FMCG in India
The fast-moving consumer goods industry or consumer packaged goods industry is mainly responsible for producing, distributing and marketing fast-moving consumer goods. The FMCG industry is the fourth largest sector in the Indian economy. Household and personal care products accounts for 50% of the sales in the industry, healthcare accounts for 31-32% and food and beverage accounts for the remaining 18-19%.
Market size and projected growth rate
In the last 10 years, the revenue in FMCG industry in India has been growing at the rate of 21.4%. There was a drastic change in revenues in FMCG sector growing from US$31.6 billion to US$52.8 from 2011 to 2017-2018 respectively. FMCG industry in India is expected to grow at the rate of 27.9% CAGR to sum to US$103.7 billion by 2020. Additionally, the rural FMCG market is projected to grow at a CAGR of 14.6% to reach US$100 billion by 2020 and US$220 billion by 2025. The rural setting accounts for 45% revenue share while the urban setting dominates with 55% revenue share of the total revenue of the FMCG industry. More than 65% of people in India stay in rural places and those people spend around 50% of their total expenditure on FMCG products. The number of people buying consumer goods online in India is projected to reach 850 million by 2025.Driving factors leading to growth rate
- Increased population of working women
- Increased disposable income and growing per capita expenditure
- Increased purchasing power of the customers
- Increased awareness of online shopping
- Higher brand recognition and consciousness
- Constant change in consumer preference
- Banking policies and government's regulations
- Growing interest for foreign investors
Market share (by revenue)
| Company's Name | Market share |
| ITC | 12% |
| Hindustan Unilever | 10% |
| Nestlé | 3% |
| Britannia | 3% |
| Dabur | 2% |
| Godrej | 2% |
| Marico | 1% |
| GSK | 1% |
| Colgate-Palmolive | 1% |
Characteristics
Technology
Since the emergence of the internet, people have adopted the research online, purchase offline method. As a result, FMCG companies have installed advantaged manufacturing machines for better quality purpose and have decreased their profit margin to match with their competitors.Marketing drive and research
Indian customers prioritise getting the best deals possible and as a result are less likely to stay loyal to a brand. Thus, FMCG companies are constantly trying to influence customers with their promotional deals and many firms offer combo deals to attract customers to buy their product.Low capital intensity
Most of the companies operating in FMCG require relatively less capital for investments in manufacturing plants, machinery, equipment and other fixed assets. The turnover is typically about five to eight times the invested capital at a fully upgraded manufacturing plant. Companies have low capital intensity as transactions in businesses are still carried out on credit and cash basis.High initial launch cost
Unlike FMCG industry in the US which is dominated by few big companies, India's industry is highly fragmented. Increasing the market share for companies is getting more challenging due to increase in number of competitors. Promotions and advertisements, cost of product development, testing market compatibility, market research and mainly, the launch of the product to create awareness requires high initial costs.Trend towards Natural Products
The premium end of the market is shifting towards natural products, which are produced entirely from naturally occurring ingredients.Evolution
Between 1950 and 1980, there was limited investment in the FMCG sector. Local people had lower purchasing power, which meant that people opted for necessity products rather than premium products. Indian government was inclined towards favouring the local shops and retailers. Between 1980 and 1990, people wanted more variety of products which encouraged FMCG companies to increase the availability of products. FMCG Industry started getting traction and other companies started entering the industry. Media industry in India also boomed during the same time which gave new companies even more incentive to make their business profitable. Prior to 1991, when globalisation and liberalisation occurred in India, western apparels and foreign food products were not available to local customers. Common people weren't very aware of brand recognition. After 1991, FMCG industry was inspired by the international companies which also allowed government intervention to incentivise foreign FMCG companies to operate in India.The Indian FMCG industry generates massive employment opportunities and currently employs more than 3 million people. Departmental stores, grocery stores, and supermarkets are the places where consumers buy the necessary products for daily consumption. In the 21st century, people don't want to move across different stores to acquire the common household goods. Hence, the introduction of supermarkets, where customers have a variety of choices for different household products, into localities are proving to be extremely convenient to the customers. Some of the major supermarket chains in India are: Reliance Retail, D-Mart, MORE, Spencer's, Spar, HyperCity, and Star Bazaar. Although the operations of supermarkets are profitable, local grocery stores are suffering due to lack of variety of products. Unlike other emerging FMCG industry around the world, FMCG sector in India is still quite conventional. Despite street markets still being one of the most visited places for shopping in urban and rural settings, online platforms are leading the way to the buying of FMCG products.