CHAPTER 1

I INTRODUCTION

II HISTORY &EVOLUTION
III CHALLENGES FACED BY FMCG
IV SWOT ANALYSIS
V PRODUCTS
VI OVERALL WORKING OF THE SECTOR
VII SUMMARY
WHAT IS FMCG?
FMCG or Fast-moving consumer goods, as the name itself suggests, are those
types of goods that are consumed on a day to day basis and hence have a large
supply and demand chain

Fast Moving Consumer Goods (FMCG) Sector is the 4th largest sector in Indian
economy with household and personal care accounting for 50% of FMCG sales in
India. Frequently purchased goods relatively low cost, replaced within a year, quick
turnover, also known as “Consumer Packaged Goods (CPG)”

This FMCG sector has the responsibility of producing, distributing, and marketing
goods so that their continuous consumption by the public takes place smoothly.

In the last 10 years, the revenue of FMCG in India has been growing at an
impressive rate of 21.4%.

In 2018, India’s FMCG market growth was 14.8%, which was the fastest market
growth recorded in the entirety of the Asia Pacific.
HISTORY AND EVOLUTION

Between 1950 and 1980, there was a limited investment in the FMCG sector. Local
people had lower purchasing power, which meant that people opted for necessity
products rather than premium products. The Indian government was inclined towards
favouring the local shops and retailers

. The period from the 1950’s to the 1980’s did not see much of a growth in this sector
owing to the low purchasing power of Indians and the government pushing for small
scale sectors. HUL and Amul were one of the only companies that stuck around and
evolved as market players

. Between 1980 and 1990, people wanted more variety of products which

encouraged FMCG companies to increase the availability of products. FMCG

Industry started getting traction and other companies started entering the industry.
The media industry in India also boomed during the same time which gave new
companies even more incentive to make their business profitable

. Prior to 1991, when globalization and liberalization occurred in India, western

apparel and foreign food products were not available to local customers. Common
people weren’t very aware of brand recognition. After 1991, the FMCG industry was
inspired by international companies which also allowed government intervention to
incentivize foreign FMCG companies to operate in India

. The economic reforms of 1991 not only brought a higher number of domestic
choices but also imported products. The lowering of trade barriers encouraged
MNC’s to come and invest in India. Rising standards of living coupled with the
growing purchasing power of rural India saw companies introduce products targeting
both rural and urban markets. Companies started investing in distribution networks,
products upgrade, as well as new product ranges.
As an outcome of increased choices to the consumers and positive euphoria after
liberalization, many of the affluent consumers who always had money but limited
CHALLENGES FACED BY FMCG

1)Lack of Efficiency in Reading the Selling Scenario

• As consumers are getting empowered by technology, FMCG market is witnessing

a persistent change in consumer behavior. Having a persuasive selling skill is not
enough. Leaders in the FMCG management need to read the existing selling
scenario effectively and require the ability to predict the upcoming pattern so that
crucial decisions could be taken well on time

. • Field sales professionals can play an important role in increasing the efficiency of
FMCG management in reading the selling scenario if the right tools and technology
empower them.

2)Providing Relative Servicing

• The relative servicing is the value provided in contrast with the competition.
According to a study across 155 brands, where the servicing level is lower, brands
have performed 81% of their average, whereas where the relative serving is higher
than the competition, the performance has increased by 1.2 times the national
average.

• It is the responsibility of the field sales professional to provide crucial information

about the competitors’ strategy prevailing in the market. If the company can enact on
the information at the right time, they can effectively increase their market coverage
and enhance sales performance.

3) Reaching Right Stores at the Right Time

• For strong in-market performance, it is essential for the FMCG companies to reach
out to the right stores at the right time with adequate service levels.

• According to Vijay Udasi, Executive Director, Sales Effectiveness Practice lead at

Nielsen India, “How much and what we place in the right stores is a critical decision
and gives the right outcome in terms of sales increase.”

• FMCG management team is required to work on strengthening their decision-

making to precisely select the right stores and provide the right stock.
4) No Visibility into Work Order Management

• Lack of visibility into the work order management limits the quality of insight
available with the FMCG management team. • Besides, when the work order volume
increases with multiple locations and equipment inventories, it becomes challenging
for the facility managers to organize the task for field-sales professionals with a data-
driven approach.
 MAJOR WORLD PLAYERS

1)Nestle
Nestle is the world’s largest food and beverage company. The Company has more
than 2000 brands ranging from global icons to local favourites, and are present in
187 countries worldwide.

