fmcg

Fast Moving Consumer Goods IndustrySREOSHI BERA (IMBA/45018/2011)

SAMBIT CHAKRABORTY (IMBA/45020/2011)

SUDHANSHU CHOUDHARY (IMBA/45025/2011)

What is FMCG?

• FMCG or the Fast Moving Consumer Goods industry is

also known as the CPG (Consumer packaged goods)

industry in India.

• This industry is named so because goods are produced,

distributed, marketed and consumed within a short span

of time.

• FMCG products mainly include; toiletries, detergents,

tooth cleaning products, soaps, cosmetics, shaving

products, paper products, glassware, batteries, plastic

goods and bulbs.

Market Overview

• The Indian FMCG sector is the fourth largest sector in the economy

• Total market size in excess of US$ 13.1 billion.

• The industry is poised to grow between 10 to 12 per cent annually.

• The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$

33.4 billion in 2015.

• The Indian FMCG industry represents nearly 2.5% of the country’s GDP.

• A well-established distribution network spread across six million retail

outlets (including two million in 5,160 towns and four million in 627,000

villages) low penetration levels, low operating costs and intense

competition between the organized and unorganized segments are key

characteristics of this sector.

FMCG COMPANIES IN INDIA

Market Shares of Companies in a few

FMCG categories:

FMCG Market in India

• Cosmetics: This is one of the most popular

segments. This includes products like color cosmetics

(lip, eye, face, and nail care products), talcum powder,

perfumes, and deodorants.

The components of the FMCG Market in India are :

• Toiletries: Toiletries are an essential part of the human life.

These products are classified as oral care products, hair care

products, skin care products, personal wash products, etc.

• Detergent: The detergent market is mainly

concentrated in the urban areas but the level of

penetration in the rural for the past few years has been

good.

FMCG Market in India

• Ice Cream: In India, the per capita consumption of ice cream is

extremely low, around 300 ml per annum, in 2010, in

comparison to that the international per capita consumption is

around 2 liters.

• Packaged Food: This is an important part of the food

processing industry in India, as convenient foods have

become an essential part of the middle class kitchen.

• Chocolate: The volume of chocolate produced in

India in a year is around 30,800 tons. Chocolate

Market in India is concentrated in the urban areas.

• Shoe Polish : The shoe polish market is worth around

Rs 110 crores, out of which the kirana stores are worth

around 80 crores.

Indian FMCG market segment

Baby Care 2%

Fabric Care 12%

Food Products 43%

Hair Care 8%

Household 4%

OTC Products 4%

Others 5%

Personal Care 22%Source : India Brand Equity Foundation

www.ibef.org

India’s FMCG sector at a glance

India’s FMCG Market Size in 2013 is $44.9 billion

(2006-13 growth rate of 16.2%)

Share of Rural FMCG Market in 2013 is 33%

Estimated Share of Modern Trade in FMCG Sales by

2016 is 10–12%

FMCG Sector’s Contribution to India’s GDP (2013) is

2.4%

Impact of the FMCG sector in

India

SOCIAL CONTRIBUTION

FISCAL CONTRIBUTION

• Cascading multiple taxes (import duty, CENVAT, service tax, CST, State VAT, octroi / entry tax, and income tax) are paid at multiple points by the FMCG sector.

• On an average, ~30% of the sector’s revenue (USD13.5 bn) goes into direct and indirect taxes.

EMPLOYMENT

• The FMCG sector is one of the largest employers in India.

• The sector’s total salary out lay on direct employment is estimated at approximately 6% of turnover (USD2.7 bn).

• Out of the ~12–13 million retail stores in India, ~9 million are FMCG kiranastores.

•It creates employment for people with lower educational qualifications. It

encourages many to become small entrepreneurs by setting up their own kirana

stores.

•FMCG companies have undertaken specific projects to integrate with rural India.

SWOT analysis of the sector

Strengths

1. Low operational costs

2. Established distribution networks in

both urban and rural areas

3. Presence of well-known brands in FMCG

sectors

Weaknesses

1. Lower scope of investing in technology

and achieving economies of scale.

