INDUSTRY IMMERSION PROJECT REPORT

ON
“A DETAILED STUDY OF FMCG SECTOR”

BY
NETRA SANJAY GHADI
PGDM 2017-19

In Partial fulfillment of the requirements for

POST GRADUATE DIPLOMA IN MANAGEMENT

July 2018
 DECLARATION

I hereby declare that the Industrial Immersion project report

entitled “A DETAILED STUDY OF FMCG SECTOR”is my work
submitted in partial fulfillment of the requirementfor the Post
Graduate Diploma In Management from KOHINOOR BUSINESS
SCHOOL , KURLA, MUMBAI and not submitted for the award
of any degree, diploma, fellowship or any similar titles or
prizes.

Date : Signature: ______________

Place : Mumbai Student’s Name: Netra Sanjay Ghadi

 CERTIFICATE

This is to certify that the project entitled “A detailed

study of FMCG sector” is successfully completed by
“Netra Sanjay Ghadi” in partial fulfillment of the POST
GRADUATE DIPLOMA IN MANAGEMENT,AICTE
approved through KOHINOOR BUSINESS SCHOOL , Kurla
, Mumbai - 4000 70.

Date :

Place : Mumbai Prof. Name : Dr. SandeepSawant

 ACKNOWLEDGEMENT

With immense pleasure, I would like to present the industry immersion

project report on “A detailed study of FMCG sector”.
It has been an enriching experience for me to undergo my project. As a
student of Kohinoor Business School, Kurla, Mumbai, I would like to
express my sincere thanks to all those who helped me during my
project study.

I would like to thank my entire faculty members for the proper

guidance and assistance extended by them. I am also grateful to my
parents and friends to encourage and giving me morale support.

I would like to express my special gratitude and thanks to industry

persons for giving me such attention and time.

Last but not least my grateful thanks extended to our and my project
guide Prof. SandeepSawantand faculties of PGDM.

However, I accept the sole responsibility for any possible error of

omission and would be extremely grateful to the readers of this project
report if they bring such mistakes to my notices.

Submitted by : NETRA SANJAY GHADI

(PGDM 2017-19)
INTRODUCTION
Fast-moving consumer goods (FMCG) or consumer packaged
goods (CPG) are products that are sold quickly and at
relatively low cost. Examples include non-durable goods such
as packaged foods, beverages, toiletries, over-the-counter
drugs and many other consumables. In contrast, durable
goods or major appliances such as kitchen appliances are
generally replaced over a period of several years.
Many fast moving consumer goods have a short shelf life, either
as a result of high consumer demand or because the product
deteriorates rapidly. Some FMCGs, such as meat, fruits and
vegetables, dairy products, and baked goods, are highly
perishable. Other goods, such as pre-packaged foods, soft
drinks, chocolate, candies, toiletries, and cleaning products, have
high turnover rates. The sales are sometimes influenced by
holidays and seasons.
Packaging is critical for FMCGs. The logistics and distribution
systems often require secondary and tertiary packaging to
maximize efficiency. The unit pack or primary package is
critical for product protection and shelf life and also provides
information and sales incentives to consumers.
Though the profit margin made on FMCG products is relatively
small (more so for retailers than the producers/suppliers), they
are generally sold in large quantities; thus, the cumulative profit
on such products can be substantial. FMCG is a classic case of
low margin and high volume business
The Fast Moving Consumer Goods (FMCG) sector is the key
contributor of the Indian economy. This fourth largest sector of
Indian economy provides employment to around 3 million
people which accounts for approximately 5% of the total factory
employment in the country. These products are daily consumed
by each and every strata of the society irrespective of social
class, income group, age group etc. FMCG sector is more
lucrative because of low penetration levels, well established
distribution network, low operating cost, lower per capita
consumption, large consumer base and simple manufacturing
processes for most of products resulting in fairly low capital
investments.
The industry is highly competitive due to presence of
multinational companies, domestic companies and unorganized
sector. A major portion of the market is captured by
unorganized players selling unbranded and unpackaged
products. More than 50 per cent of the total revenues of FMCG
companies come from products worth Rs 10 or less .This has
made the proliferation of localized brands which are offered in
loose form in small towns and rural part where brand awareness
is low. In last 10 years domestic players are giving tough
competition to multinationals; in fact they have outstripped
many MNCs in growth and market cap. Between 2005- 2014 the
profit of domestic companies increased by 24% against 14%
increase of multinational companies.
Urban India accounts for 66% of total FMCG consumption,
while rural India accounts for the remaining 34%. However,
rural India accounts for more than 40% of the consumption in
major FMCG categories such as personal care, fabric care and
hot beverages. As per the analysis by ASSOCHAM, companies
like Hindustan Unilever Ltd and Dabur India generate half of
their sales from rural India while Colgate Palmolive India and
Marico constitute nearly 37% respectively.

