Fast Moving Consumer Goods

(FMCG)
Sector Report

By:
Rajat Gupta
Ayushi Garg
Md Arham
Contents
1. About the Sector................................................................................................................................2
2. FMCG Sector contribution to GDP...................................................................................................3
3. Growth History of FMCG.................................................................................................................3
4. Market Size........................................................................................................................................4
5. Market Share (International and Domestic).......................................................................................6
6. CAGR................................................................................................................................................7
7. Porter's five force Model...................................................................................................................7
8. Swot Analysis....................................................................................................................................8
1. About the Sector

The fast-moving consumer goods (FMCG) sector is an important contributor to India’s GDP
and it is the fourth largest sector of the Indian economy. FMCG, alternatively called as CPG
(Consumer Packaged goods) are those goods that are sold quickly and at relatively low cost.
These are non- durable products which are sold in packaged form. Some common FMCG
product categories include food and dairy products, glassware, paper products,
pharmaceuticals, packaged food products, plastic goods, printing and stationery, household
products, drinks etc. These products are consumed by every strata of society irrespective of
social class, income group, age group etc. FMCG companies have always enjoyed a vast
potential market because of the large population of the country. The industry is highly
competitive due to the presence of large multinational companies and the unorganized sector.

From the consumer's perspective

• Frequent purchase

• Low involvement (little or no effort to

choose the item)

• Low price

• Short shelf life

Characteristics of FMCG market • Rapid consumption

From the marketer's perspective

• High volumes

• Low contribution margins

• High stock turnover

2. FMCG Sector contribution to GDP

FMCG Sector has generated total revenue of $10,621.2 billion in 2017-2018 and is
expected to garner $15,361.8 billion by 2025
Sector Composition Contribution
FMCG sector has mainly 3 segments and its overall performance is driven by the internal
competitiveness of the segment.

Healthcare (31%)- Healthcare has become one of India's largest sectors - both in terms of
revenue and employment and represents 31% of FMCG industry.
Household & Personal Care (50%)- It is the prominent segment and accounts for 50 of the
overall market shares. Hair care accounting to 23 percent comes next in terms of market
share. Personal hygiene products, hair care, skin care, cosmetics, perfumes are the key
segments of the personal care market.
Food & Beverages (19%)- Food & Beverages segment accounts for 19% in Indian FMCG’s
market. This segment includes beverage, staples/ cereals, bakery products, snacks, supplying
raw chocolates, ice cream, tea/coffee/soft drinks, processed fruits and vegetables, dairy
products, and branded flour.

3. Growth History of FMCG

This sector witness growth through leaps and bounds due to government policies and changes
in overall market place. The FMCG sector in India generated US$52.75 billion in 2018 as
compared to US$49 billion in 2017, thereby resulting in the gain of 7.65% on YoY basis.
Revenues in the FMCG sector is expected to advance to US$ 103.7 billion in 2020. Indian
FMCG sector is forecasted to report revenue growth of around 11-12% in FY19 from 8% in
FY18.
Nifty FMCG with a positive trend (2011-2019)

FMCG sector has posted growth at CAGR 15.76% from 2011- 2018.
Expenditure to increase at CAGR of 25.44%% from the year 2017-2021. Total consumption
is expected to reach nearly US$3600 billion by 2020 fromUS$1595 billion in 2016. India’s
contribution to global consumption is expected to be more than5.8 percent by 2020. Rising
income and growing youth population have been key growth drivers of this sector. Brand
consciousness has also aided demand.

1. Higher income and rise in rural

consumption
2. Evolving consumer tastes and preferences
Factors that speed up the growth of FMCG 3. Focus on innovation and R&D
4. Higher Investment
5. Government Initiatives
6. Modern trade channels
4. Market Size
 FMCG sector in India generated US$52.75 billion in 2018 and forecasted to report
revenue growth of around 11-12% in FY19.
 Total consumption expenditure to increase at CAGR of 25.44% from year 2017-2021
with US$1595 billion in year 2016.
 Urban segment is largest contributor to overall revenue (55%) whereas rural segment
rose by 9.7%.
 Household and Personal Care is the leading segment, accounting for 50 per cent of the
overall market.
 The sector witnessed healthy FDI inflows of US$ 13.07 billion, during April 2017 to
December 2017.
Rural FMCG Market (US $ billion)

250.00
200.00
150.00
100.00
50.00
0.00
2011 2012 2013 2015 2018 2020F
INCOME 12.30 12.10 14.80 18.92 23.63 220.00
5. Market Share (International and Domestic)

 FMCG sector is the fourth largest sector of the Indian economy.

