INTRODUCTION OF FMCG INDUSTRY

 Overview of the industry

 Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) are

products that are sold quickly and at a relatively low cost. Examples include non-
durable household goods such as packaged foods, beverages, toiletries, over-the-
counter drugs, and other consumables. Many fast-moving consumer goods have a
short shelf life, either as a result of high consumer demand or as the result of fast
deterioration.
 Some FMCGs, such as meats, fruits, vegetables, dairy products, and baked goods are
highly perishable. Other goods, such as pre-packaged foods, soft drinks, candies, and
toiletries have high turnover rates. Sales are sometimes influenced by holiday and/or
seasonal periods and also by the discounts offered. Packaging is critical for FMCGs.
To become successful in the highly dynamic and innovative FMCG segment, a
company not only has to be acquainted with the consumer, brands, and logistics, but
also, it has to have a sound understanding of packaging and product promotion.
 The packaging has to be both hygienic and customer-attracting. Logistics and
distribution systems often require secondary and tertiary packaging to maximize
efficiency. Unit or primary packaging protects products and extends shelf life while
providing product information to consumers.
 FMCG product touches every aspects of human life. These products are frequently
consumed by all sections of the society and a considerable portion of their income is
spent on these goods. Apart from this, the sector is one of the important contributors
of the Indian economy. This sector has shown an extraordinary growth over past few
years, in fact it has registered growth during recession period also. The future for
 FMCG sector is very promising due to its inherent capacity and favorable changes in
the environment.
 Consumers in rural areas typically purchase goods from nearby towns and villages.
Recently, there has been a shift in consumer purchase behavior towards purchasing
locally that has prompted the need for better local promotional efforts to generate
brand awareness in small towns. FMCG's play a large part in the economy, as
inelastic products that touch every part of consumer life in one way or another.
Businesses that supply FMCG's to a rural community can help provide employment
opportunities, as well as drive down the cost of such products in those rural areas. For
instance, the FMCG sector in India is the 4th largest sector in its economy and
generates employment for more than 3 million people in downstream activities.
 Fast moving consumer goods are products that have a quick turnover and a relatively
low cost; FMCG products usually get replaced within a year, and they constitute a
major part of the consumers' budget in many countries. Marketing of FMCGs plays a
pivotal role in the growth and development of a country irrespective of the size and
population. Further, the development of FMCG marketing has always kept pace with
the economic growth of the country. The FMCG sector primarily operates on low
margins, and therefore, success very much depends on the volume of sales.
 Major players

 Hindustan Unilever Limited (HUL)

 Colgate-Palmolive.

 ITC Limited.

 Nestlé

 Parle Agro.

 Britannia Industries Limited.

 Marico Limited.

 Procter and Gamble.

 Major product
 Fast moving consumer goods are also known as consumer packaged goods
(CPG). The range of FMCG products is classified into three broad categories:
household care, food and beverages, and personal care products. The products
under each of these categories are provided below:
  FMCG category and products:

Category Products
Fabric wash (laundry soaps and synthetic detergents); household cleaners
Household
(dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners,
care
insecticides and mosquito repellents, metal polish and furniture polish)
Health beverages; soft drinks; staples/cereals; bakery products (biscuits,
Food and bread, cakes); snack food; chocolates; ice cream; tea; coffee; processed fruits,
beverages vegetables; dairy products; bottled water; branded flour; branded rice; branded
sugar; juices.
Personal Oral care, hair care, skin care, personal wash (soaps); cosmetics and toiletries;
care deodorants; perfumes; feminine hygiene; paper products.
 Contribution towards the GDP

