Critical Analysis Of
Indian FMCG Sector
INTRODUCTION
The Fast Moving Consumer Goods Sector is
the fourth largest sector of Indian economy
with total market size of more than 60000
crore.
The FMCG sector in India is expected to
grow at a compounded annual growth rate
(CAGR) of 9% to a size of Rs 1,43,000 crore
by 2010 from Rs 93,000 crore at present.
Contd………..
With a growth of 52.5%, the BSE FMCG
Index has, during the last one year,
outperformed the Sensex, which could
manage a growth of 41% only.
A well-established distribution network,
intense competition between the organized
and unorganized segments, low operating
cost, strong branding characterizes the
sector.
INDUSTRY SEGMENTS
Personal Care
Household Care
Branded and Packaged Food and Beverages
Spirits and Tobacco
INDUSTRY CHARACTERISTICS
Branding
Distribution Network
Contract manufacturing
Large Unorganized Sector
Market Players In Indian FMCG Sector
Domestic Players:-
ITC Limited
Marico
Nirma Limited
Foreign Players:-
Cadbury India Limited
Cargill
Coca Cola
Colgate Palmolive India
Hindustan Unilever Limited
Nestle India Limited
PepsiCo
Trends In FMCG Sector
The FMCG sector has been registering double-digit growth
in sales since the last couple of years. Currently, with
annual revenues of US$ 14. 74 billion, it is the one of the
most promising sectors.
The FMCG sector is witnessing rapid growth in rural areas
and is estimated to grow by 40 per cent compared to the
growth of 25 per cent in urban areas.
PepsiCo has announced a US$ 500 million investment in
India over the next three years.
FMCG companies have acquired about 15 companies and
have spread their presence in more than a dozen countries.
Indian FMCG Market Size
(In US $ Billion)
(Source: IBEF FMCG Analysis)
Rise in Disposable Income
With increasing disposable income and subsequent
rise in quality of living and hygiene concerns, the
average Indian’s spending on grocery and personal
care products will likely increase.
Currently, the average Indian spends about 48%,
also the majority, of his total income on groceries
(40%) and personal care products (8%).
Rise In Disposable Income
(In USD Thousand)
(Source: Euro Monitor Goldman Sachs BRIC Report)
Competition
Significant Presence of Unorganized Sector –
Basic technology for most products is fairly simple
and easily available.
The small-scale sector in India enjoys exemption/
lower rates of excise duty, sales tax etc. This makes
them more price competitive.
A highly scattered market and poor transport
infrastructure limits the ability of MNCs and national
players to reach rural areas and small towns.
Low brand awareness enables local players to market
their fake look-alike brands.
SWOT Analysis: Whole Industry!
Strengths
Well established distribution networks extending to the
rural areas
Backed by strong brands
Low cost operations
Weakness
Low export levels
Small scale sector reservations limit ability to invest in
technology and achieve economies of scale
Several “Me-Too” products
SWOT Analysis: Whole Industry!
Opportunities
Large domestic market
Export potential
Increasing income levels will result in faster revenue
growth
Threats
Imports
Tax & Regulatory Structures
Slowdown in Rural Demands
Flying Geese Paradigm
FMCG Sector
Heavy Launch Cost On New-Products
Very Low Investments In Fixed Assets
Existence Of Contract Manufacturing
Distribution Networks & Logistics Are Key To Achieve High Level Of
Penetration In Markets
Mushrooming Of Unorganized Sector
“Good Price Points”, Is Key To Success
Striking Between Rural & Urban Average Consumption
Existence Of Unsaturated Markets: Expand As Income Level Rises
Demand Boomed Up By 60% In 2007 To 100% In 2015
FMCG Market Review
Q2 FY 09 Result Highlights
(Source: India Info-line Research)
FMCG Sector: Policy
Lifting Up Of Quantitative Restrictions
Reduce Excise Duties
Automated Foreign direct Investments
License Abolishment From Food Processing Industry
Easing Prices Of Raw Materials
100% FDI For NRIs & PIOs For Setting Up Units In India
State Government Led Interventions
Rajasthan: Resurgent Rajasthan
Subsidies In Taxes Specially VAT & Excises
Building teams
JUDGE
LEGISLATOR
L
SMEs
I
FMCG TA
RE
T I
UL
M
Conclusion
Middle Class Customer Population!
Domestic Consumption!
High Population!
The Leader Today Is A Follower Tomorrow!
The Finest Set Of Perfect Competition In World!
You May Not Purchase Software!
You May Not Purchase Cement!
You May Not Buy Clothes From A Retail Outlet!
You May Aside Automobiles!
But Soaps, Toothpastes, Tea, Coffee & So On Are Basic
Need For Us!
Thus FMCG Is On & On!!!!!!!!!!!!!!!
CASE STUDY:-
Confused on how to make profits out of crisis times? I
wish to provide some info on my observations with one
of the fast moving consumer goods (FMCGs) of Indian
market. Surf Excel detergent bar is the example here.
Not sure if you know a little fact behind this
soap – The same detergent bar was previously known as
‘Rin Supreme’ maha bar. We have been using this soap
for over a number of years to wash clothes. The same
soap got a make over as Surf Excel marketed by HLL ie.,
Hindustan Lever Limited. As far as I can recall, this soap
used to cost only INR 25 till a year back. Now the price
has shot up almost 50% to INR 38 as on today.
There are 3 main things you should be observing:
1. Net Weight
2. Price
3. Time line
Initially, after the take over of Rin from Surf
Excel, the price was increased to INR 33.
Then came in picture the inflation which
directly hit the the cost of input material to
go skywards. Now the management funda
starts… The picture talks the rest!
In a span of 2 months, they decreased the
net weight from 400grams to 384g at first
step. Then over the next couple of months,
they increase the price! Whose money is it
anyways? end user always takes the hit
while companies continue to post profits in
spite of inflation or even recession!
THANK YOU