The following are the main characteristics of FMCGs:

From the consumer's perspective

 Frequent purchase
 Low involvement (little or no effort to choose the
item)
 Low price
 Short shelf life
 Rapid consumption

From the marketer's perspective

 High volumes
 Low contribution margins
 Extensive distribution networks
 High stock turnover
TOP 10 PLAYERS IN FMCG SECTOR-2018
1)Hindustan Unilever Limited
Turnover: 4.0 Billion Dollar
Employees: 16000+
Company Website: https://www.hul.co.in/

2) Colgate-Palmolive
Turnover: 17.08 Billion Dollar
Employees:  37000+
Company
Website: http://www.colgate.co.in/app/Colgate/IN/CompanyHo
mePage.cvsp

3) ITC Limited
Turnover: 7.0 Billion Dollar
Employees: 29000+
Company Website: http://www.itcportal.com/

4) Nestle
Turnover: 87.0 Billion Dollar
Employees: 328000+
Company Website: https://www.nestle.in/

5) Parle Agro
Turnover: 1 Billion dollar (Approx)
Employees: 2500
Company Website: http://parleagro.com/

6) Britannia Industries Limited

Turnover: 730 Million Dollar
Employees: 2000+
Company Website: http://britannia.co.in/

7) Marico Limited
Turnover: 61 Billion Dollar
Employees: 1000+
Company Website: http://marico.com/

8) Procter & Gamble

Turnover: 83 Billion Dollar |
Employees: 125000+
Company Website: http://www.pg.com/en_IN/

9)Godrej Group
Turnover: 4 Billion Dollar
Employees: 25000+
Company Website: http://www.godrej.com/

10) Amul
Turnover: 2.15 Billion Dollar
Employees: 700+
Company Website: http://www.amul.com/
MARKET SIZE:
The Retail market in India is estimated to reach US$ 1.1 trillion
by 2020 from US$ 840 billion in 2017, with modern trade
expected to grow at 20 per cent - 25 per cent per annum, which
is likely to boost revenues of FMCG companies. In 2016-17,
revenue for FMCG sector have reached US$ 49 billion and is
expected to grow at 9-9.5 per cent in FY18 supported by
expectations of the total consumption expenditure reaching
nearly US$ 3,600 billion by 2020 from US$ 1,595 billion in
2016. Direct selling sector in India is expected to reach Rs 159.3
billion (US$ 2.5 billion) by 2021, if provided with a conducive
environment through reforms and regulation.
INVESTMENTS/ DEVELOPMENTS:

The government has allowed 100 per cent Foreign Direct

Investment (FDI) in food processing and single-brand retail and
51 per cent in multi-brand retail. This would bolster employment
and supply chains, and also provide high visibility for FMCG
brands in organised retail markets, bolstering consumer
spending and encouraging more product launches. The sector
witnessed healthy FDI inflows of US$ 13.07 billion, during
April 2000 to December 2017. Some of the recent developments
in the FMCG sector are as follows:

 The Hershey Co plans to invest US$ 50 million over the

next five years in India, its fastest growing core market
outside of US. 
 As a part of its Rs 25,000 crore (US$ 3.88 billion)
investment package, ITC will invest Rs 10,000 crore (US$
1.55 billion) to expand its food processing segment.
 The bottling arm of Coca-Cola India, Hindustan Coca-Cola
Beverages (HCCB) is planning to increase its retail reach
by one million new outlets and is targeting revenue of US$
2.5 billion by 2020.
 Future Retail will acquire HyperCity, which is owned by
Shoppers Stop for Rs 911 crore (US$ 139.7 million) to
further consolidate its business and have a better footing in
the hypermarket segment.
 Patanjali will spend US$743.72 million in various food
parks in Maharashtra, Madhya Pradesh, Assam, Andhra
Pradesh and Uttar Pradesh.
GOVERNMENT INITIATIVES:

Some of the major initiatives taken by the government to

promote the FMCG sector in India are as follows:

 In the Union Budget 2017-18, the Government of India has

proposed to spend more on the rural side with an aim to
double the farmer’s income in five years; as well as the cut
in income tax rate targeting mainly the small tax payers,
focus on affordable housing and infrastructure development
will provide multiple growth drivers for the consumer
market industry.
 The Government of India’s decision to allow 100 per
cent Foreign Direct Investment (FDI) in online retail of
goods and services through the automatic route has
provided clarity on the existing businesses of e-commerce
companies operating in India.
 With the demand for skilled labor growing among Indian
industries, the government plans to train 500 million people
by 2022 and is also encouraging private players and
entrepreneurs to invest in the venture. Many governments,
corporate and educational organizations are working
towards providing training and education to create a skilled
workforce.
 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.
  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. 

