INDUSTRIAL / SECTORAL SCENARIO

HISTORY / EVOLUTION OF THE SECTOR :-

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 choices started splurging.
OVERALL WORKING OF THE SECTOR :-
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.

Thorough planning, effective thought process, effort and investment is required to set up a
distribution channel. Distribution channel margin and the expense occurred in managing the
distribution channels forms a substantial part of overall marketing cost.

Even from a public perspective, setting up a distribution channel opens new job opportunities for
labors and also helps in making FMCG products available to people with a wide socio-economic
spectrum.

From a competitive perspective, having a robust distribution network gives manufacturing

companies an edge over their competitors. Therefore, channel management and distribution form
an important element in a company’s business strategy.

FMCG distribution channels consist of three important entities: agents, merchants and
facilitators.

Agents generate sales by promoting a company’s product but they never stock or buy the product
themselves. An agent can be an independent person or a member of the company itself.

Merchants such as retailers, wholesalers or stockists buy and stock the products in bulk and them
supply them to other retailers or sometimes directly to the consumer. Merchants are usually
independent but sometimes a manufacturing unit has their own wholesale or retail departments.

Facilitators, as the name indicates, facilitates the transportation of goods manufactured from one
place to another. Facilitators include logistic services, warehouse owners, independent
distributors who are just involved in storing and transporting the manufactured product and not
promoting or trading them.
CHALLENGES FACED BY FMCG SECTOR :-
Transportation problems: Marketing activities require transportation facilities. Due to
poor transportation facilities,farmers and marketers find it difficult to reach
markets.Transportation infrastructure is quite poor in rural India. Nearly 80 percentages of
villages in the country are not connected by well constructed roads.

Warehousing: In the rural areas, there are no facilities for public as well as private
warehousing. Marketers face the problem of storageof their goods.

Packaging: It is the first important step of product processing. If the packaging cost is high,
the total cost of products goes up. It is suggested that the marketers should use cheaper materials
in packaging for the rural markets.

Media Problems: Media have lots of problems in rural areas. Television is a good medium
to communicate message to the rural people. But due to non-availability of power, as well as
television sets, majority of the rural population cannot get the benefits of various media.

Seasonal Marketing: The main problem of rural marketing is seasonal demand in rural
areas, because 75% of rural income is also seasonal. For example, the demand for consumer
goods will be high during the peak crop harvesting period, because this is the time when the rural
people have substantial high cash flow. Rural marketing depends upon the demand of rural
people and demand depends upon income and consumer behaviour.

Low Per Capita Income: Per capita income is lower in rural areas compared to those in
urban areas. Again, the distribution of ruralincome is highly skewed, since the land holding
pattern, which is the basic asset, is skewed. Thus the rural population presents a highly
heterogeneous spread in the villages.

Low Level of Literacy Rate: Literacy rate is low in rural areas compared to urban areas.
This again leads to the problem of communication for promotion purpose. Print medium
becomes ineffective and to an extent irrelevant in rural areas since its reach is poor.
Distribution: An effective distribution system requires village-level shopkeeper, Mandal/
Taluka- level wholesaler or preferred dealer, distributor or stockiest at district level and
company-owned depot or consignment distribution at state level. The presence of too many tiers
in the distribution system increases the cost of distribution.
SWOT ANALYSIS :-
Strengths:

• Well-established distribution network extending to rural areas.

• Strong brands in the FMCG sector.

• Low cost operations.

Weaknesses:

• Low export levels.

• Small-scale sector reservations limit ability to invest in technology and achieve

economies of scale.

• Several products.

Opportunities:

• Large domestic market.

• Export potential.

• Increasing income levels will result in faster revenue growth..

Threats:

• Imports.

• Tax and regulatory structure.

• Slowdown in rural demand.

MAJOR PLAYERS IN THE FMCG SECTOR :-

Customers :-

Of course the most important organization or people in the market are your customers. This
includes both current and potential customers.

Major customers :-

It is very common for most sales to be made to a relatively small set of big customers. These
always need careful attention and may have account/relationship managers assigned to them. A
problem is that big customers may also demand big discounts and special attention.

Minor customers :-

Minor customers buy less, but nevertheless are useful as in aggregate they may buy quite a lot.
The only time minor customers are undesirable is when serving them costs more than the profit
gained from them. This can happen when they are angered or when they try to gain an unfair
attention for their smaller payment.

Suppliers:-

Suppliers may sell directly into the market, for example selling spare parts, but largely they need
to be kept aligned to your strategy. In some markets suppliers also supply your competitors.
When supply is short, the supplier may hold a position of power in the choice of who to serve.
You can also have major and minor suppliers. Major suppliers are critical for everyday delivery
and a problem from them can cause delays or product quality issues.

