What is FMCG?

FMCG stands for Fast-moving consumer goods also called consumer packaged goods sometimes. It
means the goods/products that are sold quickly and are mostly priced at a relatively low cost.
Examples include non-durable household goods such as packaged foods, beverages, toiletries,
candies, cosmetics, over-the-counter drugs, dry goods, and other consumables.

Consumer POV Company POV

Frequent purchases Low effort (pre-decided) High volumes Low margins

Low prices Short shelf life Extensive distribution High inventory tunrover

Rapid consumption
Value Creation and Value Chain
Fast-moving consumer goods (FMCG)
sector is India’s fourth-largest sector and is
an important contributor to India’s GDP.

FMCG sector provides employment to

around 3 million people accounting for
approximately 5% of the total factory
employment in India.

India’s fast-moving consumer goods

(FMCG) sector grew 7.5% by volumes in
the April-June 2023 quarter, the highest in
the last eight quarters, led by a revival in
rural India and higher growth in modern
trade.
FMCG Market Size
FMCG market reached US$ 167 billion as of
2023. Trends in FMCG revenue over the years
700
The total revenue of the FMCG market is expected to grow at a
615.87
CAGR of 27.9% from 2021 to 2027, reaching nearly US$ 615.87 600
billion.
500
In 2023, urban segment contributed 65% whereas rural India
contributed more than 35% to the overall annual FMCG sales. 400

The FMCG market in India is expected to increase at a CAGR of 300

14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020.
200

The India online grocery market size has been projected to grow 110
from US$ 4.45 billion in 2022 to US$ 76.76 billion by 2032, at a CAGR 100 83.3
49 52.8 68.4
of 32.7% through 2032.
0
2016 2017 2018 2019 2020 2027E
Source: IBEF
Growth Drivers
Growing awareness, easier access and changing lifestyles have been the key growth drivers for the
sector. 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.

High e-commerce adoption is proof of consumer aspirations Favourable Government initiatives & policies

Premiumisation Adoption of Branded Products Rural consumption has increased

A younger population base has increased the spending intensity Share of the affluent and elite class has expanded
Why FMCG?
Attractive Policy Inorganic
Growing Demand
Opportunities Support Growth

Indian food processing market Entrepreneurs interested in Union Budget 2023-24 has In January 2023, ITC
size reached US$ 307.2 billion setting up the food-related allocated US$ 976 million for announced plans to acquire
in 2022 and is expected to FMCG industry can set up their PLI schemes that aims to 100% of Sproutlife Foods, a
reach US$ 547.3 billion by processing units in the reduce import costs, improve D2C startup and parent
2028, exhibiting a growth rate government-designated agro- the cost competitiveness of company of health food brand
(CAGR) of 9.5% during 2023- processing clusters, which domestically produced goods, 'Yoga Bar' over a period of
2028. helps cut down the plant setup increase domestic capacity, three to four years.
costs. and promote exports. Union In December 2022, Hindustan
Digital advertising will grow to budget 2023-24 focuses on Unilever Limited announced its
reach US$ 9.92 billion by 2023, With the advent of online retail reviving rural demand by foray into the 'Health &
with the FMCG industry being and e-commerce, FMCG boosting disposable income, Wellbeing' category through
the biggest contributor at 42% businesses are able to market allocation to farms and higher strategic investments in Zywie
share of the total digital spend. and sell their products across fund allocation on rural Ventures Private Limited
the country without investing infrastructure, connectivity, ("OZiva") and Nutritionalab
much in marketing activities. and mobility to create long- Private Limited ("Wellbeing
term jobs. Nutrition").
.
.
 Sector Valuation
The sector's valuation has experienced a consistent re-rating over the last 10-15 years. The sector was trading at around
30x P/E during 2014, but it has since undergone a re-rating, with multiples increasing to more than 40-45x since 2019.
However, over the past 2-3 years, sector valuations have remained relatively stagnant.

The sector (excluding ITC) has largely experienced a de-rating in valuation over the past two years. Most of the stocks have
generated returns below their earnings growth as the quality of earnings (volume-led) was lacking.

Sector PAT Mix Sector Market-Cap Mix

Source: MOFSL
Revenue Mix: Staples vs. Discretionary
Staples contributed 68% of the consumer universe in FY10, with major contributors being F&B, Cigarettes, Home
Care, Personal Care, etc. The mix of staples category, however, has decreased to 56% in FY23. The consumer
wallet has shifted towards discretionary categories. The biggest gainers were paints, jewelry and QSR.