•Revenue: $ 94 Billion

•Country: Switzerland

Nestle history begins in 1866, with the foundation of the Anglo-Swiss Condensed
Milk Company. Henri Nestlé develops a breakthrough instant food in 1867, and in
1905 the company he founded merges with Anglo-Swiss, to form what is now known
as the Nestlé Group. During this period cities grow and railways and steamships
bring down commodity costs, spurring international trade in consumer goods.

2)PEPSICO

PepsiCo products are enjoyed by consumers more than one billion times a day in
more than 200 countries and territories around the world. PepsiCo generated more
than $67 billion in net revenue in 2019, driven by a complementary food and
beverage portfolio that includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker and
Tropicana.
•Revenue: $ 65 Billion

•Country: United States

In 1965, Donald Kendall, the CEO of Pepsi-Cola, and Herman Lay, the CEO of
Frito-Lay, recognized what they called “a marriage made in heaven,” a single
company delivering perfectly-salty snacks served alongside the best cola on earth.
Their vision led to what quickly became one of the world’s leading food and
beverage companies: PepsiCo. PepsiCo’s product portfolio includes a wide range of
enjoyable foods and beverages, including 23 brands that generate more than $1
billion each in estimated annual report.

3) . Procter & Gamble Company

The Procter & Gamble Company (P&G) is an American multinational consumer

goods corporation headquartered in Cincinnati, Ohio, founded in 1837 by William
Procter and James Gamble

. •Revenue: $ 67 Billion

•Country: United States

It specializes in a wide range of personal health/consumer health, and personal care

and hygiene products; these products are organized into several segments including
Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine, & Family
Care
 MAJOR PLAYERS IN INDIA

1) Hindustan Unilever Limited (HUL)

HUL is one of India’s oldest FMCG companies. It is a subsidiary of Unilever, a

British-DUTCH company. The company was established in 1933 and has
headquarters in Mumbai. HUL has served over 2 billion customers for over 87 years.

HUL has over 35 brands across 20 categories such as soaps, detergent, skincare,
cosmetics, tea, toothpaste. The brand includes famous names like Surf, Excel, Dove,
Lux, Lifebuoy, Clinic Plus, Wheel, Sun silk, Knorr, Axe, etc.

2)ITC

• ITC Ltd. has flourished in the Indian markets for over 110 years giving them a
deep understanding of the Indian Consumer. The ITC is known to guarantee a
certain standard in production and packaging. They have broad distribution
channels in India. This has allowed them to penetrate into even the most rural
areas through several retail shops.
• Their products include Bingo, Sun feast, Di Wills soaps and handwash,
Papercraft, and Classmate. ITC has 77% monopoly in the Indian cigarette
market share and offers brands like Wills Navy Cut, Gold Flake Kings, Silk
Cut, India Kings, Bristol, Gold Flake Super Star, Gold Flake Premium Lights,
 Classic Menthol, etc. In FY2020, ITC made a net profit after tax of Rs 15,300
Crores. 

STRENGHTS

• Low operational costs.

• Presence of established distribution networks in both urban and rural areas.

• Presence of well-known brands in FMCG sector.

• Deep roots in local culture and great understanding of consumer needs.

WEAKNESS

• Lower scope of investing in technology and achieving economies of scale,

especially in small sectors.
 • Low exports levels.

• Counterfeit product. These products narrow the scope of FMCG products in

rural and semi-urban market.

OPPORTUNITIES

• Untapped rural market.

• Rising income levels, that is, 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.

• Tax and regulatory structure.

GDP CONTRIBUTION
 FOOD & BEVERAGES HEALTHCARE
HOUSEHOLD&PERSONAL CARE 4th Qtr

• Fast moving consumer goods (FMCG) is the fourth largest sector in the Indian
economy. There are three main segments in the sector food and beverages,
which accounts for 19% of the sector; healthcare, which accounts for 31% of
the share; and household and personal care, which accounts for the
remaining 50% share
• .According to Nielsen, the Indian FMCG industry grew 9.4% in the January-
March quarter of 2021, supported by consumption-led growth and value
expansion from higher product prices, particularly for staples. The rural
market registered an increase of 14.6% in the same quarter and metro
markets recorded positive growth after two quarters. E-commerce is likely to
contribute 5% or US$ 4 billion to FMCG sales by 2022