GROWTH PROSPECTS OF FMCG IN RURAL INDIA:

-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.
-The Accenture report goes on to state that rural incomes have
been growing at more than 7% over the past few years, helping
to account for almost 40% of India’s total consumption of goods
and services.
-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 mind-set 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 future, 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. 
IMPACT OF FMCG SECTOR IN INDIA:

Employment
-Direct employment is estimated at approximately 6% of
turnover, i.e. US$ 1.5 billion4 (Rs. 7,000 crores)
-Approximately 12-13 million retail stores in India, out of which
9 million are FMCG kirana stores. Thus the sector is responsible
for the livelihood of almost 13 million people
 
Fiscal Contribution
-Cascading Multiple Taxes by the FMCG sector(Import duty,
service tax, CST, income tax). 30%  revenue of the sector goes
into both direct and indirect taxes. estimated size of $25 billion
(Rs. 120,000 crores), that would constitute a contribution to the
exchequer of approximately US$ 6.5 billion (Rs. 31,000 crores).
 
Social Contribution
-Create employment for people with lower educational
qualifications. FMCG firms have also undertaken  some specific
projects to integrate with upcountry and rural areas for both
inputs and for distribution as well as to fulfil CSR.

SOME EXAMPLES:
 
ITC Echoupal And ChoupalSagar:- sells both agricultural
inputs and daily needs products. ITC’s rural e-network enables
farmer connectivity and provides an easy way for farmers to get
better profitability and control through access to timely
information.
 
HUL’s Shakti Amma Network:-  HUL pioneered a rural
entrepreneurship model amongst women who became HUL
distributors.
 
Dabur India:- regularly conducts rural and adult education
programs and provides training in rural areas to facilitate
employability.
Contribution to Other Sectors:
 
Agriculture - Its intake of agricultural output as raw material is
estimated to constitute roughly 9% of total turnover for the
sector. That would put its total value to agriculture at US$ 2.2
billion7 (Rs. 10,500crores).
 
Third Party Logistics - The third-party logistics market for the
FMCG sector in India has been growing at a CAGR of 12%
since 2002, and is estimated to be worth US$ 63 million8 (Rs.
300 crores). It is anticipated to double by 2011, and be worth
over US$ 146 million (Rs. 700 crores) by 2012, a growth of
211% from 2002.
 
We clearly identify that Bihar is the leader in the rural
contribution to total FMCG sales, and Tamil Nadu is the state
with the lowest rural contribution. The following graph throws
some light on the growth of the FMCG retail sector, both, in
terms of rural and urban.
[sociallocker]

Ancillary Industries:-
 
Manufacturing – Almost 9-10% of total sector’s production is
outsourced to contract manufacturing units taking the total size
to $ 1.7 – 2 billion (Rs. 8,000 – Rs. 9,500 crores),
approximately.

Distribution –ITC services 1.1 million outlets at an average

frequency of three days down to villages with population of
2,000, and has 1,000 wholesale dealers. Marico reaches 1.6
mlnoutlets, through almost 900 direct distributors, 100+ super
distributors, catering to almost 2,500 small stockists and 4,600
van markets.

Packaging Industry - The packaging industry for the FMCG

sector alone is worth US$ 2.9 billion10 (Rs. 14,000 crores), and
is expected to grow faster due to the growth of private label
FMCG products.

