99594811 analysis-and-assessment-of-fmcg-market-of-india

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A RESEARCH REPORT ON

ANALYSIS & ASSESSMENT OF FMCG
MARKET OF INDIA

ACKNOWLEDGEMENT

We would like to express our sincere gratitude to _______________, for
his inspiration and guidance towards penetration of this report. We are
highly indebted to all those who provided us the stimulus of writing this
project report on Analysis and Assessment of FMCG Market of India.

We are grateful to ____________________________for their valuable
advice, continuous support and guidance through various useful discussions
at different stages of this work.

A humble thanks are also due to ___________________for their useful
suggestions and constant help in preparation of this report.

We also acknowledge the whole staff at _________________office to render
their whole hearted co-operation at times.

Our sincere THANKS are due to all of them. They all have been a constant
source of inspiration to us throughout our summer training program.

Last but not the least, a word of thanks to our entire faculty and staff
members at our Institutes for their encouragement at any times.

Table of Contents

 INTRODUCTION OF REPORT………………………………………..
 RESEARCH PROCESS IN FLOW CHART……………………………

• DEFINE RESEARCH PROBLEM………………………………….
• FORMULATE HYPOTHESIS……………………………………….
• DESIGN RESEARCH………………………………………………..
• COLLECTION OF DATA……………………………………………

• ANALYSE DATA……………………………………………………

• INTERPRET AND REPORT ………………………………………..
 INTRODUCTION OF FMCG MARKET……………………………….

• " WHAT IS FMCG? "………………………………………………..

• SCOPE OF THE FMCG SECTOR…………………………………
• BUDGET 2007-2008 FOR FMCG SECTOR ……………………….
 WHY INDIAN MARKET……………………………………………….
 CONSUMPTION PIE CHART …………………………………………
 INDIA COMPETITIVENESS AND COMPARISON WITH THE
WORLD………………………………………………………………….
 TOP TEN PLAYERS IN FMCG SECTOR……………………………..
 MARKET OPPORTUNITIES FOR INVESTMENT……………………
 ANALYSIS OF FMCG MARKET……………………………………….

 SEGMENT WISE ANALYSIS…………………………………………..

 RECOMMENDATIONS FOR FMG MARKET…………………………

RESEARCH PROCESS IN FLOW CHART

REVIEW
CONCEPTS
& THEORIES
FORMULATE DESIGN COLLECT ANALYSE INTERPRET
DEFINE HYPOTHESIS RESEARCH DATA DATA AND REPORT
RESEARCH REVIEW
PROBLEM PREVIOUS
RESEARCH
FINDINGS

DEFINE RESEARCH PROBLEM

Research encompasses activities that increase the sum of human knowledge.

Research and Experimental Development comprises:

• Creative work undertaken on a systematic basis in order to increase the stock of
knowledge, including knowledge of humanity, culture and society, and the use of
this stock of knowledge to devise new applications.
• Any activity classified as research and experimental development is characterized
by originality; it should have investigation as a primary objective and should have
the potential to produce results that are sufficiently general for humanity's stock of
knowledge (theoretical and/or practical) to be recognizably increased. Most higher
education research work would qualify as research and experimental development.

Research carries with it a professional and ethical responsibility to disseminate and apply
the results of research activity and to conduct research in a manner consistent with the
Statement and Guidelines on Research Practice . An essential characteristic is that it leads to
publicly verifiable outcomes which are open to peer appraisal.

The complementary activity of scholarship refers to possession of an extensive and
profound knowledge of an academic discipline and the analysis and interpretation of
existing knowledge aimed at improving, through teaching or by other means of
communication, the depth of human understanding.

Types of Research Activity

Research includes pure basic research, strategic basic research, applied research and
experimental development .

Pure basic research is experimental and theoretical work undertaken to acquire new
knowledge without looking for long-term benefits other than the advancement of
knowledge.

