FMCG- Fast Moving Consumer Goods Overview

1. Market Overview -
Fast-Moving Consumer Goods (FMCG) 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.
Following are the characteristics of the FMCG industry
a. From the consumer perspective
i. Frequent purchases
ii. Low engagement (little or no effort to choose the item)
iii. Low prices
iv. Short shelf life
v. Rapid consumption
vi. Price Comparison over online purchase by customer.
b. From the marketer perspective
i. High volumes
ii. Low contribution margins
iii. Extensive distribution
iv. High inventory turnover
Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian
economy. Household and Personal Care account for 50 % of FMCG sales in India.
Revenues of FMCG sector reached Rs 3.4 lakh crore (US$ 52.75 billion) in FY18. The
sector witnessed growth of 16.5 per cent in value terms between July-September 2018
Future prospects: The sector is further expected to grow at a Compound Annual Growth
Rate (CAGR) of 27 % to reach Rs 7,24,759.3 crore (US$ 103.7 billion) by 2020.

FMCG in India

Urban (55%) Growth rate of 8 %

Rural (45%) Growth rate of 11-12 %

2. Market leaders -
Indian market leaders in FMCG industry are as follows :
Company Revenue (FY Major Products/services
2019)
Nestle 11551 crores Maggi, Nescafe, Munch, Kitkat

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 Colgate 4500 Colgate sensitive, Visible white, Palmolive
Palmolive
HUL 38888 Lux, Lifebuoy, Fair & Lovely, Surf Excel
ITC Limited 47480 Aashirvaad, Sunfeast, ITC Hotels, Fiama di wills
Britannia 10672 Good day, Marie Gold, Rusk, Cheese
Limited
Marico 6272 Parachute, Saffola, Livon, Set Wet
P&G 3872 Ariel, Gillete, Head & Shoulders, Vicks, Oral-B,
Pampers
Godrej group 11981 Cinthol, Good Knight, Hit, Aer
Amul 6966 Milk, Cheese, Ghee, Ice-cream, Chocolates

3. Strategies Adopted -
a. Multi-Brand Strategy
It is a strategy in which the company markets several similar and competitive brands of
the same company under the guise of different brand names. For eg. Hindustan Lever
have introduced many brands like “Dove” in premium segment, “Lifebuoy” for
economy segment and “Lux”, “Liril” and “Rexona” in the intervening segment, meaning
thereby, the company has not left any segment untouched.
b. Product Flanking:
Product flanking refers to the introduction of different combinations of products at
different prices, to cover as many market segments as possible. It is basically offering
the same product in different sizes and price combinations to tap diverse market
opportunities. Shampoos in small sachets, Pan masala in small pouches and premium
detergents (Tide, Aeriel etc.) in small pouches are examples of this strategy.
c. Brand Extensions:
Hindustan Lever’s Lifebuoy soap’s brand extensions are Lifebuoy Plus, Lifebuoy liquid
and Lifebuoy Gold, since these brands have been positioned at different segments.
Similarly, Amul butter, Amul ghee, Amul cheese and Amul chocolates are various brand
extensions of regular Amul Brand. Companies make brand extensions in the hope that
the extensions will be able to ride on the equity of the successful brands.
d. Building product Lines:
Hindustan Lever has added product lines one after another starting from Lifebuoy, Lux,
Liril, Dove etc. Similarly, Britannia Industries have related biscuits as differed product
lines. Companies add related new product lines to give consumers at the products they
would like to buy.
e. NPD (New Product Development):

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 Proctor and Gamble is shown as the number one company in the world reputed for
new products development. Companies that fail to develop new products would
expose themselves to great risk and might face stagnation in future.
f. Taking advantage of Wide distribution network:
A very simple way of increasing an FMCG company’s market share is by developing a
strong distributions network, preferably in terms of more locations. An extensive
distribution system can be developed over time, or the company may acquire another
company which has an extensive distribution network. Coca-Cola and PepsiCo’s wide
distribution network systems have made them market leaders.
4. Growth Drivers/Government Initiatives -
a. The Government of India has approved 100 % Foreign Direct Investment (FDI) in the
cash and carry segment and in single-brand retail along with 51 % FDI in multi-brand
retail.
b. The Government of India has drafted a new Consumer Protection Bill with special
emphasis on setting up an extensive mechanism to ensure simple, speedy, accessible,
affordable and timely delivery of justice to consumers.
c. The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the
FMCG products such as Soap, Toothpaste and Hair oil now come under 18 per cent tax
bracket against the previous 23-24 per cent rate.
d. GST Rates on food products and hygiene products have been reduced to 0-5 per cent
and 12-18 per cent respectively.
5. Key Trends -
a. Growth of E-commerce:
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
omnichannel approach.
b. Greater Focus on Healthier Products:
Snackers are looking for ‘clean’ food snacks and are more mindful of what they are
eating.
c. Role of Millennials:
Millennial consumers are seeking out new brands that they perceive as innovative
product lines and have their own distinct FMCG demands. They prefer to research
products by sharing information with their peers online and are much more influenced
by peers than a mass-brand channel approach.
d. Sustainability consumer mindset:

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 Sustainability is set to take a more central role within FMCG in 2019 and beyond.
Consumers are becoming more aware and interested in how sustainability relates to
products across the whole supply chain, from the sourcing of ingredients to the
packaging.
6. Important News -
a. Patanjali will spend US$743.72 million in various food parks in Maharashtra, Madhya
Pradesh, Assam, Andhra Pradesh and Uttar Pradesh.
b. Dabur is planning to invest Rs 250-300 crore (US$ 38.79-46.55 million) in FY19 for
capacity expansion and is also planning to make acquisitions in the domestic market.
c. In May 2018, RP-Sanjiv Goenka Group created an Rs 1 billion (US$ 14.92 million)
venture capital fund to invest in FMCG start-ups.
d. In August 2018, Fonterra announced a joint venture with Future Consumer Ltd which
will produce a range of consumer and foodservice dairy products.
7. Prospects/ Opportunities -
e. We have discussed the FMCG extensively and we can say that it has great potential of
upswing.
f. However, in order to scale up and maintain this pace, FMCG sector is subsequently
investing in new sales technologies such as SFA among others.
g. Increased internet users across the country, higher consumption and spends pattern in
the rural segment, cutthroat competition, emergence of Modern trade and need for an
organized retail distribution system has therefore prompted leading FMCG players to
integrate SFA solutions in their sales system.
h. This will create an automated, robust and seamless business environment for
organizations.

Credits: The Hindu, Mint, www.fieldassist.in, ibef.org, www.dksh.com