Source: MOFSL
 Volume Growth
Staple companies (indexing for FY18)

Discretionary companies (indexing for FY18)

Source: MOFSL
Category-wise Growth Trends
 Oral Care
The oral care category grew more than 15% during FY07-FY15. However,
when the natural/ayurvedic trend emerged. Dabur has outperformed the
category, delivering a 9% revenue CAGR over the last five years. With a
high oral care penetration (>90%), the category reported a 6% CAGR over
FY18-23.

Source: MOFSL
 Hair Care
Marico holds a dominant market position in the category and has
delivered a 7% revenue CAGR over the last five years. Emami's Kesh King
outperformed while Navratna underperformed during FY18-23.

Source: MOFSL
 Personal Care
This category always looks promising due to low penetration and room for
upgrades. However, new entrants have hurt the mainstream brands
consistently. Category growth over FY07-15 was 13%, which fell to 7% over
FY15-23. Gillette outperformed during the last 12 months

Source: MOFSL
 Home Care
The category posted double-digit growth over the last five years across
most of the companies. HUL, the market leader, posted a 13% revenue
CAGR over FY18-23.

Source: MOFSL
 Food & Beverages (F&B)
Marico has outperformed this category with a 15% revenue CAGR over FY18-23.
However, its performance was hurt in 9MFY24 due to a price correction of
edible oil. ITC/Nestle also delivered 11%/12% (five-year) revenue CAGR along
with a high single-to-double-digit growth in 9MFY24. This growth was driven
by premiumization and penetration-led strategies. The category CAGR has
been one of the best in the staples category.

Source: MOFSL
 Cigarette
This category has faced several challenges over the past 10 years, including
high taxes and the increasing prevalence of illegal cigarettes, which have
affected the sales of top legal brands. The revenue growth during FY07-15
was 14% for the category, which tapered down to 6% during FY15-23. Godfrey
Philips is an outperformer in the Cigarette category with a revenue CAGR of
8% (five-year ended FY23).

Source: MOFSL
QSR
A significant portion of the category's growth is driven by the addition
of stores; over the past three years, most brands have substantially
increased their store count. The category registered a 15% revenue
CAGR during the last five years. KFC has witnessed higher growth in
both Devyani and Sapphire, while Specialty Restaurants has been the
most underperforming.

Source: MOFSL
 Liquor
The historical growth trend was not strong. The category has faced several
headwinds such as higher taxes, highway ban, pricing pressure, etc. Over the
last three years, P&A growth has been very strong, clearly supporting the
upgrade narrative.

Source: MOFSL
 Paints
This category represents one of the most compelling growth compounding
stories, with the long-term CAGR exceeding 15%. Asian Paints and Berger
achieved a 15% revenue CAGR from FY18 to FY23. However, growth has been
subdued in 9MFY24, with mid-to-high single-digit growth being achieved due
to price cuts. Indigo Paints delivered a 22% revenue CAGR over FY18-23, and it
also achieved a double-digit growth in the last 12 months.

Source: MOFSL
 Footwear
This category delivered a 16% revenue CAGR during FY07-15, but the
growth rate decreased to 9% during FY15-23. Metro Brands reported
double-digit revenue growth over the last five years and also in the
LTM, despite a slowdown in the discretionary market.

Source: MOFSL
 Jewellery
This is one of the best growth compounding categories with the
benefits of transitioning from unorganized to organized players.
Titan has not only outperformed its competitors in the last five
years but also in the last 12 months. Gold inflation and store
expansion are further supporting the growth of the category.

Source: MOFSL
 FMCG Companies CAGR during FY24E-26E

Source: MOFSL
 FMCG Companies PAT and Market cap CAGR over the years

Source: MOFSL
Changes in GROSS and EBITDA margins over FY19-24E

Source: MOFSL
The company operates into three large categories,
with a presence across the traditional and emerging
segments.
It is a market leader in ~90% of its businesses.

The company earns ~29% margins from the beauty

and personal care segment which is the most among
its divisions.
It is estimated that a record of 400 HUL alumni are
CEOs/CXOs across corporate India.

