make some
acquisitions.
 CUSTOMISATION, introducing different combination of
products in different markets to tap as many markets as
possible.
 GREEN INITIATIVES TO LOWER COSTS, companies
can invest in more energy efficient plants which will benefit the
society as well as lead to lower cost of production in long run,
like, HUL’s Sumerpur plant uses solar power majorly.
 JOINT VENTURES, Eveready India entered into a joint
venture with the Wings Group in January 2018. Wings group is
a large Indonesian conglomerate and a major FMCG company.
Through this Eveready plans to launch a range of FMCG in the
country.
 PRODUCT INNOVATION, in 2018, Nestle, a big
Switzerland company, entered into India’s pet care segment by
introducing a range of pet foods called ‘Purina Supercoats’.
 CONCLUSION AND
FUTURE PROSPECTS
 Leading players in the sector have strong penetration in the
rural India. Also, they stand to gain advantage of technology
like advances in e-commerce sector to better logistics. In the
segment of household pesticides, Godrej is there with 25% sale
of household pesticides sale from rural areas. Rural FMCG
sector is expected to touch the valuation of $220 billion by
2020.
 Due to direct cash transfers schemes, Mahatma Gandhi National
Rural Guarantee Act (MNREGA), Minimum Support Prices to
farmers and loan wavers to farmers has led to the increased
disposable income of rural households, thus, giving
opportunities of growth in FMCG sector there.
 Rising income and increasing brand consciousness amongst the
youth has also acted as driver to the growth of the sector. It is
expected that by 2020, India’s contribution in global
consumption would double to about 5.8%.
 Working on penetration into untapped rural markets, creating
demand for premium products by launching newer products in
the market, initiating more and more of joint-ventures, realizing
the cost advantages in India in the foreign markets to capture
foreign markets can lead to faster growth of the sector.
 So overall, growing demand, attractive opportunities, higher
investment and government policy support are the main
advantages to the FMCG sector in India.

xxxxxx