Media Industry - The media industry has a lot to gain from the
FMCG sector. Around 40% of media industry earnings from
advertising (US$ 5 billion) are estimated to come from the
FMCG sector, a contribution of US$ 2 billion (Rs. 9,500 crores).
OBJECTIVES:
• To understand the concept of FMCG
• To present an overview Indian FMCG sector
• To study the growth of Indian FMCG sector
METHODOLOGY:
Exploratory research design is used for conducting this study.
The objective of this study is toprovide brief overview of the
sector and critically analyze it. The study is based on secondary
data which is collected from thesis, reports, books, journals,
periodicals and newspapers.
Part A)
Fast Moving Consumer Goods Fast Moving Consumer Goods
are inexpensive products that require little shopping efforts.
These are non-durable products which are sold in packaged
forms. These products are purchased by the end-consumer in
small quantities and frequently. The main FMCG segments can
be classified as Personal Care, Household care, Branded and
Packaged food and Tobacco3.
• Personal Care:
It consists of oral care; hair care; skin care; personal wash
(soaps); cosmetics and toiletries; deodorants; perfumes; paper
products (tissues, diapers, sanitary); shoe care etc.
• Household Care:
It comprises of fabric wash (laundry soaps and synthetic
detergents); household cleaners (dish/utensil cleaners, floor
cleaners, toilet cleaners, air fresheners, insecticides and
mosquito repellants, metal polish and furniture polish).
• Branded and Packaged Food and Beverages:
It consists of health beverages; soft drinks; staples/cereals;
bakery products (biscuits, bread, cakes); snack food; chocolates;
ice cream; tea; coffee; processed fruits, vegetables and meat;
dairy products; bottled water; branded flour; branded rice;
branded sugar; juices etc.

• Spirits and Tobacco:

An exact product-wise sales break up for each of the items is
difficult.
As per recent Nielsen report the share of food segment
decreased to 43% and personal care share increased to 22%.
FMCG brands have high brand equity due to its unique
characteristics and broad consumer base. As per “Most Trusted
Brands Survey 2014” conducted by Brand Equity, out of top 20
brands 16 were FMCG. FMCG brands like Colgate, Dettol,
Maza and Magi were among top 5 brands.
Part B) Overview of Indian FMCG Sector:
History:
The Indian Fast Moving Consumer Goods (FMCG) industry
began to shape during the last fifty odd years. The growth of
FMCG industry was not significant between 1950’s to the 80’s.
The FMCG industry previously was not attractive from
investor’s point of view due to low purchasing power and the
government’s favoring of the small-scale sector.
FMCG’s growth story further continued following the
deregulation of Indian economy in early 1990s. With relatively
lesser capital and technological requirements, a number of new
brands emerged domestically as well, while the relaxed FDI
conditions led to entry of many global players in this segment.
These factors made FMCG market in India highly competitive
and one of the important contributor in the Indian economy. In
the mid - nineties, the growth of the sector was very fast where
as it declined rapidly at the end of the decade. The initial growth
was due to increase in product penetration and consumption
levels4. Riding on a rapidly growing economy, increasing per-
capita incomes, and rising trend of urbanization, the FMCG
market in India is expected to further expand to $100 billion by
20255.
Growth of FMCG sector The Indian FMCG sector growth
between 2006 to 2013 has been phenomenal (approximately
16%). The industry has tripled in size over the last 10 years ,
growing much faster than in past decades.
Even during the slowdown of the Indian economy, the FMCG
sector has registered a growth rate of 14.5 percent for the year
2007-08 6. According to Nomura, the volatility in agriculture
sector has not had much impact on FMCG sector7. The
comparison of past ten years’ performance of top 50 Global
FMCG companies versus the Indian top 50 FMCG companies
shows that India has outperformed global growth across all
major FMCG categories8. As per Pricewaterhousecoopers
Private Limited, India is second biggest market for Soaps &
cleansers in Asia after China. The growth for Indian FMCG
sector for Food, beverages and tobacco segment is promising in
near future.

Part C) Analysisof FMCG Sector-PEST analysis

i) Political
• Tax Structure: Complicated tax structure, high in
direct tax and changing tax policies are challenges for this
sector.
• Infrastructure Issues: Performance of FMCG sector is
very much dependent on government spending on
Agricultural, Power, and Transportation Infrastructure.
• Regulatory Constraints: Multiplicity permits and
licenses for various states, prevailing outdated labor laws,
 cumbersome and lengthy export procedures are major
constraints.
• Policy framework: FDI into Retail sector (single-
brand & multi-brand retail), Licenserules in setting up of
Industry, Changes in Statutory Minimum Price of
commodities arebarriers for growth of this sector.

ii) Economical
• GDP Growth: Growth of FMCG industry is
consistent with the Indian economy. It has grown by 15 %
over past 5 years. It shows good scope for this sector in
near future.
• Inflation: Inflationary pressures alter the purchasing
power of consumer which Indian economy is facing in
recent years. But it has not affected much to Indian
FMCG sector.
• Consumer Income: Over the past few years, India has
seen increased economic growth. The GDP per capita
income of India increased from 797.26 US dollars in 2006
to 1262.4 US dollars in 2014 . It resulted in increase of
consumer expenditure
• Private Consumption: The Indian economy, unlike
other economies, has a very high rate of private
consumption (61%).
iii) Social
• Change in consumer Profile: Rapid urbanization,
increased literacy, increase in nuclear families and rising
 per capita income, have all caused rapid growth and
change in demand patterns, leading to an explosion of new
opportunities Around 45 per cent of the population in India
is below 20 years of age and the young population is set to
rise further.
• Change in Lifestyle : In past decade changes are
taking place in consumption pattern of Indian consumer
with more spending on discretionary ( 52%) than
necessities ( eg food, clothings). In last decade the apparel,
footwear and healthcare segments have registered highest
growth whereas essentials such as cereals, edible oil, fruits
and vegetables shown decline.

