Letter of Transmittal

Subject: Submission of Case Analysis Report

Respected Ma’am

We hereby submit a report entitled “Industry Analysis Report on Fast Moving Consumer
Goods Sector.” This report has been prepared after exhaustive study of the FMCG industry and
its growth trends. The report covers the relevant facts about overview of the industry, its market
analysis and challenges of the industry.

We humbly request you to evaluate the same and provide us with your valuable inputs and
suggestions.

Table of Content

S.No. Contents Page no.

1 Table of Content 1
2 Industry Overview 2
3 Industry’s History 2
4 Products 3
5 Geographical Scope of FMCG Industry sector-wise 4
6 Lifecycle Stage 5
7 Market Analysis 5
8 Technology 6
9 Factors influencing competition 6
10 PEST Analysis of FMCG Industry 7
 11 Challenges faced by the FMCG industry 9
12 References 10

Industry Overview

Fast-Moving Consumer Goods (FMCG) are products that are sold quickly and at a relatively low
cost. FMCG products include mainly household goods: packaged foods, beverages, toiletries, OTC
pharmaceuticals, and other consumables.
FMCGs generally have limited shelf life, usually up to one year. FMCGs also have a high turnover
rate due to high consumer demand. Grocery products such as produce and meat and fish are highly
perishable. Other products, such as packaged foods and personal hygiene products, have a shelf life
of up to two years.
One of the most critical aspects of FMCGs is the packaging of the product. Since most of the players
in the industry sell slightly differentiated products, packaging plays a vital role in providing

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information to the consumer about the product, familiarizing consumers with the brand as well as
its promotion. The packaging needs to be attractive to a consumer because the packaging of the
product is the consumer's first experience of the product
FMCG industry relies on the volume of goods sold rather than an individual unit's margin for
profits.

Industry's History

In post-independent India, poverty was one of the primary reasons for the slow growth of the FMCG
sector. Hindustan Unilever Limited or HUL (at the time known as Hindustan Lever Limited) was
the only MNC with its manufacturing in India, focusing primarily on the urban population.
However, with the entry of domestic players in the market, such as Nirma with its low-cost
production, gave fierce competition to HUL.
After the liberalization of the economy in 1991, India saw the entry of more foreign players in the
industry. With the rise in the standard of living in urban areas and the continuously rising purchasing
power of rural India saw the growth of both the MNCs and the smaller domestic player. The period
also saw an introduction of the full range of household and grocery products. The companies
focused their investment primarily on their distribution network, customer retention, and increasing
the demand for their existing range of products.
HUL, being the oldest MNC in the country, shifted their focus from the urban areas to rural India
earlier than the other major players. This reaped them huge benefits as they enjoyed an almost
monopoly in the rural areas, competing only with the local micro-enterprises, which didn't pose
much of a challenge
However, there have been instances of these domestic companies growing to capture a sizable share
of the industry. Even so far as to threaten the market share of the FMCG giants such as HUL, P&G
(Proctor & Gamble). Domestic brands such as Nirma, Ghari, Dabur, and in recent times the
explosion of Patanjali group in FMCG is of particular note.

Products

Company Food& Beverages Personal Care Homecare

Hindustan Cornetto, Knorr, Fair & lovely, Ponds, Comfort, Surf Excel,
Unilever Greentea, Magnum, Lakme, Dove, Pears, Rin, Vim, Wheel,

Limited Bru, Annapuma, Pepsodent, LUX, Clinic Domex, Sunlight

Brooke Bond, Kissan, Plus, Axe, Aviance, Color guard, Cif, New
Kwality Walls Lifebuoy, Closeup, Magic