Strategic basic research is experimental and theoretical work undertaken to acquire new
knowledge directed into specified broad areas in the expectation of useful discoveries. It
provides the broad base of knowledge necessary for the solution of recognised practical
problems.

Applied research is original work undertaken primarily to acquire new knowledge with a
specific application in view. It is undertaken either to determine possible uses for the
findings of basic research or to determine new ways of achieving some specific and
predetermined objectives.

Experimental development is systematic work, using existing knowledge gained from
research or practical experience, that is directed to producing new materials, products or
devices, to installing new processes, systems and services, or to improving substantially
those already produced or installed.

The purpose of the research is to discover answers to questions through the application of
scientific procedures. The main aim of research is to find out the truth which is hidden
and which has not been discovered as yet.

Aim: Analysis and Assessment of Fast Moving Consumer Goods,
which refer to things that we buy from local supermarkets on daily
basis, the things that have high turnover and are relatively
cheaper.

FORMULATE HYPOTHESIS

A hypothesis is a specific statement of prediction. It is simple; hypothesis is a suggested
solution or explanation to a problem or a phenomenon. So you will just write what you
think is the solution to that problem. It describes in concrete (rather than theoretical)
terms what you expect will happen in your study. Not all studies have hypotheses.
Sometimes a study is designed to be exploratory. There is no formal hypothesis, and
perhaps the purpose of the study is to explore some area more thoroughly in order to
develop some specific hypothesis or prediction that can be tested in future research. A
single study may have one or many hypotheses.

If your prediction specifies a direction, and the null therefore is the no difference
prediction and the prediction of the opposite direction, we call this a one-tailed
hypothesis. When your prediction does not specify a direction, we say you have a two-
tailed hypothesis

The logic of hypothesis testing is based on these two basic principles:

• The formulation of two mutually exclusive hypothesis statements that, together,
exhaust all possible outcomes
• The testing of these so that one is necessarily accepted and the other rejected

DESIGN RESEARCH

Research design is the controlling plan for a marketing research study in which the
methods and procedures for collecting and analysing the information to be collected is
specified. Research design can be thought of as the structure of research -- it is the "glue"
that holds all of the elements in a research project together.

Types of Research Designs

• Randomized experiment
• Non-experimental design
• Quasi-experimental design

We can classify designs into a simple threefold classification by asking some key
questions. First, does the design use random assignment to groups? [Don't forget that
random assignment is not the same thing as random selection of a sample from a
population!] If random assignment is used, we call the design a randomized experiment
or true experiment. If random assignment is not used, then we have to ask a second
question: Does the design use either multiple groups or multiple waves of measurement?
If the answer is yes, we would label it a quasi-experimental design. If no, we would call
it a non-experimental design. A randomized experiment generally is the strongest of the
three designs when your interest is in establishing a cause-effect relationship. A non-
experiment is generally the weakest in this respect.

COLLECTION OF DATA

Methods of primary data collection

 Semi-structured interview / unstructured interview
 Focus groups
 Diaries / written accounts
 Participant observation / non-participant observation
 Media sources
 Through schedule
 Warranty cards
 Distributors or Store audits
 Pantry audits
 Consumers panels
 Use of mechanical device
 Projective technique

Methods of secondary data collection

 Various publications of the central, state local governments
 Various publication of foreign governments or international bodies and
their subsidiary organisations
 Reports and publication of various associations
 Reports prepared by research scholars
 Public records and statistics, historical documents
 Technical and trade journals
 Newspapers
 Magazines
 Books

ANALYSE DATA

This will be much more substantial, and much more discursive, than the results section of
a typical experimental report. Your purpose here is twofold - you need to give an account
of your data (to communicate a sense of ‘what it is like’) and to offer an interpretation of
(to make a case for ‘what it means’). This should be based upon your codes and/or
themes, but there is plenty of scope for you to be imaginative in both the way that you
choose to structure your analysis section, and in the way that you choose to lay out your
evidence. Many of your decisions will depend on your chosen approach.