2. Low exports levels

3. Counterfeit Products

Opportunities

1. Untapped rural market

2. Rising income levels

3. Large domestic market

4. Export potential

5. High consumer goods spending

Threats

1.Removal of import restrictions

2. Slowdown in rural demand

3. Tax and regulatory structure

Total FMCG sector Revenue (2006- 2013)

0

5

10

15

20

25

30

35

40

45

50

US

D B

illi

on

Year CAGR

• The FMCG sector s the 4th largest in

the Indian economy, with a total market

size of USD 44.9 bn in 2013. The sector

grew at a CAGE of 16.2% during 2006-

13

• The sector’s growth has been

driven by increasing consumption,

resulting from rise in incomes,

changing lifestyles, and favourable

demographics.

• Though the FMCG sector continues to

grow in double digits, there has been

some moderation (9.4%) in growth rate

during 2013 due to deceleration in GDP

growth and high inflation.

GDP and FMCG sector

FMCG REVENUES

Food products & personal care

are the largest segments

accounting for ~69% of the

FMCG market; biscuits and

refined oil are the largest

product categories.

• Food products is the largest

FMCG segment, constituting

~43% of the total market,

followed by personal care

products (22%).

• Salty snacks was the fastest

growing FMCG category in 2013

with a growth rate of 25%. Other

categories such as packaged

atta, chocolates, and non-refined

oil grew over 20% in 2013, as

companies aggressively focused

on increasing their penetration.

REVENUES / GROWTH

BY PRODUCT

CATEGORIES

Sales in biscuits, refined oil, soap,

and washing powder (among the

top five FMCG product categories)

grew 4–10% in 2013, down from 15–

23% in 2012. Their value growth

was affected due to consumers

opting for cheaper options due to

economic slow down and inflation,

forcing companies to offer

discounts to push volume sales.

Source: AC Nielsen report, The Economic Times, Industry estimates, Aranca analysis

FMCG Market Structure – By Ownership

(2013)

• India’s FMCG market is highly

fragmented and a major part of

the market constitutes of private

players selling unbranded and

unpackaged products.

• MNCs hold a majority share in

various FMCG segments

compared to their Indian peers.

• A combination of stronger brand

equity, premium products, and

international expertise to localize

products has provided MNCs a

competitive advantage over the

domestic players.

Source: Spark Capital December 2013 report, The Hindu Business Line, Aranca analysis

Market Share Of Players In Key Categories (2013)

Growth Drivers of FMCG in India

FMCG growth

600m + rural population

finally became CONSUMER

Distribution enhances

PENETRATION

Urban India MOVED UP a

ladder

Media created AWARENESS

Organized retail platform built

SHELF SPACE Government INCENTIVIZED

organized players

Indian companies

went the NON LINEAR way

FMCG sector INVESTED

Rs 80 bn+ in manufacturing

THE FUTURE OF FMCG

• Accelerating ‘premiumisation’ : The rich are willing to spend on premium products

for their ‘emotional value’ and ‘exclusive feel’, and their behavior is close to

consumers in developed economies. They are well-informed about various product

options, and want to buy products which suit their style. The upper middle class

wants to emulate the rich and up-trade towards higher-priced products which offer

greater functional benefits and experience compared to product for mass

consumption.

• Evolving categories : With their rising economic status, these consumers are

shifting from need- to want-based products. consumers have started demanding

customised products, specifically tailored to their individual tastes and needs.

• Value at the bottom: Products such as fruit juices and sanitary pads which had no

demand in the rural markets earlier have suddenly started establishing their

presence. While most FMCG players have succeeded in establishing sufficient

access to their products in rural areas, the next wave of growth is expected to come

from increasing category penetration, development of customised products and up-

trading rural consumers towards higher-priced and better products.

Fast moving consumer goods will become a Rs 400,000-crore industry

by 2020. A Booz & Company study finds out the trends that will shape

its future

Source: http://www.business-standard.com

Future Projections for the FMCG sector

• As per the base case scenario, where the key assumptions are that GDP growth would

continue at the same pace(5-6%) until 2020 and there would be no major change in

regulations, the FMCG sector is expected to grow at least 12% annually to become an

~USD 99 bn industry by 2020.

