FMCG sector of India
The Indian FMCG sector is the fourth largest in the Indian economy and According to‖ india
bulls securities publish & Nielsen‘s study ‖ market size of FMCG is $13.1 billion. This
industry primarily includes the production, distribution and marketing of consumer packaged
goods, that is those categories of products which are consumed at regular intervals. The
sector is growing at rapid pace with well-established distribution networks and intense
competition between the organized and unorganized segments. It has a strong and
competitive MNC presence across the entire value chain. The FMCG‘s promising market
includes middle class and the rural segments of the Indian population, and give brand makers
the opportunity to convert them to branded products. It includes food and beverage, personal
care, pharmaceuticals, plastic goods, paper and stationery and household products etc.
FMCG industry facilitates extensive series of consumables and it circulates high amount of
money in the economy. The intense competition in the FMCG manufacturers is resulting in
increase in investment in FMCG industry. According to‖ india bulls securities‖ publish report
& Nielsen's study shows that out of the total $ 28 billion in FMCG sales last year, products
worth about $ 6 Billion were consumed in these smaller towns. This number makes up more
than 20% of overall FMCG sales, and 30% of the urban FMCG sales. Since 2002, the FMCG
sector grew 3.5 times in these smaller towns of 1-10 lakh population, compared to 3.2 times
at the all-India level.
At present high burden of local taxes is likely to have an adverse impact on disposable
income and purchasing power as a whole. The growth of imports constitutes another problem
area and while so far imports in this sector have been confined to the premium segment.
FMCG companies estimate they have already cornered a four to six per cent market share.
However, most of the companies are concentrating on cost reduction and supply chain
management. This should yield positive results for them.
Current growth rate
The FMCG sector of india growth is very faster there is some risen such as the changing the
economic standard of people and changing the life style of the people the Fast Moving
Consumer Goods sector in India has been growing at a healthy CAGR of 11% over the last
decade the market is estimated to grow to US$ 100 billion by 2025, according to market
research firm Nielsen. In the last decade the FMCG sector has grown at an average of 11% a
year; in the last five years, annual growth accelerated to 17%. FMCGs are slowly and
gradually positioning and deeply penetrating in the fast growing rural market. The Rural
mindset is open to consumption of newer, more contemporary food categories and as a result,
drive consistent growth. FMCG industry to be Rs.4000-6000 billion industry by 2020.
According to Nielsen, FMCG growth was 10.7% in the rural market and 10.8% in the urban
market during the quarter ended December 2011; for the quarter ended March 2012, while
growth in the urban market improved to 16.5%, it rose even higher, to 17.2%, in the rural
Government Policies and Regulatory Framework
The govt. Policy and regulation has a bighand to changing the scenario of every sector there
are some important regulation and policy According to Business Today, Mercer and Taylor
Nelson Sofres (TNS). which is influence the FMCG sector in india .
Investment Approval : Automatic investment approval up to 100 per cent foreign
equity for NRI and overseas corporate bodies. These investments are allowed in food
processing segments such as coffee and tea.
FDI in organized retail: India currently allows 100 per cent FDI in Cash & Carry
segment and 51% in single-brand retail, which is expected to be further increased to
100%. India is also expected to allow 51% FDI in multi-brand retail, which will
boost the nascent organized retail market in the country.
Priority Sector: The Government of India recognizes food processing and agro
industries as priority sectors.
Relaxation of license rules: Industrial licenses are not required for almost all food and
agro processing industries, barring certain items such as beer, potable alcohol and
wines, cane sugar, and hydrogenated animal fats and oils as well as items reserved for
exclusive manufacturing in the small-scale sector.
Statutory Minimum Price: In October 2009, the government amended the Sugarcane
Control Order, 1966, and replaced the Statutory Minimum Price (SMP) of sugarcane
with Fair and Remunerative Price (FRP) and the State- Advised Price (SAP).
Market size of FMCG sector india
The FMCG sector in India is at present, the fourth largest sector with a total market size in
excess of USD 13 billion as of 2012. This sector is expected to grow to a USD 33 billion
industry by 2015 and to a whooping USD 100 billion by the year 2025.
Growth drivers is that which drive the growth of industry, growth driver play important role
for growth and expansion for various sector there is some growth drivers for FMCG sector as
follow according to: Dinodia Capital Advisors report.
Let‘s see, some other growth driver factor those are help to expansion ofFMCG sector of
Increasing rate of urbanization, expected to see major growth in coming years.
Rise in disposable incomes, resulting in premium brands having faster growth and deeper
Innovative and stronger channels of distribution to the rural segment, leading to deeper
penetration into this segment.
Increase in rural non-agricultural income and benefits from government welfare programmes.
Investment in stock markets of FMCG companies, which are expected to grow constantly.
There are many opportunity in india for the FMCG sector which is help to establish new
industry attract the investor to invest in FMCG sector on india let‘s see what are those
According to Business Today, Mercer and Taylor Nelson Sofres (TNS).
Let‘s see the some other opportunity for the Indian FMCG sector wich makes this sector
more effective for enlargement.
Rising income levels
Large domestic market-.
Lifestyle & Premium products
Fast evolving lifestyles, rapid urbanization and increasing disposable incomes there exists an
opportunity for high-end products.