By the time you get to the analysis of your data, most of the really difficult work has been
done. It's much more difficult to: define the research problem; develop and implement a
sampling plan; conceptualize, operationalize and test your measures; and develop a
design structure. If you have done this work well, the analysis of the data is usually a
fairly straightforward affair.

In most social research the data analysis involves three major steps, done in roughly this
order:

• Cleaning and organizing the data for analysis (Data Preparation)
• Describing the data (Descriptive Statistics)
• Testing Hypotheses and Models (Inferential Statistics)

involves checking or logging the data in; checking the data for accuracy;
Data Preparation
entering the data into the computer; transforming the data; and developing and
documenting a database structure that integrates the various measures.

are used to describe the basic features of the data in a study. They
Descriptive Statistics
provide simple summaries about the sample and the measures. Together with simple
graphics analysis, they form the basis of virtually every quantitative analysis of data.
With descriptive statistics you are simply describing what is, what the data shows.

investigate questions, models and hypotheses. In many cases, the
Inferential Statistics
conclusions from inferential statistics extend beyond the immediate data alone. For
instance, we use inferential statistics to try to infer from the sample data what the
population thinks. Or, we use inferential statistics to make judgments of the probability

that an observed difference between groups is a dependable one or one that might have
happened by chance in this study. Thus, we use inferential statistics to make inferences
from our data to more general conditions; we use descriptive statistics simply to describe
what's going on in our data.

INTERPRET AND REPORT

The best advice is to consider your particular writing context carefully and to let it guide
your writing. If you’re writing in a workplace context, find out if your organization has
document or style guidelines and look at previous reports put out by the organization.
Whenever you write, you should keep your purpose and audience clearly in focus. Begin
by considering

• what you want to accomplish with your report: what are your primary and
secondary objectives?
• who will be reading your report and for what purposes: What is their background?
What questions might they have? What might they expect in terms of content and
format?

INTRODUCTION

The Indian FMCG sector is the fourth largest
sector in the economy with a total market size in
excess of US$ 13.1 billion.It has a strong MNC
presence and is characterised by a
wellestablished distribution network, intense
competition between the organised and
unorganised segments and low operational cost.
Availability of key raw materials, cheaper
labour costs and presence across the entire value
chain gives India a competitive advantage.

The FMCG market is set to treble from US$
11.6 billion in 2003 to US$ 33.4 billion in 2015.
Penetration level as well as per capita
consumption in most product categories like
jams, toothpaste, skin care, hair wash etc in
India is low indicating the untapped market
potential. Burgeoning Indian population,
particularly the middle class and the rural
segments, presents an opportunity to makers of
branded products to convert consumers to
branded products.

Growth is also likely to come from consumer
'upgrading' in the matured product categories.
With 200 million people expected to shift to
processed and packaged food by 2010, India
needs around US$ 28 billion of investment in
the food-processing industry.

Automatic investment approval (including
foreign technology agreements within specified
norms), up to 100 per cent foreign equity or 100
per cent for NRI and Overseas Corporate Bodies
(OCBs) investment, is allowed for most of the
food processing sector.

" WHAT IS FMCG? "

FMCG’s or fast moving consumer goods are the products which are frequently purchased
by consumers including toiletries, soaps, cosmetics, teeth cleaning products, shaving
products, detergents, other non-durables such as glassware, bulbs, batteries, paper
products ,plastic goods etc. It used to be called the grocery industry, now it’s just called
FMCG. FMCG is an ugly acronym for Fast Moving Consumer Goods , which translated into
English means 'things you buy on a regular basis at places like your local supermarket.