• Rural focus: As market is getting saturated,

companies are focusing on rural area for penetration by
providing consumers with small sized or single-use packs
such as sachets.

iv) Technology
• Effective use of technology is seen only in leading
companies like HUL, ITC etc.
• E- Commerce will boost FMCG sales in future. More
than 150 million consumers would be influenced by digital
by 2020 and they will spend more than $45 billion on
FMCG categories –CII
SWOT analysis :
i) Strengths
• Low operational costs: One of the important strength
of this sector is low operational cost.
• Presence of established distribution networks in both
urban and rural areas. A well established and wide
distribution network of both MNC and Indian FMCG
companies increased an access for consumers.
• Presence of well-known FMCG brands: The Presence
of strong brands in Indian FMCG sector not only results
in increased sales but also provides an opportunity in
future.

ii) Weakness
• Low scope for investing in technologies and
achieving economies of scale, especially in small sectors.
• “Me- too products, which illegally mimic the labels of
established brands .These products narrow the scope of
FMCG products in rural and semi- urban markets.
• Less innovative abilities and systems: Indian FMCG
sector, especially small players are lagging behind in
adopting innovative approaches for fulfilling needs of
the consumers.
iii) Opportunities
• Untapped rural market, changing life style: An
untapped, huge and fragmented rural market is an
opportunity for FMCG players. The Penetration level for
many FMCG product categories is very low especially in
rural area. • Rising income levels, i.e. increase in
purchasing power of consumers: According Mckinesy
Global Institute report, in next two decades income level
of Indian consumer will almost triple and India will
become world’s fifth – largest consumer market by
2025.India’s middle class size will increase to 583
million , or 41% of the population. Extreme rural poverty
has declined from 94% in 1985 to 61% in 2005 and is
projected to drop to 26% by 2025. This will result into
increased purchasing power of Indian consumer.
• Large domestic market with more population of
median age 25 years: India has large young population,
54 % of Indians are under 25 years of age. A rising
productive population fuels growth and drives personal
consumption
• High consumer goods spending: The rising income is
resulting into high spending into consumer goods.
According to a Nielsen report, the spending on consumer
goods set to triple to $ 5 billion by 201511.
• Export potential to neighboring countries like
Bangladesh, Pakistan, Srilanka.
iv) Threats
• Entry of MNCs with liberalization: In the post
liberalization era Indian market has become highly
competitive. Many multinational companies have entered
in to the Indian market.
• The removal of import restrictions resulted in
replacement of domestic brands.
• Rural demand is cyclical in nature and also depends
upon monsoon to large extent.
• Complicated, changing and uneven tax structure is
one of the major threats for FMCG sector.
• New packaging norms made mandatory for all
companies to sell products in standard size packs.
FINDINGS:
Indian FMCG sector has almost tripled in last decade, much
faster than past decades. Even in the meltdown years of FY 2008
and FY 2009 the FMCG industry witnessed sustained growth
rates of 14% and 11% respectively, this sector was relatively
recession-proof12. This growth in FMCG sector is due to
increase in demand, developments in supply side and favorable
changes in Government Policy.
Demand drivers Consistent GDP growth (approximately 15%
for last five years), increasing population , growing awareness,
changes in consumer profile ( more young population),
increasing consumer income ( approx 60% increase from 2006
to 2014), changing consumer expenditure pattern (More
expenditure on nonfood items), increasing discretionary
income , changing lifestyle, growth in rural sector (increasing
share of nonagricultural sector), Untapped rural market ( Low
penetration levels for many FMCG categories), aspiring rural
consumers, high private consumption, rising urbanization and
huge export potential are resulting in increased demand for
FMCG products.
Supply side drivers: The nature of FMCG product i.e. frequently
consumed, low priced & easily available generates huge and
consistent demand for companies. Apart from this the presence
of strong brands in different FMCG categories made this sector
growing for years. New products, E-commerce and innovation
in marketing methods are helping companies in improving
 service quality expanding their businesses. Also the growth in
modern retail provided an opportunity to companies for
expanding their business.
Environmental drivers: Apart from this other Macro and micro
environmental factors such as Improving economy, favorable
Government policy, Infrastructural development, availability of
raw materials, low labor cost have created favorable
environment for FMCG sector.