 Fast moving consumer goods (FMCG) are the 4th largest sector in the Indian
economy. There are three main segments in the sector – food and beverages
which accounts for 19 per cent of the sector, healthcare which accounts for 31 per
cent and household and personal care which accounts for the remaining 50 per
cent.
 The FMCG sector has grown from Rs 2,20,852.4 crore (US$ 31.6 billion) in 2011
to Rs 3,68,669.75 crore (US$ 52.75 billion) in 2017-18. The sector is further
expected to grow at a Compound Annual Growth Rate (CAGR) of 27.86 per cent
to reach Rs 7,24,759.3 crore (US$ 103.7 billion) by 2020. The sector is projected
to grow 11-12 per cent in 2019. It witnessed growth of 16.5 per cent in value
terms between June–September 2018; supported by moderate inflation, increase
in private consumption and rural income. FMCG’s urban segment is expected to
have a steady revenue growth at 8 per cent in FY19 and the rural segment is
forecasted to contribute 11-12 per cent of total income in FY19. Post GST and
demonetization, modern trade share grew to 10 per cent of the overall FMCG
revenue, as of August 2018.
 Accounting for a revenue share of around 45 per cent, rural segment is a large
contributor to the overall revenue generated by the FMCG sector in India.
 Demand for quality goods and services have been going up in rural areas of India,
on the back of improved distribution channels of manufacturing and FMCG
companies. Urban segment accounted for a revenue share of 55 per cent in the
overall revenues recorded by FMCG sector in India.
 FMCG Companies are looking to invest in energy efficient plants to benefit the
society and lower costs in the long term. Patanjali will spend Rs 5,197.85 crore
(US$ 743.72 million) in various food parks in Maharashtra, Madhya Pradesh,
Assam, Andhra Pradesh and Uttar Pradesh. Dabur is planning to invest Rs 250-
300 crore (US$ 38.79-46.55 million) in FY19 for capacity expansion and is also
looking for acquisitions in the domestic market. Tata’s are also planning to
expand its home and personal care products in FMCG sector.
 Growing awareness, easier access, and changing lifestyles are the key growth
drivers for the consumer market. The focus on agriculture, MSMEs, education,
healthcare, infrastructure and tax rebate under the Union Budget 2019-20 is
expected to directly impact the FMCG sector. These initiatives are expected to
increase the disposable income in the hands of the common people, especially in
the rural area, which will be beneficial for the sector.

 Growth of the Industry:

  An FMCG industry overview indicated that India’s demographic profile plays a
major role in the growth of this sector. Not only is India’s demographic young,
but this segment is also characterized by increased urbanization and higher
expenditure. Urban development initiatives by the government, as well as the
increasing middle class of India, have led to an increase in the number of
attractive markets in the country. 
 India’s young population is also characterized by a high degree of technological
awareness. Growing penetration of smartphones and better internet connectivity
in India has led to a burgeoning E-Commerce sector, which has, in turn, helped
formalize large sections of the unorganized retail sector. The E-Commerce
segment is projected to contribute 11% of overall Indian FMCG companies’ sales
in 2030. The online FMCG market is projected to reach $ 45 billion in 2020. This
has been a major catalyst in the development of the FMCG sector in rural India.
 Favorable demand drivers such as rising income levels and growing urbanization,
among others, have recently encouraged major and diverse investments in the
FMCG sector. While top FMCG companies are expanding their capacity to feed
the growing domestic demand, homegrown brands have ventured into
international markets. Some of these include: 
 Patanjali- Their success has encouraged the brand to look at the international
stage, with plans to set up a 100% export-oriented manufacturing unit in Milan
SEZ, Nagpur 
 RP-Sanjiv Goenka Group- They have created a venture capital fund of $ 14.74
million to invest in FMCG startups. This move was made taking into account the
capital appreciation in the FMCG sector.