Scope of the FMCG Sector

The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector
in the economy. A well-established distribution network, intense competition between the
organized and unorganized segments characterize the sector. FMCG Sector is expected to
grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-
year period. It has been estimated that FMCG sector will rise from around Rs 56,500
crores in 2005 to Rs 92,100 crores in 2010. Hair care, household care, male grooming,
female hygiene, and the chocolates and confectionery categories are estimated to be the
fastest growing segments, says an HSBC report. Though the sector witnessed a slower
growth in 2002-2004, it has been able to make a fine recovery since then.
For example, Hindustan Levers Limited (HLL) has shown a healthy growth in the last
quarter. An estimated double-digit growth over the next few years shows that the good
times are likely to continue.

Recent Developments in Fast Moving Consumer Goods (FMCG) Sector
FMCG sector is no doubt registering an up trend in growth. According to CNBC, FMCG
sector growth story will continue because of the positive budget. Nevertheless, there are
some barriers to the growth of the sector. Indirect taxes constitute no less than 35% of the
total cost of consumer products - the highest in Asia. Last year, Finance Minister
proposed to introduce an integrated Goods and Service Tax by April 2010.This is an
exceptionally good move because the growth of consumption, production, and
employment is directly proportionate to reduction in indirect taxes.

Budget 2007-2008 for FMCG Sector
 Reduction of duty on edible oil will have a positive impact on Marico.
 Full exemption of excise duty on biscuits priced at 50 rupees or less per kg is
positive for ITC, Britannia, and Parle.
 Reduction of custom duty on food processing machinery and their parts from
7.5% to 5%.
 Reduction of excise duty on food mixes from 16% or 8% to nil is positive for
ITC.
 Development of rural infrastructure is in focus, which is beneficial for FMCG
companies because it is a big market for FMCGs. Better infrastructure will
improve the supply chain.
 Exemption of free samples and displays from the purview of FBT will be
beneficial for FMCG companies because they spend huge amount of money on
advertising and brand building. HLL, Dabur, ITC, and Marico will be amongst
the most benefited companies.

The Indian FMCG sector is the fourth
largest sector in the economy with a total
market size in excess of US$ 13.1 billion. It
has a strong MNC presence and is
characterized by a well established
distribution network, intense competition
between the organized and unorganized
segments and low operational cost.
Availability of key raw materials, cheaper
labour costs and presence across the entire
value chain gives India a competitive
advantage. The FMCG market is set to
treble from US$ 11.6 billion in 2003 to US$
33.4 billion in 2015. Penetration level as
well as per capita consumption in most
product categories like jams, toothpaste,
skin care, hair wash etc in India is low
indicating the untapped market potential.
Burgeoning Indian population, particularly
the middle class and the rural segments,
presents an opportunity to makers of
branded products to convert consumers to
branded products. Growth is also likely to
come from consumer 'upgrading' in the
matured product categories. With 200
million people expected to shift to processed
and packaged food by 2010, India needs
around US$ 28 billion of investment in the
food-processing industry.

WHY INDIAN MARKET

Large Domestic Market
India is one of the largest emerging markets, with a population of over one billion. India
is one of the largest economies in the world in terms of purchasing power and has a
strong middle class base of 300 million.

Around 70 per cent of the total households in India (188 million) resides in the rural
areas. The total numbers of rural households are expected to rise from 135 million in
2001-02 to 153 million in 2009-10. This presents the largest potential market in the
world. The annual size of the rural FMCG market was estimated at around US$ 10.5
billion in 2001-02. With growing incomes at both the rural and the urban level, the
market potential is expected to expand further.

India - A Large Consumer Goods Spender
An average Indian spends around 40 per cent of his income on grocery and 8 per cent on
personal care products. The large share of fast moving consumer goods (FMCG) in total
individual spending along with the large population base is another factor that makes
India one of the largest FMCG markets.

Even on an international scale, total consumer expenditure on food in India at US$ 120
billion is amongst the largest in the emerging markets, next only to China.