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 Sunsilk, ELLE18, Vaseline,
Tresemme, Hamam. Clear,
Rexona, Ayush, Liril,
Breeze, Tigi, Sure,
Toni&Guy
Procter & Gillette, Head & Ambi Pur, Cascade,
Gamble Shoulders, Olay, Oral- B, Dawn, Febreze, Gain,
Pampers, Pantene, Vicks, ultra Joy, Mr. Clean,
Wella, Whisper Salvo, Swiffer, Comet
Patanjali Creamfeast Biscuits, Drishti Eye Drop, Dant Detergent powder
Ayurved Jeera bites, Pickle, Kanti, Divya Dhara, Lip Popular, Detergent
Ketchup, Rice, Sabzi Balm, Kanti Body Powder Ujjwal,
Masala, Jam, Corn cleanser, Gulab Jal, Boro Detergent cake
Flakes, Noodles, Oil, Safe, Herbal Mehendi, Popular, Somya
Sugar, Pulses and Dal, Super steel Scrub Pad, Liquid Detergent
Namkeen, Chips Shampoo and
Conditioner, Body Lotion,
Hair Oil, Diapers, Oral
Care, Shave Gel
Dabur Real, Activ, Burrst, Amla Oil, Vatika Shampoo, Sani Fresh Shine,
India Homemade, Lemoneez, Vatika Oil, Babool Odonil, Odomos,
Capsico Toothpaste, Red Odopic
Toothpaste, Gulabari
Range, Fem Range, Uveda
Range

Geographical Scope of FMCG Industry sector-wise

Food and Beverages Sector

The largest share in India’s FMCG market accounts for Food & beverages sector. The changing
preferences of the upper-middle class lead to an increase in the importance of the food & beverages
sector, which fuelled the growth in the past few years.
The volume of foodservice outlets across India is as follows:

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Beauty and Personal Care in India
Imported cosmetics have significant importance in the Indian market. Indian customers perceive
international brands as lifestyle-enhancing products.
Factors driving the rural market
The trend of being conscious about self-grooming, with about 50% of the rural population who are
aged below 25 years
With an increase in awareness, rural habits and lifestyle have started following urban aspirations
and lifestyle.

Household care products:

The household care market in India has risen due to the increase in awareness about hygiene and
health and a considerable increase in per capita disposable income. The household market was
valued at Rs. 218 billion as of 2013-14, of which the fabric care segment holds a major share of
around 68%.
The detergent market has a large share of small and regional players. Usage of washing machines
is the key growth driver for the detergent market.
The dishwashing segment has witnessed a shift gradually from dishwash powder to dishwash bar,
specifically among the middle-class population.
Toilet cleaners mainly cater to the urban and semi-urban markets. Government initiatives such as
‘Swach Bharat Abhiyaan’ are key enablers for the toilet cleaners market share in India.
Lifecycle Stage

The FMCG industry in India had begun to shape during the last fifty years. There was no significant
growth in the industry from the 1950s to 80’s. The industry was previously not attractive from an
investor's point of view because of the low purchasing power and the government’s favoring
towards the small-scale sector.

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In the early 1990s with relatively lesser capital and technological requirements, several new brands
emerged domestically as well. Also, the relaxed FDI norms led to the entry of many global players
in the FMCG segment. All these factors made the FMCG market highly competitive in India and
one of the most important contributors to the Indian economy. In the mid 90’s, the growth of the
FMCG sector was very rapid where as it rapidly declined by the end of the decade. The initial
growth was due to an increase in consumption levels and product penetration. With a rapidly
growing economy, rising trend of urbanization and increasing per-capita incomes, and rising per-
capita incomes, the Indian FMCG sector is expected to expand to $100 billion by 2025.

Growth of the FMCG sector

The Indian FMCG sector’s growth between 2006 - 2013 has been approximately 16%, which is
phenomenal. The industry has almost tripled in its size over the past ten years, growing much faster
than in recent decades.
Even slowdown of the Indian economy hasn’t impacted the FMCG sector. It had registered a growth
rate of 14.5 percent for the year 2007-08. According to Nomura, the volatility in the agriculture
sector has not had much impact on FMCG sector.

