Economics - Development 01 _ Handwritten Notes.pdf
Fmcg
1. Fast Moving Consumer Goods Industry
SREOSHI BERA (IMBA/45018/2011)
SAMBIT CHAKRABORTY (IMBA/45020/2011)
SUDHANSHU CHOUDHARY (IMBA/45025/2011)
2. What is FMCG?
• FMCG or the Fast Moving Consumer Goods industry is
also known as the CPG (Consumer packaged goods)
industry in India.
• This industry is named so because goods are produced,
distributed, marketed and consumed within a short span
of time.
• FMCG products mainly include; toiletries, detergents,
tooth cleaning products, soaps, cosmetics, shaving
products, paper products, glassware, batteries, plastic
goods and bulbs.
3. Market Overview
• The Indian FMCG sector is the fourth largest sector in the economy
• Total market size in excess of US$ 13.1 billion.
• The industry is poised to grow between 10 to 12 per cent annually.
• The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$
33.4 billion in 2015.
• The Indian FMCG industry represents nearly 2.5% of the country’s GDP.
• A well-established distribution network spread across six million retail
outlets (including two million in 5,160 towns and four million in 627,000
villages) low penetration levels, low operating costs and intense
competition between the organized and unorganized segments are key
characteristics of this sector.
6. FMCG Market in India
• Cosmetics: This is one of the most popular
segments. This includes products like color cosmetics
(lip, eye, face, and nail care products), talcum powder,
perfumes, and deodorants.
The components of the FMCG Market in India are :
• Toiletries: Toiletries are an essential part of the human life.
These products are classified as oral care products, hair care
products, skin care products, personal wash products, etc.
• Detergent: The detergent market is mainly
concentrated in the urban areas but the level of
penetration in the rural for the past few years has been
good.
7. FMCG Market in India
• Ice Cream: In India, the per capita consumption of ice cream is
extremely low, around 300 ml per annum, in 2010, in
comparison to that the international per capita consumption is
around 2 liters.
• Packaged Food: This is an important part of the food
processing industry in India, as convenient foods have
become an essential part of the middle class kitchen.
• Chocolate: The volume of chocolate produced in
India in a year is around 30,800 tons. Chocolate
Market in India is concentrated in the urban areas.
• Shoe Polish : The shoe polish market is worth around
Rs 110 crores, out of which the kirana stores are worth
around 80 crores.
8. Indian FMCG market segment
Baby Care 2%
Fabric Care 12%
Food Products 43%
Hair Care 8%
Household 4%
OTC Products 4%
Others 5%
Personal Care 22%
Source : India Brand Equity Foundation
www.ibef.org
9. India’s FMCG sector at a glance
India’s FMCG Market Size in 2013 is $44.9 billion
(2006-13 growth rate of 16.2%)
Share of Rural FMCG Market in 2013 is 33%
Estimated Share of Modern Trade in FMCG Sales by
2016 is 10–12%
FMCG Sector’s Contribution to India’s GDP (2013) is
2.4%
10. Impact of the FMCG sector in
India
SOCIAL
CONTRIBUTION
FISCAL
CONTRIBUTION
• Cascading multiple taxes (import duty, CENVAT, service tax, CST, State VAT,
octroi / entry tax, and income tax) are paid at multiple points by the FMCG
sector.
• On an average, ~30% of the sector’s revenue (USD13.5 bn) goes into direct and
indirect taxes.
EMPLOYMENT
• The FMCG sector is one of the largest employers in India.
• The sector’s total salary out lay on direct employment is estimated at
approximately 6% of turnover (USD2.7 bn).
• Out of the ~12–13 million retail stores in India, ~9 million are FMCG kirana
stores.
•It creates employment for people with lower educational qualifications. It
encourages many to become small entrepreneurs by setting up their own kirana
stores.
•FMCG companies have undertaken specific projects to integrate with rural India.
11. SWOT analysis of the sector
Strengths
1. Low operational costs
2. Established
distribution networks in
both urban and rural
areas
3. Presence of well-
known brands in FMCG
sectors
Weaknesses
1. Lower scope of
investing in technology
and achieving
economies of scale.