Change in the Indian consumer profile

Rapid urbanisation, increased literacy and rising per capita income, have all caused rapid
growth and change in demand patterns, leading to an explosion of new opportunities.
Around 45 per cent of the population in India is below 20 years of age and the young
population is set to rise further. Aspiration levels in this age group have been fuelled by
greater media exposure, unleashing a latent demand with more money and a new mindset.

Demand-supply gap
Currently, only a small percentage of the raw materials in India are processed into value
added products even as the demand for processed and convenience food is on the rise.
This demand supply gap indicates an untapped opportunity in areas such as packaged
form, convenience food and drinks, milk products etc. In the personal care segment, the
low penetration rate in both the rural and urban areas indicates a market potential.

INDIA COMPETITIVENESS AND COMPARISON WITH THE WORLD
MARKETS

Materials Availability
India has a diverse agro-climatic condition due to which there exists a wide-ranging and
large raw material base suitable for food processing industries. India is the largest
producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second
largest producer of rice, wheat and fruits & vegetables. India also has an ample supply of
caustic soda and soda ash, the raw materials in the production of soaps and detergents –
India produced 1.6 million tonnes of caustic soda in 2003-04. Tata Chemicals, one of the
largest producers of synthetic soda ash in the world is located in India. The availability of
these raw materials gives India the locational advantage.

Apart from the advantage in terms
of ample raw material availability,
existence of low-cost labour force
also works in favour of India.
Labour cost in India is amongst the
lowest in Asian countries. Easy
raw material availability and low
labour costs have resulted in a
lower cost of production. Many
multi-nationals have set up large
low cost production bases in India
to outsource for domestic as well
as export markets.

Leveraging the cost advantage
Global major, Unilever, sources a major portion of its product requirements from its
Indian subsidiary, HLL. In 2003-04, Unilever outsourced around US$ 218 million of
home and personal care along with food products to leverage on the cost arbitrage
opportunities with the West. To take another case, Procter & Gamble (P&G) outsourced
the manufacture of Vicks Vaporub to contract manufacturers in Hyderabad, India. This
enables P&G to continue exporting Vicks Vaporub to Australia, Japan and other Asian
countries, but at more competitive rates, whilst maintaining its high quality and cost
efficiency.

Presence across value chain
Indian firms also have a presence across the entire value chain of the FMCG industry
from supply of raw material to final processed and packaged goods, both in the personal
care products and in the food processing sector. For instance, Indian firm Amul's product
portfolio includes supply of milk as well as the supply of processed dairy products like
cheese and butter. This makes the firms located in India more cost competitive.

Trends and Players
The Indian FMCG sector is the fourth largest sector in the economy and creates
employment for three million people in downstream activities. Within the FMCG sector,
the Indian food processing industry represented 6.3 per cent of GDP and accounted for 13
percent of the country's exports in 2003-04. A distinct feature of the FMCG industry is
the presence of most global players through their subsidiaries (HLL, P&G, Nestle), which
ensures new product launches in the Indian market from the parent's portfolio.

Top Ten Players in FMCG Sector:-

Companies

1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)

3. Nestlé India

4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Marico Industries
10.Procter & Gamble Hygiene and Health Care

Critical Operating Rules In Indian FMCG Sector:-

 Heavy launch costs on new products on launch advertisements,
free samples and product promotions.
 Majority of the product classes require very low investment in
fixed assets
 Existence of contract manufacturing
 Marketing assumes a significant 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 the mushrooming of
the unorganised sector
 Providing good price points is the key to
success

Penetration And Per Capita Consumption:-

Penetration level in most product
categories like jams, toothpaste,
skin care, hair wash etc in India is
low. The contrast is particularly
striking between the rural and
urban segments - the average
consumption by rural households is
much lower than their urban
counterparts. Low penetration
indicates the existence of
unsaturated markets, which are
likely to expand as the income
levels rise. This provides an
excellent opportunity for the
industry players in the form of a
vastly untapped market. Moreover,
per capita consumption in most of
the FMCG categories (including
the high penetration categories) in
India is low as compared to both
the developed markets and other
emerging economies. A rise in per
capita consumption, with
improvement in incomes and
affordability and change in tastes
and preferences, is further expected
to boost FMCG demand. Growth is
also likely to come from consumer
"upgrading", especially in the
matured product categories.