Rising income levels i.e. increase in purchasing power of consumers
Large domestic market- a population of over 1 billion
Higher consumer goods spending
Indian consumers being highly receptive to new products demonstrates an opportunity to
offer new products targeting specific segments.
Fast growing emerging markets as well as culturally compatible markets offer a dimension to
further growth .
The Indian consumer are very price sensitive and value oriented consumer so for in Indian
FMCG market is face many challenges on the way of growth let‘s focus those element which
is create risk for indian FMCG sector.
Diverse consumer preferences
Rising logistics, procurement costs
Ability to win rural consumers
Slowdown in rural demand
Removal of import restrictions resulting in replacement of domestic brands
Increasing clutter – advent of price wars
Commodity prices fluctuate, which make it difficult to finalize raw material prices,
affecting the final price of the product
Indian consumers are very price-sensitive and value conscious, making it difficult for
FMCG firms to pass on the increased costs
Private labels serve to lower the consumer‘s price points, particularly at the mass level
Conflicts of interest when a retail chain has its own label whose packaging looks like
category leaders‘ and stocks brands of other manufacturers, (in terms of display space,
These products narrow the scope of FMCG products in rural andsemi-urban market
The spurious pass off products affect large, high quality brands which have actually
invested money in research and development to create their products and build brand
Indian rural FMCG Market
A World Bank study has revealed that nearly two-thirds of India's 120 crore population still
live in rural areas. Most of the companies are steadily transforming their rural operations into
viable profit centres. They have been devising ‗reach strategies‘ which proved to be
instrumental in selling to unsophisticated buyers in geographically dispersed locations.In
recent years, rural markets have acquired significance in countries like China and India. as
the overall growth of the economy has resulted into substantial increase in the purchasing
power of the rural communities. Onaccount of the green revolution in India, the rural areas
are consuming a large quantity ofindustrial and urban manufactured products. In this context,
a special marketing strategy ,namely, rural marketing has taken shape. Rural India, mostly
termed as ―high opportunity‖ market, is no longer just an opportunity, but is now yielding
results .The concept of Rural Marketing in India Economy has always played an influential
role in the lives of people. In India, leaving out a few metropolitan cities, all the districts and
industrial townships are connected with rural markets.
The difference between rural and urban consumers always exist in India. Indian rural
customer is large with illiteracy and poverty. Illiteracy leads to an inability o identify brand
differences and read the basic text on packages. Poverty and dependence on vagaries of
monsoon result into a low and unpredictable purchasing power. Moreover products are sold
lose, giving high competition to branded sealed products. Ignorance and illiteracy are
accompanied by strong influence leaders like the local panchayat members, caste and
religious leaders etc. Since rural consumers are economically, socially and Psychologically
different from the urban counter parts and indefinitely the rural consumer are price sensitive .
Irregular income dependency on the vagaries of monsoon induces the rural consumer to by
in small quantity. To address this issue, most FMCG companies have introduce product
(such as : tea , shampoos , biscuits etc.) in smaller packs and sachets to make the product
more affordable for rural consumer to obtain a share of wallet. Small coke worth RS 8 chik
shampoos, Miera shampoos worth RS 1 and 2 a tread that boosted rural sale .sience rural
population dose not have the concept of storing goods and blocking too much capital into it
is important for rural marketers to provide product in small quantity as well as good credit
system for large product . it is also important induce first time purchase and trials so that
consumer are able to experience product he never has . credit facility also need to be
extended to the wholesalers.
Rural costumers have upgraded their life style and as a result purchasing life style product
like cosmetics, beverage ,mobile phones etc. Whiche have become necessities for them.
urbanisation become more life style and no longer bound to geographical area.
IMPULSE TO GO RURAL
1. Large Population
2. Rising Rural Prosperity
3. Distribution of people income-wise
HOW TO DRIVE RURAL MARKET
Heavy launch costs for new products on launch advertisements, free samples and
Majority of the product classes require very low investment in fixed asset Existence
of contract manufacturing
Marketing assumes a signifycant place in the brand-building process
Extensive distribution networks and logistics are key to achieving a high level of
penetration in both the urban and rural markets
Factors like low-entry barriers in terms of low capital investment, fiscal incentives
from government and low brand awareness in rural areas have led to mushrooming of
the unorganised sector
Providing good price points is the key to success
Demand for FMCG products is set to boom by more than 100 per cent by 2015. It will be
driven by a rise in the share of the middle class from 67 per cent in 2009 to 88 percent in
2015. The boom in various consumer categories, further, indicates a latent demand for
various product segments. For example, the upper end of very rich and a part of the
consuming class indicate a small but rapidly growing segment for branded products. The
middle segment, on the other hand, indicates a large market for the mass end products.
The BRICs report indicates that India‘s per capita disposable income, currently at $556 per
annum, will rise to $1150 by 2015—another FMCG demand driver. Spurt in the industrial
and services sector growth is also likely to boost the urban consumption demand.
CURRENT AFFIR OF INDIAN FMCG SECTOR
ITC aims to be the No.1 FMCG player
Fake Products Cause Rs 100000 Crore Loss To Industry: FICCI
Invest in IT, pharma, FMCG in short term: Blackridge
Consumption in India likely to touch $3600 billion in 2020