Maharashtra Economic Development Council

Industry Monitor

Fast Moving Consumer Goods

Ms. Vidya Dhopatkar
Economist, MEDC

he fast moving consumer goods (FMCG) industry is highly fragmented and consists of segments like house-hold

products in these markets. The growing aspiration level is backed by increased purchasing power. Table 1: FDI inflows in FMCG categories*

products, personal care products, and food and beverages. Growth of the

Sector

(Rs crore) 5,528.38 946.4 856.79 429.69 593.41 1965.48 576,422.42

(US $ million) 1,209.96 203.51 190.71 95.6 128.34 451.39 128,763.44

% with total FDI inflow 0.94 0.16 0.15 0.07 0.1 0.35

FMCG sector is largely volume driven Food processing and oriented towards large scale market.
Vegetable oil and vanaspati Soaps, cosmetics and toilet

These products are regularly consumed preparations and sold quickly by the retailers. The Tea & Coffee^

sector has been dominated my multi- Retail Trading (single brand) national companies with strong distribution Paper and Pulp (including paper products) network and intense rivalry among firms.
Total FDI

The major players in FMCG sectors are Note: * cumulative from April 2000 to February 2011 Hindustan Unilever Limited, Nestle India, ^Processing and warehousing coffee and rubber ; Source: DIPP Godrej Consumer Products Ltd, Wipro Consumer Care, Marico Ltd, ITC Foods, Dabur India, Proctor & Gamble, and many more. Market Trends Domestic players are trying various ways to capture Demand Drivers Large and growing young population, emergence of organized retail market, growing urbanization, increasing disposable income in the hands of people both, in rural and urban market, increase in consumption levels, changing life styles of middle income group, etc have been contributing in growing demand for FMCG products. From past few years, the government has been focusing on development of rural sector including infrastructure development projects, creation of jobs (under NREGA), debt waiver schemes resulting in increasing income levels of rural people. A trend of increased spending on personal care products as well as on branded goods has been witnessed among rural people. The consumer demand has remained robust fuelling growth in consumer
May 2011

as much share as they can in rural FMCG market. Companies like Coca Cola, Pepsico, and Britannia are introducing small size products at lower price in the rural markets to increase volumes. FMCG majors including Wipro, ITC foods, Dabur India and Emami are expanding their manufacturing capacities to product large volumes. Wipro is expanding its capacity of toilet soap production at Waluj, Maharashtra. Emami has undertaken the expansion of its eight plants in India. Whereas, ITC foods is investing to strengthen their distribution network mainly supply chain management. Dabur India has 13 plants across India and is expanding its capacity by 25% of its existing plants. The company is also keen on expanding its distribution network. Marico Limited will be investing around Rs 37 crore to set up a manufacturing plant
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Maharashtra Economic Development Council

Industry Monitor
beauty (premium) products. Customers demand is switching from basic products like soaps, shampoos, hair oils to products like skin whitening cream, antiageing products, etc. Dabur India is introducing new products to strengthen its oral care product portfolio. The company is developing new technology to rollout new products. Shortly, the company is entering into hand sanitizer market under its Fem care brand. Hindustan Unilever had entered into juice segment earlier this year and re-launch its talcum powder brand. Godrej consumer products also planning to launch new products across categories like personal and house-hold care in the current fiscal. To pass on the burden of rise in input costs companies like Marico, Dabur and Asian Paints have increased prices on selected products. Godrej had also increased the prices of soaps due to rising palm oil prices. Profit margins of most companies are expected to shrink due to high input cost such as rising prices of crude oil (main ingredient in detergent making). Spending on advertisement and sales promotion techniques are also likely to remain high due intense competition.

at Bangladesh. Amway India is planning to set up another manufacturing facility in India. To expand the product portfolio and global foot prints the FMCG companies are keen on overseas as well as domestic acquisitions. Dabur has already acquired 85% share in Vietnam based firm to enter into personal care product business. In November 2010, Dabur acquired the US based personal care firm Namaste Laboratories LLC along with its three subsidiaries to accelerate growth in the international market. This acquisition helps Dabur to expand its presence in Africa, Europe, Middle East and North America. This acquisition marks the companys entry into the fast-growing ethnic hair care products market in the US, Europe and Africa. In September 2010, Dabur had also acquired a Turkish personal care firm Hobi Kozmetik Group to strengthen its presence in West Asia and North Africa. In November 2009, Wipro Consumer Care acquired the Yardley brand, London. Yardley has a strong presence in West Asian markets. Through this acquisition, Wipro acquired the business for Asia, Australasia and the North and West African markets. In 2010, Godrej had made several acquisitions, including leading African personal care brand Tura from Nigerias Tura Group, Indonesiabased insecticides maker Megasari Makmur Group, Latin American hair colour firm Issue Group and Argentinean brand Argencos to name a few. The Indian FMCG players have started acquiring domestic brands to extend their product portfolio. In December 2010, Godrej Consumer Products has acquired liquid detergent brand Genteel and Swastik soap. The acquisitions will help Godrej to strengthen its position in the liquid detergents (personal and house hold care category). A boom in various consumer categories indicates robust demand for several product segments. A trend has also been witnessed in the personal care segment of moving from health care products to

Key concerns and future prospects The increased level of inflation could have some dampening impact on the sale/growth of some categories of FMCG products. The domestic commodity prices are linked to international commodity prices, which causes fluctuations in price of the product. Surging crude oil prices remains a matter of concern for the sector. The domestic FMCG companies facing intense competition from the new as well as the existing players. The MNCs are aggressively focusing on branding, sales promotion, product development, and innovation techniques to grab the untapped market such as rural and semiurban areas. It also leads to price war between the existing companies. Though the FMCG sector is

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Industry Monitor
House-hold Products : This segment consists of laundry toilet soaps,

growing rapidly, the export of FMCG products are still at a nascent stage. Indias share in the export of processed food in global trade is only 1.5%. As the Indian economy is surging ahead with rapid urbanisation, rise in literacy levels and rising per capita income; the future of FMCG companies looks promising backed by robust domestic demand. According to a FICCI-Technopak report, Indias FMCG sector is poised to reach US$ 43 billion by 2013 and US$ 74 billion by 2018.The middle class and the rural segments have become the most promising market for FMCG companies. The setting up of new plants leads to immense employment opportunities for the domestic people. Technological advancement and implementation of Hub and Spoke model will help in better logistics and distribution in the rural areas. With the Indian companies going global, the share of exports (which is currently in small proportion) is expected to rise in the near future. There is immense potential lying for increasing exports. The expansion and diversification strategy adopted by the FMCG players coupled with the vast market size and growing demand gives huge opportunity for attracting heavy investments.

detergents,

floor

cleaners,

cleaners,

dish clears, air fresheners, etc. Major Players - Hindustan Unilever, Nirma Ltd, & Godrej Consumer Products Ltd Personal Care Products : This segment includes oral care, hair care, skin care products, soaps, cosmetics, perfumes, paper products, deodorants, etc. Major Players Dabur India, Proctor & Gamble, ColgatePalmolive, and Godrej Consumer Products Ltd Food and Beverages : This segment includes processed food items, spices, bakery products, processed fruits, soft drinks, tea, coffee, dairy products, etc. Major players - Hindustan Unilever, Nestle India, Parle Agro, and Britannia Industries.

vidyadhopatkar@gmail.com

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