Detergent per capita Consumption (in Kg) Tea per capita Consumption (in Kg)

Tooth paste per capita Consumption (in Kg) Personal wash per capita Consumption (in Kg)

Tea per capita Consumption (in Kg) Skin care products per capita Consumption (in Rs)

Ice Cream per capita Consumption (in Lit.) Shampoo per capita Consumption (in Kg)

MARKET OPPORTUNITIES FOR INVESTMENT:-

According to estimates based on
China's current per capita
consumption, the Indian FMCG
market is set to treble from US$
11.6 billion in 2003 to US$ 33.4
billion in 2015. The dominance
of Indian markets by unbranded
products, change in eating habits
and the increased affordability of
the growing Indian population
presents an opportunity to
makers of branded products, who
can convert consumers to
branded products.

A recent survey of industries in the Fast Moving Consumer Goods (FMCG) sector
conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) has
shown positive growth trends and signs of recovery in various segments .The survey
notes, some sectors showing negative growth in terms of value have recorded positive
growth in volumes.

The survey attributes the reflected buoyancy to the following factors:

1) Several cost saving measures

2) Various tax benefits

3) Rising demand

4) Growing GDP

5) Good monsoon

6) Strong economic fundamentals

7) The expected policy packages to be announced by the new government for farmers for
raising rural income is bound to stimulate growth further

GROWTH PROSPECTS

With the presence of 12.2% of the world population in the villages of India, the Indian
rural FMCG market is something no one can overlook. Increased focus on farm sector
will boost rural incomes, hence providing better growth prospects to the FMCG
companies. Better infrastructure facilities will improve their supply chain.

FMCG sector is also likely to benefit from growing demand in the market. Because of the
low per capita consumption for almost all the products in the country, FMCG companies
have immense possibilities for growth. And if the companies are able to change the
mindset of the consumers, i.e. if they are able to take the consumers to branded products
and offer new generation products, they would be able to generate higher growth in the
near future.

It is expected that the rural income will rise in 2007, boosting purchasing power in the
countryside. However, the demand in urban areas would be the key growth driver over
the long term. Also, increase in the urban population, along with increase in income
levels and the availability of new categories, would help the urban areas maintain their
position in terms of consumption. At present, urban India accounts for 66% of total
FMCG consumption, with rural India accounting for the remaining 34%.

However, rural India accounts for more than 40% consumption in major FMCG
categories such as personal care, fabric care, and hot beverages. In urban areas, home and
personal care category, including skin care, household care and feminine hygiene, will
keep growing at relatively attractive rates. Within the foods segment, it is estimated that
processed foods, bakery, and dairy are long-term growth categories in both rural and
urban areas.

The survey confirms higher growth rates for some FMCGs belonging to personal care
products, fabric & personal wash products, oral care products and Hair care products. The
sectors which have recorded double digit growth in terms of value are shaving cream (20
per cent), deodorant (40 per cent), branded coconut oil (10 per cent),anti dandruff
shampoos (15 %), hair dyes (25 per cent), cleaners & repellents (20 per cent). Some
sectors which have recorded negative growth are personal health care (-3 %) Laundry
soaps (-5 percent), dish wash (-3 %), toilet soap (-4.5%) Tooth paste (-5
percent),toothpowder(-8percent).