Market Analysis

The Indian FMCG sector comes at 4th rank in the economy. The FMCG sector has grown from
US$ 31.6 billion in 2011 and has reached to US$ 52.75 billion in 2017-18 whereas the expected
growth by 2020 is US$ 103.7 billion at a Compound Annual Growth Rate (CAGR) of 27.86 percent.
Steady revenue growth of 8 percent for 2019 has been predicted in the urban segment while for
rural, it is 15-16 percent of total income. Rural FMCG market accounts for almost 45 percent of the
revenue share, and 7 percent growth in income has been observed over the past few years, which
will uplift the purchasing power of the customers. At the same time, the growing demand for quality
goods and services in the rural segment will be beneficial for the growth of FMCG because of low
per capita consumption for most of the products and services. Few companies have different
marketing strategies and financial plans for rural areas such as Yamaha, Dabur, etc. Through such
strategies, it becomes easy to persuade customers to buy products and services. Thus a significant
amount of revenue can be obtained by the FMCG companies in the rural segment if proper strategies
and technologies are utilized to make plans.
The estimated Indian retail market size is US$ 350.3 billion, and it is forecasted to be growing at
13 percent per annum while the current share is predicted to increase by 14 to 18 percent. The
organized retail market has developed new means of distribution for FMCG players such as stores,
supermarkets, hypermarkets. The revenues of FMCG companies are anticipated to rush with the
help of developing organized retailing.

Technology

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Inclusion of Information Technology in FMCG is a wise decision to stay ahead in the world of
innovation. Technology can act as a game-changer to stimulate growth in revenue by innovating.
With the increase in the use of technological equipment, the FMCG industry needs to keep pace
with this growth. Some of the technological add on are:

Salesforce Automation
It is a tool which has the potential to ease out the consolidation of data. FMCG industry is spread
across a geography with stores at multiple locations. It becomes difficult for the sales and marketing
department to collect all the data manually. Salesforce automation can be used to connect clients
and suppliers.

ERP Software
An enterprise resource planner facilitates inventory management, tracking stock record, managing
multiple orders and control system, supply chain management, MIS reporting, Logistic
management, workflow management. They have become an integral part of the FMCG industry.

Mobile Apps
Mobility solution comes into existence to serve consumers at the right time and place. The mobile
app renders personalized experience. It helps to locate product store at ease, check product
specification any time, and get alerts on discount, and purchase online anywhere anytime.

Factors influencing competition

Advertising
Advertising involves practices used to broadcast the products and services to bring them to public
notice and is intended to inform or influence the public. It is an audio or visual form of marketing
communication to reach people to promote and sell a product, service, or idea.

Branding
The process involves creating a name, symbol or logo, and image with a consistent theme that will
give the product identification value so as to differentiate the product from other competitor's
products and services to attract loyal customers.

Demographic factors

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This factor plays an important role in segmenting the market. Demographic factors involve gender,
age, income, place of residence, occupation, family size. The customer's preference changes with
these factors.

Product quality
Product quality defines the brand image and is essential to gain the trust of the customers, which
helps the product in the long-run as customers are much more inclined towards the quality factor.

Discounts or Extra quantity offered

The customers are usually oriented towards the lucrative discount offers of the markets, or extra
quantity is offered to the customers who provide a competitive advantage to the company in short-
run in grasping market share as customers are psychologically motivated towards extra quantity
offered by the companies.

PEST Analysis of FMCG Industry

Political

Tax Structure
The tax structure is complicated with high indirect tax and octroi. There is a lack of uniformity, as
well. However, as per the current statistics, it can be inferred that the FMCG sector has done well
under the GST regime and has been able to transition without any major hiccups.

Infrastructure Issues
The effectivity of FMCG depends on the amount the government is ready to spend on the
agricultural infrastructure. It also has a dependency on the power and transportation infrastructure.

Regulatory Constraints
There is a need for a multiplicity of permits and licenses for various states. The labor law needs to
be updated. The export procedure is very tedious. The subsidy available is quite confusing and time-
consuming.