Competitors:-

Competitors are those who have products and services similar to you and where customers who
are buying something will compare your offerings and prices directly, weighing one up against
the other. The interaction with competitors is usually directly antagonistic. You seek to convince
customers that your offerings are better and that competitors' offerings are worse. Nevertheless,
there are times when collaborating with competitors is helpful, for example in influencing
sensible regulations.

Regulators:-

In any industry, standards are often helpful in many ways, from ensuring product safety to
helping suppliers create plug-compatible parts that enable economies of scale and hence lower
product prices. Regulation may be driven by collaboration between competitors. Regulations
may also be created by independent organizations or even governments, whose agendas may not
align with company profit motives. An important part of regulation is policing, without which
regulations become only guidelines. Sometimes customers do their own policing, for example by
not buying non-standard products. Regulation may also be done by independent inspectors who
can have draconian punitive powers be an
GDP CONTRIBUTION BY FMCG SECTOR :-
Fast-moving consumer goods (FMCG) sector is India’s fourth largest sector with household and
personal care accounting for 50% of FMCG sales in India. Growing awareness, easier access and
changing lifestyles have been the key growth drivers for the sector. The urban segment (accounts
for a revenue share of around 55%) is the largest contributor to the overall revenue generated by
the FMCG sector in India. However, in the last few years, the FMCG market has grown at a
faster pace in rural India compared to urban India. Semi-urban and rural segments are growing at
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 25% per annum, which is likely to boost
revenue of FMCG companies. Revenue of FMCG sector reached Rs. 3.4 lakh crore (US$ 52.75
billion) in FY18 and is estimated to reach US$ 103.7 billion in 2020. From October 2020 to
December 2020, the FMCG market rose 7.1%, driven by food items, health, hygiene and rural
areas. Rise in rural consumption will drive the FMCG market. It contributes around 36% to the
overall FMCG spending. In the third quarter of FY20 in rural India, FMCG witnessed a double-
digit growth recovery of 10.6% due to various government initiatives (such as packaged staples
and hygiene categories); high agricultural produce, reverse migration and a lower unemployment
rate.a rapid pace and FMCG products account for 50% of the total rural spending.
GLOBAL PERSPECTIVE OF FMCG SECTOR :-
Global FMCG Market by Type and Distribution Channel: Opportunity Analysis and Industry
Forecast, 2018 - 2025' the global FMCG market size was valued at $10,020.0 billion in 2017 and
is projected to reach $ 15,361.8 billion by 2025, registering a CAGR of 5.4% from 2018 to 2025.
Fast moving consumer goods (FMCG) is the largest combination of consumer goods with
different product categories that include home, health, and personal care and food & drinks
including its marketing, production, and distribution. The personal care segment is anticipated to
witness substantial growth owing to the rise in disposable income of consumers, thus enabling
them to spend considerable amount on luxury personal care products. Other factors such as surge
in trend of online shopping, R&D for the new brands & products, and expansion of FMCG
network in rural areas of the developing countries are expected to open new avenues for the
FMCG market players in the future. However, high competition among major market players
and retail execution are expected to hamper the global FMCG market growth. In the recent
decade, there is a trend that consumers are more concerned about their health and personal
hygiene, thus preferring hygienic lifestyle. Consumers choose their daily need products
according to their hygienic compatibility and thus change their purchasing decisions according to
their lifestyle. This trend is becoming opportunities for the FMCG market. Companies are
offering the products, which are compatible to the lifestyle of their targeted consumer segment.
The personal care segment is expected to grow comparatively faster than other FMCG types,
witnessing a CAGR of 6.0%. The food and beverage segment in the FMCG market is driven by
rise in disposable income, cross cultural interaction, and increase in population. The trend of
healthy eating has been a top impacting factor affecting the growth of the food & beverage
market.
SUMMARY :-
FMCG industry is the most emerging industry nowadays in Indian as wel as global market. In
India it is the 4th largest market, which shows that how important is and how much it contributes
towards our economy.

FMCG includes the personal care product also like soaps, shampoos, etc. so our project mainly
focuses on the market and study of BATH SOAPS IN INDDIA. It consists various multi-
national and domestic companies. Major players are Unilever(HLL), Nirma, Godrej, Jonhson &
Jonhson, Colgate etc.

Our main focus is on Hindustan lever ltd, Nirma, and Godrej. HLL is having largest market share
within our country which gives tough competition to other local and domestic companies also.
Bath soap market is gradually developing very fast and day by day many new varieties, flavours
and fragrances, are added in it by various companies to exist in the market.