2. Low exports levels
3. Counterfeit
Products
Opportunities
1. Untapped rural market
2. Rising income levels
3. Large domestic
market
4. Export potential
5. High consumer goods
spending
Threats
1.Removal of import
restrictions
2. Slowdown in rural
demand
3. Tax and regulatory
structure
12. Total FMCG sector Revenue (2006- 2013)
0
5
10
15
20
25
30
35
40
45
50
USDBillion
Year CAGR
• The FMCG sector s the 4th largest in
the Indian economy, with a total market
size of USD 44.9 bn in 2013. The sector
grew at a CAGE of 16.2% during 2006-
13
• The sector’s growth has been
driven by increasing consumption,
resulting from rise in incomes,
changing lifestyles, and favourable
demographics.
• Though the FMCG sector continues to
grow in double digits, there has been
some moderation (9.4%) in growth rate
during 2013 due to deceleration in GDP
growth and high inflation.
14. FMCG REVENUES
Food products & personal care
are the largest segments
accounting for ~69% of the
FMCG market; biscuits and
refined oil are the largest
product categories.
• Food products is the largest
FMCG segment, constituting
~43% of the total market,
followed by personal care
products (22%).
• Salty snacks was the fastest
growing FMCG category in 2013
with a growth rate of 25%. Other
categories such as packaged
atta, chocolates, and non-refined
oil grew over 20% in 2013, as
companies aggressively focused
on increasing their penetration.
15. REVENUES / GROWTH
BY PRODUCT
CATEGORIES
Sales in biscuits, refined oil, soap,
and washing powder (among the
top five FMCG product categories)
grew 4–10% in 2013, down from 15–
23% in 2012. Their value growth
was affected due to consumers
opting for cheaper options due to
economic slow down and inflation,
forcing companies to offer
discounts to push volume sales.
Source: AC Nielsen report, The Economic Times, Industry estimates, Aranca analysis
16. FMCG Market Structure – By Ownership
(2013)
• India’s FMCG market is highly
fragmented and a major part of
the market constitutes of private
players selling unbranded and
unpackaged products.
• MNCs hold a majority share in
various FMCG segments
compared to their Indian peers.
• A combination of stronger brand
equity, premium products, and
international expertise to localize
products has provided MNCs a
competitive advantage over the
domestic players.
Source: Spark Capital December 2013 report, The Hindu Business Line, Aranca analysis
19. Growth Drivers of FMCG in India
FMCG
growth
600m + rural
population
finally became
CONSUMER
Distribution
enhances
PENETRATION
Urban India
MOVED UP a
ladder
Media created
AWARENESS
Organized retail
platform built
SHELF SPACE Government
INCENTIVIZED
organized
players
Indian
companies
went the NON
LINEAR way
FMCG sector
INVESTED
Rs 80 bn+ in
manufacturing
20. THE FUTURE OF FMCG
• Accelerating ‘premiumisation’ : The rich are willing to spend on premium products
for their ‘emotional value’ and ‘exclusive feel’, and their behavior is close to
consumers in developed economies. They are well-informed about various product
options, and want to buy products which suit their style. The upper middle class
wants to emulate the rich and up-trade towards higher-priced products which offer
greater functional benefits and experience compared to product for mass
consumption.
• Evolving categories : With their rising economic status, these consumers are
shifting from need- to want-based products. consumers have started demanding
customised products, specifically tailored to their individual tastes and needs.
• Value at the bottom: Products such as fruit juices and sanitary pads which had no
demand in the rural markets earlier have suddenly started establishing their
presence. While most FMCG players have succeeded in establishing sufficient
access to their products in rural areas, the next wave of growth is expected to come
from increasing category penetration, development of customised products and up-
trading rural consumers towards higher-priced and better products.
Fast moving consumer goods will become a Rs 400,000-crore industry
by 2020. A Booz & Company study finds out the trends that will shape
its future
Source: http://www.business-standard.com
21. Future Projections for the FMCG sector
• As per the base case scenario, where the key assumptions are that GDP growth would
continue at the same pace(5-6%) until 2020 and there would be no major change in
regulations, the FMCG sector is expected to grow at least 12% annually to become an
~USD 99 bn industry by 2020.