FMCG SECTOR IN MERE FUTURE:

 By 2020, the revenues of the sector are forecasted to reach
US$ 104 billion
 In the long run, with the system becoming more transparent
and easily compliable, demonetization is expected to benefit
organized players in the FMCG industry.
 Direct selling sector in India is expected to reach Rs 159.3
billion (US$ 2.5 billion) by 2021, if provided with a conducive
environment through reforms and regulation
 The focus on agriculture, MSMEs, education, healthcare,
infrastructure and employment under the Union Budget 2018-19
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.
ROAD AHEAD:

 Rural consumption has increased, led by a combination of

increasing incomes and higher aspiration levels; there is an
increased demand for branded products in rural India. The
rural FMCG market in India is expected to grow at a
CAGR of 14.6 per cent, and reach US$ 220 billion by 2025
from US$ 29.4 billion in 2016. In FY18, FMCG’s rural
segment contributed an estimated 10 per cent of the total
income and it is forecasted to contribute 15-16 per cent in
FY 19.
 On the other hand, with the share of unorganised market in
the FMCG sector falling, the organised sector growth is
expected to rise with increased level of brand
consciousness, also augmented by the growth in modern
retail.
 Another major factor propelling the demand for food
services in India is the growing youth population, primarily
in the country’s urban regions. India has a large base of
young consumers who form the majority of the workforce
and, due to time constraints, barely get time for cooking.
 Online portals are expected to play a key role for
companies trying to enter the hinterlands. The Internet has
contributed in a big way, facilitating a cheaper and more
convenient means to increase a company’s reach. It is
estimated that 40 per cent of all FMCG purchases in India
will be online by 2020, thereby making it a US$ 5-6 billion
business opportunity. By the year 2025, e-commerce will
contribute around 10-15 per cent sales of few categories in
the FMCG sector*.
  Mr Mark Mobius, Executive Chairman, Templeton EM,
opined that the Goods and Services Tax (GST) will lead to
mergers and rise of world class consumer companies in
India. GST and demonetisation are expected to drive
demand, both in the rural and urban areas, and economic
growth in a structured manner in the long term and improve
performance of companies within the sector.

FMCG SECTOR IN 2014 -2018

They are called 'Fast Moving Consumer Goods' companies, but
it has turned out to be a year of slow business for the FMCG
sector, even as movements were quite visible in 2014 among
those at the helm of affairs.
For the direct-selling segment of the FMCG space, it was almost
a stand-still as head of market leader Amway India got arrested,
resulting in louder demands for putting in place a clear-cut
regulatory framework for this business to weed out illegal multi-
level marketing schemes from genuine operators.
The year also saw change of guard taking place at various major
FMCG companies, including HUL, Marico and Britannia.
Prominent among them, Varun Berry took over as Managing
Director of bakery and dairy products maker Britannia, from the
company's long-serving chief Vinita Bali upon her retirement.
On business front, FMCG firms continued to struggle with
subdued demand as the economy is to get back on tracks.
Most companies, including Hindustan Unilever (HUL), Marico,
Dabur, ITC and Emami reported increase in sales during the
year but complained of headwinds that impacted growth.
High inflation led to drop in consumer spending, especially
discretionary spending. 

There is a lag of 2-3 quarters between economic indicators such

as GDP and inflation numbers improving and sale of FMCG
products.
We remain positive about our medium to long-term growth
outlook, HUL's Chief Financial Officer P B Balaji had said in
October.
While announcing results for the second quarter, Dabur India
CEO Sunil Duggal also said that growth rates in most consumer
products segments have witnessed a sharp fall due to low growth
and challenging environment.
Even as they faced the challenges, there were also a few
management level changes in the FMCG companies this year.
Marico elevated Saugata Gupta as the Managing Director of the
company from April 1.
Gupta, who joined Marico in January 2004 as Marketing Head,
was elevated to become the CEO of the company's India
business in 2007.
Harsh Mariwala, who was earlier Chairman and MD, will
continue as the chairman of the company.
This announcement reflects the next phase of Marico's growth
journey.
"Under Gupta's leadership, Marico has had a track record of
sustainable profitable growth. I am confident that we will
achieve new heights under the leadership of Saugata and his
team", Mariwala said on Gupta's elevation.
This year also saw resignation of Marico Group CFO
MilindSarwate.
Sarwate was with Marico for the last 16 years and had joined the
company in 1998 as the CFO.
He was instrumental in driving Marico's inorganic growth
agenda through acquisitions and alliances, in India and overseas.

