F E AT U R E D I N S I G H T S

DELIVERING CONSUMER CL ARIT Y

W H AT S I N S T O R E
FOR OUR FMCG
MARKET?
PREDICTING SALES OF FAST-MOVING
CONSUMER GOODS IN INDIA
Nielsen predicts that Indias 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.

Indias FMCG industry is massive. In 2013, 8.4 million outlets served

1.26 billion people and accounted for US$37 billion in sales.
The last three years have been challenging for Indias FMCG industry.
Sales have been affected by a weak economy and high inflation.
Consumer confidence which we found has a strong correlation with
FMCG sales, has also dipped in this period. In more recent months,
however, confidence is rebounding and the sector appears to be one
with perceptible signs of a sustained recovery.

Copyright 2014 The Nielsen Company

FMCG VALUE GROWTH RATE %

22

19

20

17

23
2008

2009

12

22

2010
U+R

13

2011
URBAN

2012

2013

RURAL

THE FMCG INDUSTRY MILIEU

To understand the declining FMCG growth trend and predict how the
future looks like, we must first understand the sales environment. There
are several forces at play that affect the FMCG industry in India.

MACRO
ECONOMIC INDICATORS

FMCG TRENDS &

PRODUCT ATTRIBUTES

MEDIA
(TV)

FORCES
AT
PLAY

DEMOGRAPHIC
PATTERNS

IDENTIFYING SALES
DRIVERS

QUANTIFYING IMPACT
OF EACH

ENVIRONMENTAL
INFLUENCERS

USING THE DRIVERS

TO FORECAST SALES

WHATS IN STORE FOR INDIAS FMCG MARKET?

Through multivariate regression modelling and custom forecasting,

Nielsen arrived at drivers-based FMCG forecasts incorporating a
range of influencing variables. This helps in understanding market
dynamics, gain foresight into current and emerging trends and to plan
better.
Nielsen used a three step approach to forecast FMCG sales value.
1. Identify the drivers impacting sales through regression modelling
2. Quantify the impact of each of the drivers
3. Finally, forecast FMCG sales for the next three years using the
identified drivers and their future values
All the above variables were modelled against FMCG sales to attain
sales drivers. Using these drivers and their impact on FMCG, we were
able to forecast sales for 2014 - 2016.

DRIVERS OF FMCG SALES

Overall 8 factors have emerged which play a direct role in influencing
FMCG sales. We have classified these drivers of sales into two
categories: those that marketers can control and those they cannot.
The good news is marketers can directly influence more than half of the
drivers of sales.

DRIVERS OF FMCG SALES

AVAILABILITY

SACHET
OFFERINGS

AWARENESS

VALUE
PACKS

33%

18%

3%

1%

EMPLOYMENT
RATE

INDEX OF
INDUSTRIAL
PRODUCTION (IIP)

GDP

20%

13%

7%

CONTROLLABLE

CRUDE OIL
PRICES

NOT DIRECTLY
CONTROLLABLE

5%

MARKETERS CAN INFLUENCE 55% OF SALES DRIVERS.

Copyright 2014 The Nielsen Company

Given the Indian FMCG consumers preference for traditional trade

outlets and the challenge for marketers in actually reaching the
consumer, its understandable that availability is the biggest driver of
FMCG sales. This is followed by employment rates, which generates
income, and then proliferation of sachets (low volume packs), which
have a low outlay and are easy on the wallet. Sachet packs also play a
strong role in recruiting new buyers and in inducing trials.

USING SALES DRIVERS TO EXPL AIN

GROWTH ON DECLINE
FMCG growth has slowing for some time now, sliding by 8.1% from
2010 to 2013. In a clear indication that sales drivers have played a part in
this decline, a slowdown was seen in the rate of distribution expansion
and the rate of sachet launches during the same period. Admittedly,
weakening macroeconomic variables also contributed to the overall
FMCG slowdown.

MARKETERS CAN
INCREASE THEIR
SALES THROUGH
WELL-PL ANNED
DISTRIBUTION
EXPANSION AND SALES
OF SMALLER PACKS

2013 vs. 2009

FMCG VALUE
GROWTH ON
DECLINE:
BREAKDOWN

Here is a closer look at how some of the drivers affect FMCG sales:
Availability: The slowdown in distribution expansion has held up
growth. The distribution expansion in 2013 has slowed down to 1.1%
from a healthy 2.3% in 2010.
Awareness: While the extent of the impact is smaller, yet, the effect of
lower television gross rating points (GRP) has affected sales.
Macro factors: Declining FMCG growth seems to be reflective of the
Indian economy as a whole. The key macroeconomic indicators have
weakened; GDP slowed from 7.9% in 2009 to 5.7% as of Nov. 12, 2013.
The Index of Industrial Production (IIP) has also plunged from 5.8% in
2009 to 1.7% in November 2013. This has affected the economy and the
consumers purchasing power.
Sachet (Low volume packs): New product launches through sachets
have fuelled growth over the years. The growth in the number of lowvolume packs hit 31.1% from 2009 to 2010. The rate then dropped to
10.5% from 2012 to 2013. This drop in sachet innovations has impacted
FMCG growth.

FMCG

-8.1%

=
AVAILABILITY

-1.6%

+
AWARENESS

-0.3%

The big question that faces the Indian

FMCG industry today is Are slower growth rates the new normal for
the FMCG sector, or can we dare to expect
better days ahead?

