Indian Institute of

FMCG Industry
Management,
Consult U
2011059
Chirag Jain
Udaipur
Group no.chirag.jain.2020@iimu.ac.in
14
Siddharth Nahar
2011243 siddharth.nahar.2020@iimu.ac.in
Waingankar Sahil Anant

2011279 waingankarsahil.anant.2020@iimu.ac.in
Akanksha Gautam
2011008 akanksha.gautam.2020@iimu.ac.in
Gaikwad Aakansha Vikas
2011074 aakansha.gaikwad.2020@iimu.ac.in
Muhammad Anas
2011141 muhammad.anas.2020@iimu.ac.in

1
A pivotal contributor to India GDP is the Indian FMCG sector. It is the fourth largest sector in
India. Employment has been increased has increased in this sector with more than three million
people.The FMCG sector has proved it’s worth time and again and has high growth rate in near
future.

 Macro & Growth drivers (include future projections, correlation with GDP)

1. Easy access

The products are available to the customers at desired time and place. Thus, Internet and
channels have made it easier to get the products. The FMCG products have been made readily
available on Various online grocery stores and online retail store like Amazon, Flipkart and Big
Basketto the customers.

2. Organised Market

In FMCG market, the unorganized market is expected to have comparatively low growth. The
level of brand consciousness has increased and there has been a fall in FMCG market. As the
organized FMCG sector grows, the mordern retail also sees an increase in the curve. In August
2018, The overall FMCG revenue’s modern trade share, grew up to 10 percent. This was post
demonetisation and GST.

3. Penetration increase

A scope of growth in volume was seen due to low penetration levels of branded products like
instant foods.Investors are attracted to this sector, hence, there is constant demand throughout the
year. In Madhya Pradesh, ITC invested Rs 700 crore (US$ 100 million) in the food parks. There
has been an increase in food parks,food labs, and food processing capacity to 17, 42, and 1.41
million respectively.

4. Consumption in rural area

In rural India, the branded products have an increase in demand.Due to the increase in the
income and standard living, the consumption is rural area has increased.The growth of 13.8
percent from 9-10 percent is estimated by the Nielsen India in the FMCG sector.
 Cost drivers

Revenue of FMCG sector reached Rs 3.4 lakh crore (US$ 52.8 billion) in FY17 and are
estimated to reach US$ 103.7 billion in 2020F.

The expectation to improve in demand generation for branded consumer products and boost
consumer confidence, the Union budget 2019-20 took initiatives to increase consumer spending
among middle class.

Retailers, warehouse operators and logistics service providers, and investment worth Rs 1.7
billion (US$ 25.35 million) was brought together by the Inland Waterways Authority of India
(IWAI) multi-modal transportation project of freight village at Varanasi. This will gain support
for the FMCG sector.

 Market size

In Indian economy, India is the fourth largest sector. The 50 percent of the total market consist of
personal care and household. Market share for food and beverages (F&B) is 19 per cent while
Healthcare comprises of 31 per cent.For the sector, increase in awareness, easy access and
lifestyle change are the main drivers. Also, It is expected that by 2025, India will cross 850
million.In covid-19, consumers stocked up on basic goods such as health, hygiene and packaged
food products, while using less personal care items. By the end of the year, India will see a
growth of 4-5%. Also the be local campaign has helped Indian brands to achieve the goal.
Ayurvedic products like patanjali hold the title of most trusted band in India.

According to the sources, In FY2018, FMCG market reached US$ 52.75 billion and is expected
to reach US$ 103.70 billion by 2020.Also, In 2018, Organized retail stores rose 22 per cent and
expected to reach US$ 45 billion in 2020. In FY18, the rural FMCG market reached US$ 23.63
billion while it is expected to grow to US$ 220 billion by 2025.

 Challenges faced

Marketing Challenge

The world is changing, and with it the market is changing as well. It is very important to accept
the new ways and opportunities for connecting with the customers. The methods change from
time to time. Using all available channels to connect with the customers and make them
understand the brands importance is the companies prior task.

Big Data
Data explosion is afoot because of the ability to acquire, store, and process data. It continues to
improve exponentially. 95% of the data being generated and sold to eager marketers and analysts
is not useful. The relevant data is used to develop products, manage trade and communicate
effectively to consumers.The FMCG organizations must use the relevant data.

Innovation.

Innovation ratios have been truly poor in recent years. Innovation is a key strategy for any
company, one must invest in products that add value to the customers. Also, the focus must be on
innovative product. The perception of innovation should not only focus on the product or format,
but also about transversal innovation.
 Innovations & Disruptions

 Technology and process changes tin Indian market are more incremental reflection and are
stealthier rather ubiquitous. Indian consumers always want value for money product.

 Many examples in Indian market show that there is shift by disruptive changes not by disruptive
innovations. The early signals of disruptive changes have brought by a company are stealthy.
In India, Nirma versus Hindustan Lever battle. In span of a decade, Nirma became the household
name in detergents in 1970s and 1980s.. HLL launched Wheel detergent to counter the threat
posed by Nirma. For many early years, HLL failed to recognize the challenge because of
differences in scale and size of two companies. Also, Indian youth were attracted towards
affordable smartphones when micromax arrived in the market, Nokia failed to realize the risk
and disruptions occured.
Also, the ayurvedic company like Patanjali changed it’s pace with introduction of full range of
products like biscuits, hair oil, shampoos, soaps etc. The backed up marketing effect might have
led it to be in the top five FMCG. Most Patanjali products are priced at 20-40% less than the
previously leading brands. This has made consumers take note of it and their shift in loyalty.

 Government policies that impact the industry

Various major initiatives were proposed by Government of India to promote FMCG sector:

1. The Government of India has approved 51 per cent FDI in multi-brand and single-brand
retail. Also in the cash and carry segment, 100 per cent FDI was approved.
2. With special emphasis to set up an extensive mechanism to ensure simple, speedy,
accessible, affordable and timely delivery of justice to consumers, the draft was put-forth by
the Government of India.
3. Toothpaste, hair oil and soap are the FMCG products that come under the 18 per cent tax
bracket against the previous rate of 23-24 per cent. Thus, making Goods and Services Tax
(GST) beneficial for the FMCG industry. Also, GST on hygiene products and food products
has been reduced to 12-18 per cent and 0-5 per cent respectively.
4. All major cooperations have been transforming their operations into larger warehouse and
logistics, which is a modern and efficient way. This happened because of the GST inception.

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