Economical

GDP Growth
The FMCG sector is expected to grow by 11-12% for the 2019 year, which is a tad slower than the
growth of 13.8% in the previous year. However, the growth of the industry is entirely consistent
with the growing GDP.

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Inflation
A fall in Indian rupee and rise in crude oil prices impacts inflation. It slowly affects the purchasing
power of money and spending power of the consumer, which eventually has a direct impact on
business investment. Customers tend to buy only necessities during high inflation, hurting the
FMCG industry.

Consumer Income
Economic growth across sectors leads to an increase in consumer incomes. India has witnessed
increased economic growth for the past few years with the consumer having surplus income in
hand. This condition leads to the growth of the FMCG sector as people tend to spend more on such
goods.

Private Consumption
The Indian economy, unlike other economies, has a very high rate of private consumption (61%).
This boosts the FMCG sector in India with other factors being favorable.

Social

Change in consumer Profile

65% of the population in India is below the age of 35 years. With increased literacy rate and rapid
urbanization coupled with growth in the working class, there has been a boost in the FMCG sector.
People are getting modern each day, leading to increased demands and luxury.

Change in Lifestyle
The people in earlier days were more loyal to products they use and not willing to switch quickly.
However, the changing lifestyle in the current generation has led to a focus on premium products
among Indian FMCG players. Today there are many couples with double income and both having
a lifestyle of their own. The purchasing power varies to a great extent.

Rural focus
With the urban market getting saturated, companies have started targeting the rural markets
considering the majority of the population residing there. The people are getting attracted to the
ease and effectiveness of new FMCG goods. There is an enormous scope of expansion in these
areas.

Technology

Considering logistics, customer experience, inventory management, and with the advent of AI and
machine learning, the technology is just inches short of marking its authority in the FMCG sector.

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Other technologies like Big Data, social media, predictive analysis, too, are contributing to the
change, of course. The retail industry is heavily dependent on deep insight, the study of customer
behavior, changes in market trends, and preferences. The customer behavior can now be predicted
close to accurate with the help of these technologies. The companies are using the social network
to a great extent as an advertisement tool, and it is very much effective but expensive. One of the
major obstructions in the adoption of technologies is the lack of funds to invest. On the one hand,
where the big fishes in the FMCG industry can afford it, the small fishes are still finding it hard to
convert today. Very soon, this sector will be majorly technology-driven. Technology is thus
sublimating the future of FMCG industry.

Challenges faced by the FMCG industry

Never have any transforming phase driven by digitalization and globalization resulted in an absolute
benefit of an industry. With these exciting changes and their advantages comes a set of challenges.
Few challenges FMCG industry is facing over a period of time are:

Social Media
A platform which has a mysterious ability to spread information at an unimaginable speed. It has
put a hurdle Infront of the FMCG companies by exposing organization which sells a product that
is unsaleable in a developed market to an underdeveloped market where norms are not that strict.
Norms may take time to catch up, but consumer information is just a click ahead and is received by
Google.

Lack of BI Support
FMCG industry lacks when it comes to the adaption of advancement in technology. This has
resulted in major concerns like not able to personalize consumer experience, not able to use
automation efficiently.

Shelf Space vs. ROI

It is one of the biggest concerns faced all over the world. Companies are not capable enough to
decide on the optimum space required and usually, end up taking larger than required space leading
to increased ROI. They need to understand the fact that more doesn't always mean better.
References

1. https://www.ibef.org/industry/fmcg.aspx
2. https://www.reviewsxp.com/blog/fmcg-companies-in-india/
3. https://www.livemint.com/industry/retail/fmcg-sales-at-organized-retail-stores-grew-22-in-
2018-nielsen-india-report-1552350779531.html
4. https://www.ibef.org/industry/fmcg/showcase

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5. https://www.researchgate.net/publication/314216580_An_Overview_of_Indian_FMCG_Sect
or/link/58ba991ea6fdcc2d14e040ca/download
6. https://www.business-standard.com/article/management/the-future-of-fmcg-
110112900006_1.html

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