Fmcg sector of india


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Fmcg sector of india

  1. 1. FMCG sector of India OVERVIEW 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. CURRENT SECNARIO 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.
  2. 2. 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 market. KEY TRENDS Recent happening 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 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.
  3. 3. Let‘s see, some other growth driver factor those are help to expansion ofFMCG sector of india. 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 penetration. 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. Opportunity 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).
  4. 4. 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-. Export potential 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 Innovation Indian consumers being highly receptive to new products demonstrates an opportunity to offer new products targeting specific segments. Geographical Expansion Fast growing emerging markets as well as culturally compatible markets offer a dimension to further growth . Challenges
  5. 5. 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 Increasing competition Rising logistics, procurement costs Ability to win rural consumers Slowdown in rural demand High Inflation 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, promotions etc) 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 equity Power Costs Transportation Infrastructure Agricultural Infrastructure 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. Rural Consumer: 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
  6. 6. 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 product promotions 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.
  7. 7. 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