 In India FMCG market share is 27%
 55% share of FMCG revenue by URBAN Segment
 23% of FMCG market share contributed by HAIR CARE
 FMCG sector has posted growth at CAGR 15.76% from 2011- 2018.

6. CAGR

 The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$
840 billion in 2017, with modern trade expected to grow at 20 percent - 25 percent per
annum, which is likely to boost revenues of FMCG companies. The FMCG sector is
predicted to undergo the highest level of growth in its history in India.
 Total consumption expenditure to increase at CAGR of 25.44% from year 2017-2021
with US$1595 billion in year 2016.
 FMCG sector has posted growth at CAGR 15.76% from 2011- 2018. And is
expected 27.86% CAGR FMCG market in India by 2020F
 The global FMCG market is projected to reach $15,361.8 billion by 2025, registering
a CAGR of 5.4% from 2018 to 2025.
7. Porter's five force Model
Threats Of
New
Entrants -
MODEST

Bargaining Competeti Bargaining

Power Of Power Of
Supplier - ve Rivalry Customer -
MODEST - HIGH LOW

Threats Of
Substitues -
HIGH

 Threats of new Entrants: Barriers to Entry and exit: The Indian FMCG Industry is
characterized with modest entry and exit barriers. Integrated business model and
increasing capital requirement in the industry restrict new entrants
 Threat of substitutes: Being an essential commodity the demand for consumer
products is elastic. Multiple brands positioned with narrow product differentiation.
 Bargaining intensity of Customers: High brand loyalty for some products, thereby
discouraging customers’ product shift. But low switching cost and aggressive
marketing strategies under intense competition within the FMCG companies
 Bargaining intensity of Supplier: Prices are generally governed by international
commodity markets, making most FMCG companies price takers.
 Competitive Rivalry: Competitiveness among the Indian FMCG players is high.
With more MNCs entering the nation, the industry is profoundly divided.

8. Swot Analysis

Strength:
 Higher Investment - - Dabur to invest Rs. 250-300 crore (US$ 37.29-44.75 million) in
FY19 for capacity expansion and is also looking for acquisitions in the domestic
market

 Government Policy Supports -

 Modern Trade Channels

Weakness:
 Innovation Gap

 Inflationary Pressure

Opportunities:
 Large domestic market
  Easing Distribution channel - The GST is expected to transform logistics in the
FMCG sector into a modern and efficient model as all major corporations are
remodelling their operations into larger logistics and warehousing

 Attracting foreign investors - Investors are optimistic on India and sentiments are
favourable following government’s announcement of a series of reform measures in
recent months. In the recent quarters, many of the foreign firms have increased their
exposure in the FMCG companies like Hindustan Unilever, Godrej Consumer
Products, Britannia Industries etc. The government allowed 100 percent FDI in the
cash and carry segment and in single-brand retail.

Threats:
 Competitive Rivalry
 Large M&A deals
 Vagaries of monsoon

9. Top Players (Sub -Sector wise

10. Contribution of Each Sub Sectors

FMCG sector has mainly 3 segments and its overall performance is driven by the internal competitiveness of the segment .