India’s FMCG Sector performance 2015: The new world and

race to win it!
For FMCG sector, which is the fourth largest in economy with
market size of US$13.1 billion year 2015 has been a mixed bag.
It was a roller coaster ride right from Union Budget to
impending implementation of GST Bill for consumer goods
sector.
6 January, 2016 18:29 IST | India Infoline News Service 
Summit Chairman and CEO, PepsiCo India of “Re-Imagining
FMCG in India”,DShiva Kumar  aptly summarized the present
scenario of FMCG sector in India saying, “The FMCG industry
has always been bedrock of talent to all other industries. It is
one of the largest sectors in India and is a largely a Make-in-
India industry. FMCG has to be re-imagined for a future world,
owing to the varied changes and opportunities seen in this
sector. " 
For FMCG sector, which is the fourth largest in economy with
market size of US$13.1 billion year 2015, has been a mixed
bag. It was a roller coaster ride right from Union Budget to
impending implementation of GST Bill for consumer goods
sector. There were cloudy days involving the Maggi ban,
increase on tax of tobacco and heavy rains affecting rural
market. However, the sector is estimated to be among the key
factors in reviving India. Despite of lackadaisical economic
growth and weak performance in the past two years, outlook
remains positive for India’s consumer goods industry in the
New Year.

Nielsen, a leading global information and measurement

company, predicts India’s FMCG industry to grow from $37
billion in 2013 to $49 billion in 2016. Digital communication,
e-commerce and premium products are foreseen as key drivers
for growth. Its future depends on how they evolve around this
sections. By 2020, around 150 million consumers are expected
to be digitally influenced in FMCG and these digital consumers
alone would spend ~ 40 USD Bn on FMCG categories,
elucidated a report by Boston Consulting Group.

Budget woes

Right from the time the Union Budget 2015 was presented in
the Parliament, FMCG sector had a fair share of its peak and
crests. .25% hike on excise duty of cigarettes for length not
exceeding 65mm and by 15% for cigarettes of other lengths
was announced. Similar increases were proposed on cigars,
cheroots and cigarillos. Also, changes were made in the
compounded levy scheme applicable to pan masala, gutkha and
certain other tobacco products. This did not augur well for
major tobacco producers like VST Industries, Godfrey Phillips,
and ITC. In a glimmer of hope however, FM ArunJaitley,
vowed to implement Goods and Service Tax bill (GST bill) by
April 2016, which would provide a respite to the industry
plaguing from several taxation structures.

Nestle Tragedy!

Perhaps the biggest controversy for the year came from major
food maker Nestle, which reported its first quaterly losses in
India due to Maggi ban. India is among the largest consumer of
Maggi noodles across all Nestle operations in the world, with a
topline at 8-9%. The ban was enforced on the accusation that
Maggi contained excess levels of lead and mono-sodium
glutamate (MSG). After much hue and cry and dozens of law
cases the company had to eventually withdraw Maggi noodles
of worth Rs. 210 crore from the market.

Distress compounded for Nestle, as during April-June quarter,

the company reported loss of Rs 64.4 crore, while recalling
Maggi worth Rs. 320 crore. Later, apex court of consumer
issued a notice to Nestle to cough up Rs. 640 crore, for unfair
trade practices, false labeling and misleading advertisements of
Maggi noodles.

Though the Swiss-based food manufacturer remain convinced

on Maggi being safe, authorities in India sent samples of it to
several food test labs. After facing tough objections from Food
Safety and Standards Authority of India (FSSAI), apex court
has finally allowed it to be brought back on shelves. Now that
everyone’s favorite snack is back, Nestle seeks double digit
growth for their brand by increasing its consumption capacity,
and new marketing strategies like partnership with Snap deal.

GST merriment or dismay!

India Inc is waiting with bated breath for GST to be

implemented. However, things might not turn out to be As per
a Religare Capital Market report, at a GST rate of 18% on food
items, edible oils, biscuits, chocolate, cocoa and baked items,
FMCG companies will take a hit as indirect tax incidence will
go up. Carbonated drinks may take a larger hit at 40%
proposed GST.

However, clarity on GST bill is yet unclear. The panel is

suggesting taxation in three categories where some essential
goods will be taxed at a lower rate of 12%, demerit goods such
as luxury cars, aerated beverages, pan masala and tobacco
products at a higher rate of 40%; and all remaining goods at a
standard rate of 17-18%. If these changes are brought into
practice, it could be downside for tobacco players in India, as
cigarettes sales account for 17% of the top 100 FMCG sales,
and just below the personal care category. ITC alone holds
60% volume market share and 70% by value of all filter
cigarettes in India. So, unlike other sector, GST is not playing
Santa to the FMCG.

