FMCG: THE NEW DEMI GOD??

India’s FMCG sector has finally proved to be one of the front-runners in India’s growth marathon. During the past few years, this sector has shown shocking double-digit growth figures. According to a survey conducted by FICCI (Federation of Indian Chambers of Commerce & Industry), sales will grow by 16% to 9.52 trillion during this fiscal year as compared to 14.5% growth in the previous year. The survey attributes this growth to factors such as increased literacy, rising aspiration levels, growing consumer demand, etc.

The industry's future prospects look bright, seeing the rising incomes and the modernisation of retail. However studies have shown that there is still a large amount of untapped potential in this field and possibilities to grow further.


Main Drivers for Growth in FMCG:-

1. Higher Consumer spending –
The per capita disposable income of people in both urban as well as rural areas has seen a good rise in the past few years. Differential pricing has helped consumers from all economic demographics experiment with new products based on their needs and abilities. A prominent shift has been seen from consumer electronics to other consumer goods such as cosmetics, soaps & detergents, etc. Most FMCG players have been targeting the consumer’s needs and converting these into strategies and final products.

2. Benefits of Organization in Retail FMCG –
Organised retail has been a boon for both the consumers as well as suppliers. This is evident from the success of recent retail players that have entered the market such as Reliance Fresh, Big Bazaar, More, etc. For suppliers, especially farmers, organised retail allows them to receive better prices for their produce. For consumers, the benefits include ease of shopping, better comparison of products, good ambience, etc. But the most important factor is that consumers spend more on a product’s value and less is wasted in services such as distribution.

3. Penetration –
FMCG majors have been looking to penetrate the mostly untapped rural as well as semi-urban areas of India. To achieve this, they have planned to implement better distribution networks. According to Asschom, FMCG will witness more than 50% of its growth in the rural and semi-urban segments by 2010. In the urban regions, due to cut throat competition FMCG players have gone in for other promotional strategies such as branding, product differentiation, package innovation, highlighting the functional aspect of foods, etc. The development of better and faster means of transport will increase FMCG penetration in the long term.

4. Indian competitiveness and global market –
India has an advantage over other nations in FMCG due to certain reasons, such as
a) Easy and cheap availability of various raw materials
b) Cheap labour
c) Spread of Indian companies across the complete value chain

5. Shift of demand from unbranded to branded goods –
Consumers have become more aware of the benefits of branded commodities in food, clothing, toiletries, etc. This has resulted in a willingness to shell out more money for such products.


Trends that may be expected in FMCG over next few years –

1. Inclination towards environment-friendly goods –
Consumers are expected to appreciate socially responsible trade. This shall lead to a move towards products with ingredients that can be replenished and more natural/herbal cosmetics and skin care products.

2. Use of more technology –
The coming years will see a greater amount of e-marketing and blogging for promotion of goods. IT is expected to help in consumer-tracking as well as Supply Chain Management.

3. More goods catering to the youth –
With the increase in youth population in India, the FMCG sector is trying to come up with more products which appeal to this class of consumers. This will include more branding of commodities such as clothing, cosmetics and other accessories.

4. Health food categories –
This mainly targets the health-conscious, rich urban Indian. Some goods already existent in this segment are skimmed milk, diet soft drinks, multigrain bread, sugar-free, etc.

5. Inflation impacts –
FMCG majors are coming up with various measures to combat the double digit inflation. These measures include repositioning of product lines, variant packaging, strengthening distribution and logistics, etc.


If FMCG is GOD, who are the ANGELS??
Yes, I’m talking about the big FMCG players in India that have brought this sector into the limelight. Some of them are listed below in order of their net worth. Each company is a leader in their respective sector.
1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestle’ India
4. Amul
5. Dabur India
6. Asian Paints
7. Cadbury India
8. Brittania Industries
9. P & G Hygiene and Health Care
10. Marico Industries
Source: naukrihub.com

Problems that this Industry may face in the near future –

i. Stiff competition among domestic and foreign entrants-
Players from the organised as well as unorganised sector continue to grab at each other’s market shares. The entry of existing players in new segments has resulted in high pressure on margins. This has been tackled by more expenses on promotion and advertising.

ii. Poor transport facilities –
The highly scattered market basket is difficult to cater to with inadequate infrastructure. Rural and semi-urban penetration in such conditions becomes a great challenge.

iii. Low Brand-Awareness –
The lack of knowledge of branded, genuine commodities among people in small towns allows local dealers to sell spurious products.

iv. Increase in factor prices –
The sustained inflationary market has put a major dent in the FMCG industry. It has led to higher costs of raw materials as well as packaging and distribution. Most companies try to transfer the burden to consumers to some extent by price hikes and smaller SKUs. Even then, margins go down. Generally consumers stick to their preferred brands as long as price hikes are reasonable.


With the Indian economy on a high growth flight, the one-billion plus population proves to be a tremendous asset for the FMCG sector. But at the same time, it may be a very difficult place to operate in. The companies will have to strategize and make sure that they are aligned to the prevailing market scenario. In all, we can say that the FMCG GOD is omnipresent.