• As per the optimistic case scenario, where the key assumptions are that GDP growth

would be 7–8% by 2020 and regulations would change favorably, the sector is expected to

record a 17% annual growth to become a ~USD 135 bn industry by 2020.

Source: FMCG Roadmap to 2020–Confederation of Indian Industry (CII), Booz & Company, Aranca analysis

Predicting Sales Of Fast-Moving Consumer

Goods In India

• Nielsen predicts that India’s FMCG industry will grow from

$37 billion in 2013 to $49 billion in 2016.

• Indian FMCG industry expected to grow 7% in 2014, 10% in

2015 and about 12% in 2016, taking the sales in 2016 to $49

billion.

• Distribution growth, innovations around sachet offerings,

employment rates and index of industrial production (IIP) are

key influencers of FMCG sales in India.

Source : Nielsen

India’s FMCG industry is massive. In 2013, 8.4 million outlets served

1.26 billion people and accounted for US$37 billion in sales.

FMCG FUTURE

Some recent updates on FMCG sector

ITC to acquire Johnson & Johnson's 'Savlon'

and 'Shower To Shower' brands

• ITC (BSE 2.10 %) Ltd has acquired Savlon

and Shower To Shower brands for India

from Johnson & Johnson as part of its

ambitious goal to become the country's

largest FMCG company by 2030.

• Industry estimates suggest that Savlon has

annual sales of around Rs 50 crore while

Shower to Shower around Rs 20 crore.

• Savlon is the second largest brand in the Rs

350-crore antiseptic liquid market with 15

per cent share way behind market leader

Dettol of Reckitt Benckiser that enjoys more

than 80 per cent share. Savlon has a

marginal presence in soaps and hand wash

too.

• ITC's entry is expected to lead to an intense

marketing war in both these product

segments

• Industry insiders expect ITC to now become

a serious player in the hygiene space,

replicating Dettol's strategy by strengthening

focus on soaps, hand wash and hand

sanitizer.

• Shower To Shower is estimated to have 5-6

per cent share in the Rs 300-crore prickly

heat powder market. Heinz's Nycil leads the

segment, followed by Emami's Boroplus and

Reckitt's Dermicool.

• ITC, which has been aggressively

diversifying its business to drastically reduce

its dependence on the core tobacco

business, has been immensely successful in

food business, attaining leadership and the

second position in categories like cream

biscuits, packaged atta, instant noodles and

finger snacks.

Source: The Economic Times

Budget 2015 : GST, sops in rural sector will boost

FMCG Industry

• The fast moving consumer goods

and retail sector today welcomed

the Budget proposal to introduce

GST from April next year, saying the

move will give a big fillip to the

industry.

• The Budget proposed to roll out

GST (Goods and Services Tax)

from next fiscal.

• The Budget clearly talks of a long

term vision for economic growth, a

vision which dreams of better

amenities, infrastructure, skill

development and jobs. The focus on

broad-based growth will benefit the

FMCG industry.

• Emami Group director Aditya

Agarwal said the Budget will augur

well for the FMCG sector if the

economy grows.

"For the FMCG industry, this Budget

is expected to have a positive

impact. Focus on uplifting the rural

economy with allocation of funds for

irrigation, roads, sops including rural

development schemes like

MNREGA are expected to have a

bullish effect on the rural market of

FMCG products, provided we have

normal monsoons," he said.


RB to enter into new product segments

through existing brands

• FMCG major RB India (erstwhile

Reckitt Benckiser) is planning a

foray into multiple segments

including deodorants by

expanding portfolio of its existing

brands such as Harpic, Dettol and

Dermicool.

• Elaborating on the possible new

areas, he said: "We are planning

to expand the brand from just

toilets to other areas that are

relevant within the bathroom

space.”

• RB's global brands include Dettol,

Veet, Harpic, Bang, Mortein, Air

Wick and Vanish.

The company will also soon launch

two new mosquito repellent products

under its Mortein brand -- a paper

product like Godrej's Good Knight

Fast Card and a new LED-based

machine


THANK YOU

IMBA 8th Semester

MANAGERIAL ECONOMICS

fmcg

Economy & Finance