Introduction
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories and extends to certain electronic goods. These items are meant for daily of frequent consumption and have a high return. A major portion of the monthly budget of each household is reserved for FMCG products.
The volume of money circulated in the economy against FMCG products is very high, as the number of products the consumer use is very high. Competition in the FMCG sector is very high resulting in high pressure on margins. FMCG companies maintain intense distribution network. Companies spend a large portion of their budget on maintaining distribution networks. New entrants who wish to bring their products in the national level need to invest huge sums of money on promoting brands. Manufacturing can be outsourced. A recent phenomenon in the sector was entry of multinationals and cheaper imports.
Also the market is more pressurized with presence of local players in rural areas and state brands A subset of FMCGs is Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops. These are replaced more frequently than other electronic products. White goods in FMCG refer to household electronic items such as Refrigerators, TVs, Music Systems, etc. In 2005, the Rs. 48,000-crore FMCG segment was one of the fast growing industries in India. According to the AC Nielsen India study, the industry grew 5. % in value between 2004 and 2005.
SCOPE OF THE SECTOR
The Indian FMCG sector with a market size of US$13. 1 billion is the fourth largest sector in the economy. A well-established distribution network, intense competition between the organized and unorganized segments characterizes the sector. FMCG Sector is expected to grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-year period. It has been estimated that FMCG sector will rise from around Rs 56,500 crores in 2005 to Rs 92,100 crores in 2010. Hair care, household care, male rooming, female hygiene, and the chocolates and confectionery categories are estimated to be the fastest growing segments, says an HSBC report. Though the sector witnessed a slower growth in 2002-2004, it has been able to make a fine recovery since then.
GROWTH PROSPECTUS
With the presence of 12. 2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain.
FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i. e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. It is expected that the rural income will rise in 2007, boosting purchasing power in the countryside. However, the demand in urban areas would be the key growth driver over the long term.
Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%.
However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas.
INDIAN COMPETITIVENESS AND COMPARISON WITH THE WORLD MARKET
AVAILABILITY OF RAW MATERIAL
Because of the diverse agro-climatic conditions in India, there is a large raw material base suitable for food processing industries. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits &vegetables. India also produces caustic soda and soda ash, which are required for the production of soaps and detergents. The availability of these raw materials gives India the location advantage
PRESENCE ACROSS VALUE CHAIN
Indian companies have their presence across the value chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-processing sector. This brings India a more cost competitive advantage. For example, Amul supplies milk as well as dairy products like cheese, butter, etc.
LABOUR COST COMPARISON
Low cost labor gives India a competitive advantage. India’s labor cost is amongst the lowest in the world, after China & Indonesia. Low labor costs give the advantage of low cost of production. Many MNC’s have established their plan India to outsource for domestic and export markets
ANALYSIS OF FMCG SECTOR
Strengths:
- Low operational costs
- Presence of established distribution networks in both urban and rural areas
- Presence of well-known brands in FMCG sector
Weaknesses:
- Lower scope of investing in technology and achieving economies of scale, especially in small sectors
- Low exports levels
- “Me-too” products, which illegally mimic the labels of the established brands.
- These products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
- Untapped rural market
- Rising income levels i. e. increase in purchasing power of consumers
- Large domestic market- a population of over one billion.
- Export potential
- High consumer goods spending
Threats:
- Removal of import restrictions resulting in replacing of domestic brands
- Slowdown in rural demand and Tax and regulatory structure
TOP TEN COMPANIES OF FMCG SECTOR S. NO.
Companies
- Hindustan Unilever Ltd.
- ITC (Indian Tobacco Company)
- Nestle India
- GCMMF (AMUL)
- Dabur India
- Asian Paints (India)
- Cadbury India
- Britannia Industries
- Procter & Gamble Hygiene and Health Care
- Marico Industries
India has a population of over 1 billion and 4 climatic zones. Several religious and personal beliefs, 15 official languages, different social customs and food habits characterize Indian consumer class. Besides, India is also different in culture if compared with other Asian countries.
Therefore, India has high distinctiveness in demand and the companies in India can get lot of market opportunities for various classes of consumers. Consumer goods marketers’ experience that dealing with India are like dealing with many small markets at the same time. Indian consumer goods market is expected to reach $400 billion by 2010. India has the youngest population amongst the major countries. There are a lot of young people in India in different income categories. Consumer goods marketers are often faced with a dilemma regarding the choice of appropriate market segment.
In India they do not have to face this dilemma largely because rapid urbanization, increase in demand, presence of large number of young population, any number of opportunities is available. The bottom line is that Indian market is changing rapidly and is showing unprecedented consumer business opportunity.
There is large difference in economic prosperity levels among several states in India, linked to the wealth creation from trade, industrial, and agricultural development. There are poor districts in many states, classified according to their market potential. India has 500 districts, out of which 150 districts (category A) and next 150 districts (category B) account for 78% and 15% of the national market potential respectively.
BIBILIOGRAPHY
- vwww. google. com
- vwww. redchief. co. in
- vwww. naukrihub. com
- vwww. thehidubusinessline. com
- vwww. fmcgindustry. com