Revenue Split FY23

Home Care: 29%

Beauty & Personal Care: 42% Foods and Refreshments: 29%

ITC operates in five business segments at present —
FMCG Cigarettes, FMCG Others, Hotels, Paperboards,
Paper and Packaging, and Agri Business.

ITC is the leader in the organised domestic cigarette

market with a market share of over 80%. Despite this
vertical contributing only 40% to the revenues, it is the
most profitable business of the company with 81%
contribution towards PBIT.

Revenue Split FY23

Cigarettes : 37% (vs ~57% in FY17) Agri : 23%

FMCG: 23% Paperboards & Packaging :11% Hotels: 3%

Nestle India Limited is a subsidiary of Nestle which is a Swiss
MNC. The company operates in the Food segment.

Nestle India a subsidiary of Nestle S A (holds 62% stake) is

primarily involved in the Food business which incorporates
product groups.

Company has launched 130 new products in the last 7 years

and its many new projects are in the pipeline. Some of its
recent launches include MAGGI Korean noodles, MAGGI Oats
Noodles with Millet Magic and GERBER Puffs.

Revenue Split FY23

Prepared Dishes And Cooking Aids: 32% Beverages : 11%

Milk Products And Nutrition: 40% Confectionery: 17%

Dabur India Limited is the fourth largest FMCG Company in India and
the world’s largest Ayurvedic and Natural Health Care Company with a
portfolio of over 250 Herbal/Ayurvedic products.

Dabur has ~63% market share in the health supplements segment

(Chyawanprash), ~16.5% in the oral care (toothpaste) segment and
15% in the hair oil segment. It is the market leader (around 60%
share) in the fruit juice segment

Capital Expenditure of 374 Cr was incurred during FY22

and the company has pledged an investment of 550
Crore in Capex over the next 5 years.

Revenue Split FY23

Health care: 36%

Home & personal care: 47% Food & Beverages: 17%

Godrej Consumer Products is engaged in manufacturing
and marketing Household and Personal Care products.

India accounts for 56% of revenues, followed by Africa, USA

and Middle East (25%), Indonesia(14%), and others.

GCPL has adopted a growth-centric strategy, which

includes pursuing inorganic growth, cross-selling, entering
new categories, and expanding the TAM for existing
products.

Revenue Split FY23

Personal Care: 58% Home Care : 39%

Others: 3%
Britannia is one of leading players in the business segment
with leading market share in the Indian biscuit segment which
is also 90% of its revenue

The company is one of the largest player in the organised bread

market with an annual turnover of over 1 lac tons in volume and
Rs.450 crores in value.

Britannia Industries is building its mega project in Ranjangaon,

Maharashtra to increase the capacity of all categories and has
invested 700 Cr so far and it plans to add another 800 Cr
strategically. The company will receive 110% incentive from the
Maharashtra government after the completion of the project.

Revenue Split FY23

Bread: 5% Dairy : 5%

Bakery and Biscuits: 90%

Emami is one of the leading companies in the
Personal Care
personal and healthcare segment with leadership
in the niche Ayurvedic segment.
Hair Care
The Company offers a consumer portfolio of 8 brands
and 13 sub-brands.
Navratna, Zandu Balm and Boro Plus are #1 market
leader in its category.
Fair & Handsome is the first brand to revolutionize
men’s grooming segment in India,

Revenue Break Up FY23:

Domestic: 83% &
Balm
International: 17%

Market Share
Navratna– 66% Boro plus– 74% Zandu Balm- 55%
Men’s Grooming
Kesh King– 27% Men’s Fairness Cream– 65%
 Speciality
Colgate-Palmolive India Ltd is engaged in
Products Tooth
manufacturing/ trading of toothpaste, tooth
powder
powder, toothbrush, mouthwash and personal
care products.

It has a penetration of ~88% in the domestic market. Mouth

Palmolive wash
The company has its R&D center in Mumbai,which
is one of its largest R&D facilities globally.
Tooth
Presently, the company spends ~13% of its revenues Brush
on advertising.

Market Share
Tooth Paste
Toothpaste– 51% Toothbrush– 30% Tooth powder– 48%
Proxy Play Packaging
Contract Manufacturing

Paint and Ice cream boxes

Glass bottles: Alochol and perfumes

Packing Tubes

Cardboard Boxes
Source:
MOFSL
IBEF
CSLA
Euromonitor
Company Reports