PRODUCTS
FMCGs can be divided into several different categories including:

 Processed foods: Cheese products, cereals, and boxed pasta

• Prepared meals: Ready-to-eat meals
• Beverages: Bottled water, energy drinks, and juices
• Baked goods: Cookies, croissants, and bagels
• Fresh, frozen foods, and dry goods: Fruits, vegetables, frozen peas and
carrots, and raisins and nuts
• Medicines: Aspirin, pain relievers, and other medication that can be
purchased without a prescription
• Cleaning products: Baking soda, oven cleaner, and window and glass cleaner
• Cosmetics and toiletries: Hair care products, concealers, toothpaste, and
soap
• Office supplies: Pens, pencils, and markers
 OVERALL WORKING OF THE SECTOR

Indian FMCG market is 4th largest sector in the Indian economy and its growth has a
significant impact on the economic structure of the country.

Fast moving consumer goods (FMCG) companies deliver products to customers at a

high rate of turnover and with a high level of innovation.

The market is exceptionally competitive and each company seeks to motivate,

excite and encourage people into buying and using their products.

Major players in this area include Unilever, Procter & Gamble, Kimberly-Clark or food
producers such as Nestlé and Kellogg's.

Some of the names that students may be familiar with, such as Heinz, are brands –
so it's best to look at the parent company behind them.

Trends and developments in fast moving consumer goods Sustainability is becoming

more important to the industry.

Consumers may not understand all the different things that have to happen from
supply to coffee table in order to produce a cup of tea.

Today, more people and companies are focused on making sure suppliers are paid
fairly, practices are sustainable and carbon footprints are kept small.

The average lead time on a project is two to three years from conception to finish,
but shorter projects could be pushed through in considerably less time.

What Is FMCG Distribution?

FMCG distribution channels are pathways along which the FMCG products travel
from manufacturers to consumers.

They are channels along which the goods, information and finance flow in the
system.
While some FMCG manufacturers prefer dealing directly with consumers, most
manufacturers use a distribution network to transfer goods to their consumers.
SUMMARY

FMCG is the fourth largest sector in Indian economy and provides employment to around 3
million people accounting for approximately 5% of the total factory employment in India.

The FMCG sector in India has grown at an average of about 11 percent over the last
decade. India’s robust economic growth and rising household incomes are expected to
increase consumer spending to US$ 3.6 trillion by 2020.

A country whose middle-class population is as big as the entire population of USA is a

market which no FMCG player can afford to overlook. In addition, as the fruits of economic
growth become available to the masses and more people start to move up the economic
strata, the Indian market only keeps on expanding. More importantly with a population where
the median age is only 27, consumerism is on the rise in India with growing aspiration levels.
This has been further aided by government’s efforts to expand financial inclusion and
creation of social security nets.

Growth in the country’s FMCG sector is being fuelled by improving scenario in both demand
as well as supply side.

FMCG sales through E-commerce channels have been increasing on account of mounting
smartphone sales leading to rise in the number of mobile internet users, internet penetration
rate in the country grew from 19% in 2014 to around 25% in 2015.

Indian companies such as ITC, Patanjali, Amul, Godrej, etc. have witnessed a higher
revenue growth compared to foreign brands namely HUL, GSK, Nestle, etc.

Government initiatives such as FDI, Food Security Bill, and GST are expected to boost the
FMCG market sentiments. Moreover, government’s focus on rural areas have also
encouraged many FMCG companies to expand their rural network and increase their
product penetration.

The FMCG industry fared well in India in the recent years with consumer food services, soft
drinks, household and personal care segments experiencing a tremendous growth with the
increasing disposable income and the growing economy. The alcoholic drinks, tobacco had
witnessed low growth given the stricter government policies and the increasing health
awareness among the consumers.

The regional analysis of Global FMCG Market is considered for the key regions such as Asia
Pacific, North America, Europe, Latin America and Rest of the World. North America is the
leading/significant region across the world in terms of market share owing to growing brand
awareness among individuals.

In India, the scenario is quite different in comparison to developed nations where the market
is dominated by few large players, whereas FMCG market in India is highly competitive and
a significant part of the market includes unorganized players selling unbranded and
unpackaged products. Approximately 12-13 million retail stores exist across India, the large
percentage of which around 9 million are KIRANA stores. India FMCG sectors comprises of
few significant characteristics like well-connected distribution network, high level of
competition between the organized and unorganized FMCG players, and low operational
cost.