The research report offers insights into the dynamics of growth in a competitive
market environment. The salient features of development the survey has identified
include:

• The improvement has been much more pronounced in volume terms than in value
terms for most of the products.
• Post liberalization period provided the consumers the opportunity to make choices
amongst the products of domestic companies and imported products.
• One of the greatest achievements made by the FMCG industry has been the
‘sachet’ bugs which have helped the companies to introduce products in smaller
package sizes, at lower price points and reach new users and to expand market
share for value added products in urban India.
• Several cost saving measures, various tax benefits, rising demand, good monsoon
have helped the industry to achieve positive growth.
• Most of the multinational companies have started sourcing their products from
India. HLL has become the production center in respect of personal consumer
products like oral care, skin care products, soap, detergents globally for Unilever.
• There has been a trend from shift to own manufacturing from third party
manufacturing or procuring goods from third party small-scale manufacturers.
• Though the companies are going global, they are focusing on the overseas markets
like Bangladesh, Pakistan, Nepal, Middle East and CiS countries because of the
lifestyles, consumption habits similar to India. Godrej Consumer, Marico, Dabur,
Vicco laboratories are among the companies.
• The offshoots and mushrooming of regional companies which are posing a threat
to bigger FMCG companies like HLL. The rise of Jyothi Laboratories, throwing
challenge to Reckitt Benckiser is a case in point.
• FMCG market remains highly fragmented with almost half of the market
representing unbranded, unpackaged home made products. This presents a
tremendous opportunity for makers of branded products who can convert
consumers to branded products.
• There is competition between the organized and the unorganized sectors in the
FMCG sector.
• Marketing and distribution are very important in FMCG companies. New products
require a large investment in product development, market research, and
awareness campaign, developing franchise for a new brand advertisements, free
samples and product promotions.
• All these developments have made the consumers strong, who are in a position
now to choose a variety of products, from a number of companies, at different
price points. Bargaining power of customers is high.
• Key factors to success are distribution (in rural markets) and advertising (in urban
markets). Critical factors for success are the ability to build, develop and maintain
a robust distribution network.
• The fact that a lot of women have started looking for specialized products has
driven growth.

SEGMENT WWISE ANALYSIS

Fabric wash market:

The demand for detergents has been growing at
an annual growth rate of 10-11 per cent during
the past five years, while the laundry bar market
has witnessed a negative growth. This year
growth rate is low at 2 per cent for detergent
cakes and 2.5 per cent for washing powder. In
the urban markets, people prefer to use washing
powder and detergents, instead of bars, on
account of convenience of usage, increased
purchasing power, aggressive advertising and
increased penetration of washing machines.

Personal wash market:

While the growth rate for the overall personal
wash market is only 1 per cent compared to
average growth rate of 5 per cent, premium and
middle-end soaps are growing at a rate of 10 per
cent. The leading players in this market are HLL
(Lux, Lifebuoy, Breeze, Rexona), Nirma
(Nima), Godrej Soaps (Cinthol, FairGlow,
Shikakai, Nikhar), and Reckitt & Colman
(Dettol).

Oral care market:

The oral care market valued at Rs. 26 bn has
suffered a negative growth of 5 per cent in 2003-
04. Toothpaste and toothpowder have suffered
negative growth of 5 % and 8 % respectively.
The market for tooth brushes valued at Rs 4 bn
has grown at 5 per cent.

Skin care and cosmetics market:

Skin care and cosmetics valued at Rs 12 bn and
includes cold creams, lotions, moisturizers,
cleansers, talcum powders, deodorants, lipsticks,
nail enamels, etc. The shaving cream market valued
at Rs 1.1 bn, has grown by 20%. The market is
dominated by C-P, Gillette India and Godrej Soaps.
The skin care market has seen the entry of a
number of international brands, like Oriflame,
Avon and Aviance. The herbal-based products are
also quite popular in
this market.

Hair care market:

Hair care includes a variety of branded and
unbranded products like hair oils, shampoos,
creams, conditioners hair dyes, etc. The Coconut
Oil Market account for 72 per cent of the hair oil
market. In the branded coconut hair oil market,
Marico (with Parachute) and Dabur are the leading
players. HLL is also extending its Sunsilk brand to
hair oils. The market for branded coconut oil valued
at approximately Rs. 8 bn has grown by 10 %. The
market has been witnessing a shift in usage patterns
in both urban and rural markets.