Weak Monsoon, Low rural consumption:

Major FMCG players are stressed on rural consumption for the

next two-three quarters. For the two successive year, there has
been shortfall in rains which has impacted incomes and
adversely affecting sales across product categories. In the past
four quarters, rural growth of household items right from
toothpastes to detergent and biscuits to beverages has been
contracting to single digit growth of 5-6% compared to 11-12%
of last year.

Dabur, the world’s largest Ayurvedic medicine & related

products manufacturer in a report stated, there has been a
decline in net disposable income of rural households specially
in drought-affected areas. The fall is led by poor monsoons,
unchanged NREGA scheme and low lower-than-normal
increase in minimum support price. For the September 2015
quarter, Coca-Cola reported 4% growth in its volume, which
the beverage maker attributed to lower farm income.

All the sun shines here!

Year 2015, belonged to debt free companies in FMCG market.
HUL has stunned the market with its volume growth, with its
soap segment among the top 10 list. Despite of new entries of
various products, the company maintained to dominate
competitors with its four brands Lifeboy, LUX, Dove and
Pears in the personal care category. The domestic major also
acquired Indulekha and Vayodha from Mosons Group for Rs
330 crore so as to strengthen its ayurvedic section and also
tapping its personal care segments.

Companies like Dabur, HUL, Marico and Britannia has started

targeting weaker states to strengthen their market value. In a
year, Dabur Red, the ayurvedic toothpaste brand of Dabur has
overtaken Colgate-Dental cream in states like Odisha and
Bihar, doubling its shares. In September ended quarter 2015,
Dabur witnessed 8% yoy increase in its revenue, led by its
consumer care business which was up by 10%.

Britannia Industries consolidated profit from operations

witnessed 56% increase in Q2 and 70% rise for the six months
at Rs. 298 crores&Rs. 559 crores respectively. The industry
has lined up capex of around Rs. 500 crore and plans
significant investment for the next two-three years.

Marico’s key products Coconut Parachute have continued to

perform, with growth of 10% maintaining its fundamentals
strong. During September ended quarter, the company
witnessed consolidated net profit of Rs. 150.72 crore, up by
27% against Rs. 118.26 crore for the same period in the
previous year
Government Initiatives:

To pacify the consumer sentiment, Government has allowed

100 percent Foreign Direct Investment (FDI) in the electronics
hardware-manufacturing sector through the automatic route. It
has also permitted 51% FDI in multi-brand retail and 100 per
cent in single-brand retail in order to attract foreign investment
for the sector. Policies such as National Electronics Mission
and digitization of television and setting up of Electronic
Hardware Technology Parks (EHTPs) are expected to boost the
growth of this sector.

What Future Holds?

The consumer electronics segment is forecast to rise to US$

400 billion by 2020. By 2016, the production is expected to
reach around US$ 104 billion. In India, urban market consists
of 65 percent share of total revenues in the sector. Demand for
non-essential products such as LED TVs, laptops, split ACs
and, beauty and wellness products are expected to be driven in
urban markets. In the coming years, rural market will see
increase in demand of durables like refrigerators as well as
consumer electronic goods as the government plans to invest
significantly in rural electrification. By 2025, India is expected
to become fifth largest consumer durables market in the world.
It remains to be seen how India will cope to that challenge,
starting 2016.
CONCLUSION :

Today, Fast Moving consumers goods have become an integral

part of human life. This sector is recession proof and created
huge employment opportunity in India , hence becoming one of
the key pillar of the Indian economy. FMCG companies should
encash opportunities like increasing consumer income,
changing consumer life style, aspiring rural consumer,
consistent economic growth by utilizing its strengths . The
competition from unorganized sector can be overcomed by
increasing brand awareness and by reducing cost through
sharing resources such as distribution network. Favorable
developments happening in demand side, supply side and
systematic drivers shows that this sector has very bright future.
BIBLIOGRAPHY:
https://www.ibef.org/industry/fmcg-presentation
https://www.ibef.org/industry/fmcg.aspx
http://info.shine.com/industry/fmcg/6.html
https://www.slideshare.net/IBEFIndia/fmcg-sector-report-
january-2018
https://nextwhatbusiness.com/top-fmcg-companies/
https://en.wikipedia.org/wiki/Fast-moving_consumer_goods