The Fast Moving Consumer Goods (FMCG) industry in India is one of the largest sectors in the country and it has seen a very steady growth pace over the years.It comprises consumer non-durable products that include personal care, household care, food & beverages.The Indian FMCG industry is mainly classified as organised & unorganised. This sector is also bolstered by fervent competition. Additionally, robust distribution network coupled with increasing influx of MNCs across the entire value chain characterize the industry. FMCG sector is highly segmented.
■ The FMCG industry is volume driven & is characterised by low margins. The products are branded & backed by marketing, heavy advertising, slick packaging & strong distribution networks. The FMCG segment can be classified under the premium segment & popular segment; the premium segment caters mostly to the higher/upper middle class which is not much price sensitive apart from being brand conscious.
The price sensitive popular or mass segment consists of consumers belonging to the semi-urban or rural areas who are not particularly brand conscious. Products sold in the popular segment have considerably lower prices than their premium counterparts.
■ Products belonging to the FMCG segment generally have the following characteristics:
■ They are used at least once a month■ They are used directly by the end-consumer■ They are non-durable■ They are sold in packaged form
Following are the segment-wise product details along with the major players:
The growth in real GDP during FY08 was at 9% moderating from 9.6% as recorded in FY07 and 9.4% during FY06, as per the Central Statistical Organisation (CSO).
Out of 63 non-durable consumer items (with a weight of 23.3% in the IIP), 20 items which accounted for a 7.4% weight, recorded a decline in production during FY08. Furthermore, lower growth in respect of sugar (with weight of 2.2% in the IIP) and some other non-durables such as chocolate and sugar confectionery, beer and edible oils also led to moderation in the non-durables segment.
On account of a rise in the disposable income with consumers, a direct demand will be felt on the consumption of FMCG goods. A considerable part of the disposable income is spent on buying products and services. According to ASSOCHAM estimates of 2007, almost 40% of total FMCG consumers spend their total income on grocery while 8% is spent on personal care products, resulting in a potential hike in the demand for these goods. [pic]
■ Well-established distribution network extending to rural areas. ■ Strong brands in the FMCG sector.■ Low cost operations
■ Low export levels.■ Small scale sector reservations limit ability to invest in technology and achieve economies of scale. ■ Several “me-too’’ products.
■ Large domestic market.■ Export potential■ Increasing income levels will result in faster revenue growth.
■ Imports■ Tax and regulatory structure■ Slowdown in rural demand
■ In this research exploratory research methodology has been employed; this form of research is often undertaken in order to collect preliminary data to help clarify or identify a problem, rather than generating problem solution. Therefore, for this particular paper it was important to understand the strengths and weaknesses of FMCG industry.The key growth drivers of the FMCG industry include availability of raw materials for the food processing industry, vast agricultural output, low labour costs, large domestic market. Next the idea was to identify the major business threats & challenges the industry is facing.
■ Inadequate distribution network is a shortcoming considering the fact that majority of the Indian population lives in rural areas where the MNCs & bigger FMCG companies don’t have enough reach. ■ The demands of young generation in non-durable consumer goods has shot up resulting in tough competition among FMCG companies, thereby putting the profit margins under pressure.
■ Suggestions for the FMGC sector to achieve holistic success:
■ A critical imperative for FMCG companies is to ensure that product launches and positioning are backed by comprehensive and on-time research. Competitor and market intelligence on current and future trends are also critical inputs imperative for growth. Changing consumer trends are a major industry challenge.
■ A joint industry –government initiative for building a “Made in India’’ brand for FMCG products is required for them to gain recognition in the market. ■ Packaging materials are to be improved as a large number of FMCG products are perishable . Better R&D must be facilitated by the government to cut costs and minimize wastes. ■ The government needs to prevent import of spurious products by undertaking a comprehensive crackdown on these products.