 Trends in the industry

Some of the major trends expected to influence FMCG industry in 2019 and beyond:

 Growth of E-commerce: By 2020, e-commerce revenues are expected to be more than

USD 4 trillion. More digitally savvy consumers will spend more time online. Messaging
apps will also be increasingly used within the context of sales and marketing. E-
commerce is growing four-times faster than offline sales, with global online sales
predicted to double within the next five years. By 2022, FMCG e-commerce is forecast to
make up around ten to twelve percent of global FMCG sales, creating a USD 400 billion
opportunity. As e-commerce penetrates FMCG, competition intensifies, and the
importance of clicks and bricks means that FMCG businesses will need to adopt an Omni
channel approach.
 Consumers demand product convenience: With more consumers leading an on-the-go
lifestyle, the demand for convenience is a big trend in 2019. A greater appetite for
convenience food and drinks that are ready-to-consume and a desire for restaurant-quality
foods at home will drive growth in this sector. Much of the expectation for quality and
convenience is due to the rising culture of delivery apps. Consumers are increasingly
demanding flexibility in how, when and where to shop for their FMCG products, with a
no-compromise approach to convenience. The trend is for consumers to do smaller, more
frequent purchases with a growing demand for fresh convenience foods to fit this lifestyle
dynamic.
 Greater focus on healthier products: The existing trend for ‘clean’ foods continues,
inspired by greater awareness, interest and understanding of wellbeing. There will be a
greater emphasis on health and wellness products, many of which combine research on
nutrition and longevity with traditional, ancient therapies. Sales of snack food in Asia-
Pacific soared in 2017 and 2018. Snackers are looking for ‘clean’ food snacks and are
more mindful of what they are eating.
 Greater disposable income and more consumers in Asia: GDP increases and disposable
income hikes will undoubtedly impact FMCG markets in 2019. Emerging economies, in
countries such as Vietnam and Indonesia, and countries with a growing middle-class,
such as Thailand, are resulting in more consumers, with more cash to spend. Findings
from the Organization for Economic Cooperation and Development (OECD) suggest this
will lead to a billion new consumers by 2020 spending between USD 10-100 per day.
Countries such as Thailand, Vietnam and the Philippines are experiencing a rapid
explosion of consumers with more disposable income than ever before. By 2030,
estimates are that over two-thirds of the world’s middle-classes will live in Asia. In
Vietnam, one of the fastest-growing FMCG markets, household wages have increased by
close to 40 percent since 2012, with GDP rising fast. FMCG in emerging markets is
growing two to four times more than in developed markets.
 Demand driven by population density: Along with shifting demographics, small towns
and mid-density cities will emerge, creating new FMCG markets. Population densities
will create more rural cities with an increasing urbanization of these inhabitants, many of
which have the same access to technology and the same consumer behaviors as their
urban counterparts. These new frontiers on the FMCG horizon will witness new trade
centers and improved infrastructure. Undoubtedly, 2019 will be a year of huge change in
the broad as well as the macro FMCG markets. Those businesses who understand these
new and divergent pathways have a far better opportunity to navigate them successfully.

 Packaging in the industry

 Packaging generally makes up 7-11% of the total costs of a product for most
FMCG companies. Being a cost-sensitive market, the pressure for FMCG
companies to reduce packaging costs is strong and they prefer plastics packaging
over other materials. This covers all the aspects of the packaging value chain from
raw material to post consumption disposal and treatment.
 In a Flexible Packaging Association (FPA) survey of 2,120 consumers, consumers
placed a high value on the packaging that is “easy to store,” “easy to reseal,” and
“easy to open.” Consumers in the survey also said they are willing to pay more for
benefits like “ability to reseal,” “ability to extend product life,” “easy to store”
and “easy to open.” Therefore, FMCG companies prefer plastics packaging
because of its lightweight and easier to handle.
 Further, with the increasing trend of pet humanization whereby pets are being
treated more like humans than animals is creating huge market opportunities for
the FMCG plastics packaging. The plastics tubs and cups supplant other
packaging containers in wet food, due to peel able lids that are easier to open. In
addition, plastics pouch with zippered closure mechanisms is widely preferred in
both dry and wet pet food.
 For instance, in January 2018, Nestle has entered into India’s pet care segment by
introducing arrange of premium dog food called ‘Purina Supercoat’ under its
 subsidiary Nestle Purina. Such product expansions by FMCG players support the
growth of the packaging market.