Household & Personal Care Food & Beverages

Healthcare It is the prominent segment and Food & Beverages segment accounts
Healthcare has become one of India's accounts for 50 of the overall market for 19% in Indian FMCG’s market.
largest sectors - both in terms of shares. Hair care accounting to 23 This segment includes beverage,
revenue and employment and percent comes next in terms of market staples/ cereals, bakery products,
represents 31% of FMCG industry. share. Personal hygiene products, hair snacks, supplying raw chocolates, ice
The Indian healthcare sector is care, skin care, cosmetics, perfumes cream, tea/coffee/soft drinks,
growing at a brisk pace due to its are the key segments of the personal processed fruits and vegetables, dairy
strengthening coverage, services and care market. Each of these segments products, and branded flour. Some
increasing expenditure by the public as exhibit their unique trends and growth common trends which are being
well as private players. This segment patterns. Active ingredients and witnessed in this segment are growing
includes OTC products and ethical. personal care products experience high affordability among increasing
The pharma companies that were demand due to favorable demographic income groups in urban India, greater
selling OTC syrups, vitamin tablets, factors and increasing consciousness consumer acceptability of newer
and pain reliever balms have forayed among the population. Rising incomes products due to the factors such as
into the personal care space. And gives boost to this segment. younger population, urbanization,
FMCG companies have jumped As of FY17, the contribution of herbal more working women, easier
aboard the OTC bandwagon and are products to the overall personal care availability due to better distribution
selling products with medicinal products market in India stood at 6-7 by FMCG players coupled with
properties to end users. OTC market is percent and is estimated to grow to 10 growth in organized retail and
under-penetrated today. As consumers percent by FY20. creating product understanding
become more health conscious, amongst consumers.
demand for such products is on the
rise.
11. Market share
12. Revenue of Top Players
Some of the leading Indian FMCG companies, by revenue, were

Companies Revenue (Rs. In cr.)

ITC 44329.77

Hindustan Unilever Ltd 35218.00

Nestle India 10192.18

Britannia Industries 9380.17

Dabur 5609.06

Marico 5181.32

Godrej Consumer Products 5354.74

GlaxoSmithKline Consumer 4377.05

Healthcare
Colgate-Palmolive India 4328.42

13. Trends in FMCG

Sector
Favourable FDI Rising
Rise in rural policy and incomes
segment government drive
initiatives purchases

Digital transion
Adoption of Goods
and evolving trade
and Service Tax
channels
Future Strategies:
Strategies adopted by Few prominent players in FMCG Industry

 Cost Cutting strategy- HUL fulfils 80 percent of its power requirement for its Sumerpur plant
from solar energy.
 Analytics- Hindustan Unilever Ltd (HUL) implemented a transformational program called
Connected 4 Growth (C4G) to help drive business growth.
 Product Expansion- Nestle, has forayed into India’s pet care segment by introducing a range
of premium dog food, called ‘Purina Supercoat’, under its subsidiary, Nestle Purina.
 Product launches- ITC to launch 30-40 products every year to become India’s biggest FMCG
company.
 Expansion- Dabur to invest Rs. 250-300 crore (US$ 37.29-44.75 million) in FY19 for
capacity expansion and is also looking for acquisitions in the domestic market.
 Joint Venture- Eveready Industries India has entered into a joint venture with Wings Group, a
large conglomerate and major FMCG companies in Indonesia called, Universal Wellbeing.

Acquisition & Merger.

• Britannia Industries will reportedly invest Rs.400-500 crore, and will set up a dairy plant
worth Rs.300 crore.
• On 11 July 2018, Dunkin' Donuts (DD), operated by Jubilant Food Works has entered into a
partnership with Nestle India to launch three new signature donuts
• Britannia Industries is reportedly planning to expand its business in neighbouring countries as
well as Africa and the Middle East, in line with its plan to enter new geographic.
• Walmart invested $16 billion in Flipkart for a 77% stake making it Walmart's biggest ever
acquisition and the world's largest e-commerce deal.
• The Swiss food group Nestle has agreed to sell its U.S. confectionery business to the Italian
company Ferrero Rocher for a little over one billion euros
The opportunity in terms of incremental penetration and consumption is present. In addition, the
opportunity for FMCG products is large given that per capita consumption in India is lower than in
most markets. Many FMCG companies will continue tapping the rural market. The industry is
budding in rural areas, where consumption of products is increasing. M&A activity will likely
continue in the near future as the company will expand their global presence in the quest for growth
and development.

Target market
Demographic trends in emerging markets suggest there is vast potential in many different product
categories, rendering these markets very attractive to many global CP companies. Major food
company, Nestle notes that’s they achieve 45% of sales from emerging market. Similarly, Unilever
has its sights set on making emerging markets 75 percent of its revenue stream by 2020.