MACRO
FACTORS

-2.4%

+
SACHET

-3.8%

WHATS IN STORE FOR INDIAS FMCG MARKET?

WHAT TO EXPECT

STRONGER GDP AND

The dark clouds of sales growth of the last few years appear to be
clearing. Nielsen expects a steady recovery over the next few years.
While we dont expect growth rates to touch the levels we saw in 2010,
we do expect the numbers to improve.

RISE IN EMPLOYMENT
ARE PRIMARILY
EXPECTED TO DRIVE A
SPURT IN SALES AND
EFFECT A RECOVERY

FMCG VALUE GROWTH RATE %

OVER THE NEXT FEW

2010

2011

2012

ACTUAL GROWTH%

2013

2014

12%-13%

2009

10%-11%

7%-8%

12%

13%

17%

20%

22%

YEARS

2015

2016

2016 vs. 2013

FMCG VALUE
GROWTH
BREAKDOWN

FMCG

FORECASTED GROWTH%

4.8%
Source: Nielsen

=
AVAILABILITY

The primary factors expected to drive a spurt in sales are a stronger GDP
and rise in employment. An increase in the rate of availability through
distribution expansion is also expected to support sales growth.

+1.4%

+
POSITIVE GROWTH RATE OF MACRO
FACTORS AND AVAIL ABILIT Y IS EXPECTED
TO REVERSE THE TREND OF GROWTH ON
DECLINE

Nielsen expects the Indian FMCG sector to touch US$49 billion by 2016.
The early signs of revival include a recovering GDP, a strengthening
economy and higher consumer sentiment about their employment
opportunities.

Copyright 2014 The Nielsen Company

AWARENESS

+0.1%

MACRO
FACTORS

+3.3%

WHAT THIS MEANS FOR MARKETERS

While marketers may not have direct control on macro-economic
factors, they do have control on the other marketing variables which
have emerged as key drivers of sales, giving them enough latitude to fuel
brand and their company growth.
DISTRIBUTION REMAINS A PRIORITY:
Distribution expansion emerging on the top of the pile is perhaps
intuitive, but we now know just how important it is. Given that an
overwhelming majority of sales still move through traditional trade,
availability of products in stores will continue to drive sales to a large
extent.
While distribution expansion should remain a priority, equally
important, if not more, is reaching the right stores. A blanket approach
to store expansion might not help; going to stores which matter more
for the respective category and brand, will make all the difference in
maximising returns and growth.
It is well-known that a small proportion of stores account for a large
proportion of sales; hence going to these stores and ensuring presence
and avoiding churn will play a pivotal role.
INNOVATIONS THROUGH SACHETS AND THE RIGHT ASSORTMENT:

NOT JUST
DISTRIBUTION
EXPANSION BUT THE
RIGHT DISTRIBUTION
EXPANSION CAN
MAKE ALL THE
DIFFERENCE TO
GROWTH.

WHILE DRIVING
SALES THROUGH
LOW VOLUME PACKS

Sachets come with a low outlay, and as we have seen from the drivers
of sales, they are integral in driving trial, penetration and sales. Sachets
also help in recruiting new stores as a part of distribution expansion.
This, when combined with the established importance of consumerdriven innovations, can lead to a potentially promising idea. Marketers
now need to boldly innovate and come out with appealing packs which
are affordable and can get consumers into the fold. Given the economic
environment, affordable low volume packs will play an important role in
driving consumer adoption and sales.

AND AFFORDABLE

This also points to a larger theme of assortment. Based on our

experience with FMCG and with sales drivers, we have seen assortment
playing a critical role. Sachets/ low volume packs are a part of this
theme and stand out as a key driver given the nature of the Indian
market and purchase dynamics. Therefore, marketers will be better
served by focusing on the broader agenda of getting the right
assortment as well. Going one step further, getting the right assortment
of SKUs in the right stores will make an even bigger impact.

GETTING THE RIGHT

INNOVATIONS WILL
NEED TO BE A FOCUS
AREA, MARKETERS
MUST ALSO KEEP
AN EYE ON THE
BROADER THEME OF
ASSORTMENT OF
SKU s IN THE RIGHT
STORES TO FULFIL
VARIED CONSUMER
NEEDS.

WHATS IN STORE FOR INDIAS FMCG MARKET?

ABOUT THE AUTHORS

NITYA BHALLA

A J R VASU

EXECUTIVE DIRECTOR

DIRECTOR

NIELSEN INDIA

NIELSEN INDIA

Arjun Trehan and Mohammad Zeeshan Alam from Nielsen

Performance Management team were instrumental in the creation of
this issue of Featured Insights.
For more details at a category level, please contact
Ajr.Vasu@nielsen.com or your Nielsen representative.

ABOUT NIELSEN
Nielsen Holdings N.V. (NYSE: NLSN) is a global information and
measurement company with leading market positions in marketing
and consumer information, television and other media measurement,
online intelligence and mobile measurement. Nielsen has a presence
in approximately 100 countries, with headquarters in New York, USA
and Diemen, the Netherlands.
For more information, visit www.nielsen.com.
Copyright 2014 The Nielsen Company. All rights reserved. Nielsen
and the Nielsen logo are trademarks or registered trademarks of
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Copyright 2014 The Nielsen Company

WHATS IN STORE FOR INDIAS FMCG MARKET?