Feminine hygiene market:

The feminine hygiene market is estimated to be
worth Rs. 2 bn market. The market has reversed
from a negative growth in previous years and flat
growth in the last year has recorded a growth of 2
per cent. This has
got a boost from the withdrawal of excise duties.

Deodorants market:

The deodorant market is estimated to be worth Rs 0.8 bn and has been growing at 40 per
cent annually. The organized segment is dominated by HLL with its Rexona, Axe, Denim
and Impulse brands in different categories targeting different segments of the market.

Dish wash market:

The total size of the dish wash market, estimated
at Rs 4.4 bn has recorded a negative growth of 3
per cent . Over 60 per cent of the market is
dominated by bars, while dish wash powders
accounts for 32 per cent. The
penetration levels are, however, still very low.

Cleaners / Repellents Market:

The cleaner market covering products like floor
cleaners, air, phenyl and toilet cleaners, and is
estimated to be growing at 20 per cent per annum.
The key players are HLL, Reckitt & Colman India
(RCI), Henkel Spic, Bayer India and Balsara
Hygiene. The market for insecticides and
repellents is estimated to be around Rs 8 bn has
grown by 20 per cent. Godrej Sara Lee is the
world's largest manufacturer of mosquito mats,
with an all-India market share of about 66 per
cent. The organized sector is trying to increase
penetration levels by higher brand visibility.

RECOMMENDATIONS
FOR FMCG MARKET

This research report outlines some measures for raising productivity, efficiency and
making FMCG competitive as follows: -

• Level
of abatement for
soaps and
detergents should
be revised to 45
per cent in
consideration of
hike in the prices
of various inputs.
• Excise duty of
about 50 per
cent without
CEN VAT
credit facilities
on alcohol
based toiletries
is very high and
should be on
par with non-
alcoholic toiletries.
• Higher and different sales tax rates in different states.
• VAT applicable for these products should fall in the proposed 4 per cent slab.
• Companies need to have a distribution system of its own or rely on other
companies and for product awareness and demand creation try new products with
already established popular product lines.
• The companies should introducing product variants that account for distinctive
regional tastes as well as a wide range of package sizes and prices to suit to
purchasing preferences of India’s varied consumer segments.

The survey confirms that the FMCG sector is poised for further growth because of the
emerging opportunities and strong fundamentals developing in the economy. This report
highlights the need for pro-active government action for
helping the industry to achieve lower cost, improved quality and better performance in the
competitive environment.

The survey foresees that future growth will come from newer segments such as the youth
and through increased rural and small town penetration. The Internet and e-commerce
will change the dynamics of this industry helping companies improve their procurement,
distribution and selling efficiencies. This will, in turn, help them reduce prices and still
remain profitable.

A package of fiscal incentives provided by various State governments like Himachal
Pradesh, Uttranchal, have encouraged companies to set up manufacturing facilities in

these regions. Some companies setting up units in backward areas are:

• Britannia Industries
• Colgate Industries
• Dabur Industries
• Godrej Consumer Products
• Hindustan Lever
• Marico Industries

FMCG market remains highly fragmented with almost half of the market representing
unbranded, unpackaged home made products. This presents a tremendous opportunity for
makers of branded products who can convert consumers to branded products.

In the past decade, the personal care industry has witnessed a consumer boom. This has
been possible due to liberalization, growing urbanization and an increase in the
disposable incomes due to rise in Gross Domestic Product. The changing lifestyles,
higher level of awareness among the rural community as a result of the onslaught of
satellite television has fuelled demand.

The boom has also been fuelled by the reduction of excise duties, de reservation from the
small-scale sector and the concerted efforts of personal care companies to tap the
potentials of the segment of the middle class through product and packaging innovations.

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