• As per the optimistic case scenario, where the key assumptions are that GDP growth
would be 7–8% by 2020 and regulations would change favorably, the sector is expected to
record a 17% annual growth to become a ~USD 135 bn industry by 2020.
Source: FMCG Roadmap to 2020–Confederation of Indian Industry (CII), Booz & Company, Aranca analysis
22. Predicting Sales Of Fast-Moving Consumer
Goods In India
• Nielsen predicts that India’s FMCG industry will grow from
$37 billion in 2013 to $49 billion in 2016.
• Indian FMCG industry expected to grow 7% in 2014, 10% in
2015 and about 12% in 2016, taking the sales in 2016 to $49
billion.
• Distribution growth, innovations around sachet offerings,
employment rates and index of industrial production (IIP) are
key influencers of FMCG sales in India.
Source : Nielsen
India’s FMCG industry is massive. In 2013, 8.4 million outlets served
1.26 billion people and accounted for US$37 billion in sales.
24. ITC to acquire Johnson & Johnson's 'Savlon'
and 'Shower To Shower' brands
• ITC (BSE 2.10 %) Ltd has acquired Savlon
and Shower To Shower brands for India
from Johnson & Johnson as part of its
ambitious goal to become the country's
largest FMCG company by 2030.
• Industry estimates suggest that Savlon has
annual sales of around Rs 50 crore while
Shower to Shower around Rs 20 crore.
• Savlon is the second largest brand in the Rs
350-crore antiseptic liquid market with 15
per cent share way behind market leader
Dettol of Reckitt Benckiser that enjoys more
than 80 per cent share. Savlon has a
marginal presence in soaps and hand wash
too.
• ITC's entry is expected to lead to an intense
marketing war in both these product
segments
• Industry insiders expect ITC to now become
a serious player in the hygiene space,
replicating Dettol's strategy by strengthening
focus on soaps, hand wash and hand
sanitizer.
• Shower To Shower is estimated to have 5-6
per cent share in the Rs 300-crore prickly
heat powder market. Heinz's Nycil leads the
segment, followed by Emami's Boroplus and
Reckitt's Dermicool.
• ITC, which has been aggressively
diversifying its business to drastically reduce
its dependence on the core tobacco
business, has been immensely successful in
food business, attaining leadership and the
second position in categories like cream
biscuits, packaged atta, instant noodles and
finger snacks.
Source: The Economic Times
25. Budget 2015 : GST, sops in rural sector will boost
FMCG Industry
• The fast moving consumer goods
and retail sector today welcomed
the Budget proposal to introduce
GST from April next year, saying the
move will give a big fillip to the
industry.
• The Budget proposed to roll out
GST (Goods and Services Tax)
from next fiscal.
• The Budget clearly talks of a long
term vision for economic growth, a
vision which dreams of better
amenities, infrastructure, skill
development and jobs. The focus on
broad-based growth will benefit the
FMCG industry.
• Emami Group director Aditya
Agarwal said the Budget will augur
well for the FMCG sector if the
economy grows.
"For the FMCG industry, this Budget
is expected to have a positive
impact. Focus on uplifting the rural
economy with allocation of funds for
irrigation, roads, sops including rural
development schemes like
MNREGA are expected to have a
bullish effect on the rural market of
FMCG products, provided we have
normal monsoons," he said.
Source: The Economic Times
26. RB to enter into new product segments
through existing brands
• FMCG major RB India (erstwhile
Reckitt Benckiser) is planning a
foray into multiple segments
including deodorants by
expanding portfolio of its existing
brands such as Harpic, Dettol and
Dermicool.
• Elaborating on the possible new
areas, he said: "We are planning
to expand the brand from just
toilets to other areas that are
relevant within the bathroom
space.”
• RB's global brands include Dettol,
Veet, Harpic, Bang, Mortein, Air
Wick and Vanish.
The company will also soon launch
two new mosquito repellent products
under its Mortein brand -- a paper
product like Godrej's Good Knight
Fast Card and a new LED-based
machine
Source: The Economic Times
