1|Page

Case Study Analysis: “Analysis on Legal Factors of FMCG Sector in India”

Under the guidance of: Submitted By:

Dr. Rajesh Tripathi Chirag Bagga
Asst. Professor (Selection Grade) SAP ID:
Subject: Strategic Management I 500108731

MBA Strategy and Consulting (KPMG)

School of Business
University of Petroleum and Energy Studies
P.O- Kandoli, Via - Prem Nagar
Dehradun -248007
Uttarakhand, India
Submission Date: - 18th May 2023
2|Page

Case Study Analysis: Indian FMCG Market

A. Introduction:
The Indian Fast Moving Consumer Goods (FMCG) sector is the fourth-largest sector
in the Indian economy, comprising food and beverages, healthcare, and household and
personal care segments. This case study analyses the dynamics, growth, and future
outlook of the Indian FMCG market, considering factors such as rural consumption,
online retail, government support, investments, and key industry developments.

B. Background:
The FMCG sector in India has witnessed significant growth, driven by factors such as
rising rural consumption, increasing disposable income, and improved standard of
living. The sector contributes to India's GDP and creates employment opportunities.
Companies like Dabur, Hindustan Unilever Limited (HUL), and ITC have utilized
advanced technology and strong distribution channels to transform the FMCG
industry. Additionally, investments and support from the government, including the
Production Linked Incentive Scheme for Food Processing Industry, have further
boosted the sector.

C. Evaluation:
The Indian FMCG market experienced a 16% growth in 2021, reaching a nine-year
high, despite nationwide lockdowns caused by the COVID-19 pandemic.
Consumption-led growth, higher product prices, and increased demand for staples
contributed to this growth. The FMCG sector is expected to witness double-digit
revenue growth in FY22, driven by price increases, volume growth, and resurgence in
demand for discretionary items. The online grocery market is projected to exceed Rs.
1,310.93 billion (US$17.12 billion) by 2026, indicating the growing importance of e-
commerce in the FMCG sector.
3|Page

D. Proposed Solutions:
To capitalize on the opportunities in the Indian FMCG market, companies should
focus on increasing consumer income, adapting to changing consumer lifestyles,
tapping into the aspiring rural consumer base, and leveraging consistent economic
growth. Diversification of product ranges, technological advancements, strong
distribution networks, and investments in food parks and manufacturing facilities can
also help companies expand their presence and cater to evolving consumer demands.

E. Recommendations

 Companies should prioritize product innovation, quality, and branding to meet

consumer expectations.
 Expanding distribution networks in tier II and III cities can tap into the growing
market potential.
 Leveraging e-commerce platforms and online retail channels can boost sales and
reach a broader customer base.
 Collaborating with local and regional partners can enhance market penetration and
distribution capabilities.
 Continuous investment in research and development can help companies stay ahead
of the competition and address evolving consumer needs.
 Focus on sustainability and responsible practices to align with changing consumer
preferences for eco-friendly products.

F. Porter's Five Forces Analysis: FMCG Industry in India

4|Page

1. Threat of New Entrants:

The FMCG industry in India faces a moderate threat of new entrants. While the sector
offers attractive growth opportunities, it also requires significant investments in
manufacturing, distribution, branding, and marketing. Established players already
enjoy economies of scale, strong brand recognition, and extensive distribution
networks, creating barriers for new entrants. However, the rise of e-commerce and the
potential for niche and innovative products may attract new players, especially in
specific segments.

2. Bargaining Power of Suppliers:

The bargaining power of suppliers in the FMCG industry in India is relatively low.
The sector relies on a vast network of suppliers for raw materials, packaging
materials, and other inputs. The presence of multiple suppliers, intense competition
among them, and the ability of FMCG companies to switch suppliers easily limit the
bargaining power of individual suppliers. However, price fluctuations of key inputs
and any disruptions in the supply chain can impact the profitability of FMCG
companies.

3. Bargaining Power of Buyers:

The bargaining power of buyers in the FMCG industry in India is high. Consumers
have a wide range of choices and can easily switch brands based on factors such as
price, quality, and preferences. The low switching costs, availability of substitute
products, and the increasing influence of e-commerce platforms give buyers
significant power in negotiating prices and seeking discounts or promotions. FMCG
companies need to invest in strong branding, product differentiation, and customer
loyalty programs to mitigate the power of buyers.

4. Threat of Substitutes:
The threat of substitutes in the FMCG industry in India is moderate. While FMCG
products often have direct substitutes available, such as different brands or products
within the same category, the demand for essential items like food, beverages, and
personal care products remains relatively stable. However, changing consumer
preferences, health-consciousness, and the availability of alternative options can
influence the demand for specific products. FMCG companies need to continuously
innovate, differentiate their offerings, and adapt to evolving consumer trends to
mitigate the threat of substitutes.

5. Competitive Rivalry:
The competitive rivalry in the FMCG industry in India is intense. The sector is
characterized by the presence of numerous domestic and international players
competing for market share. Established FMCG companies have strong brand
5|Page

portfolios, wide distribution networks, and significant marketing budgets. The

industry also witnesses frequent product launches, promotional activities, and price
wars to attract and retain customers. Differentiation through product quality, branding,
innovation, and customer engagement becomes crucial to gain a competitive edge.

Overall, while the FMCG industry in India offers growth opportunities, it is also highly
competitive, driven by changing consumer preferences and the rise of e-commerce.
Established players enjoy advantages such as economies of scale, distribution networks, and
brand recognition. However, new entrants can enter the market with innovative products or
through niche segments. To succeed, FMCG companies need to navigate these forces by
focusing on branding, product differentiation, innovation, distribution efficiency, and
customer loyalty programs.

G. PESTEL Analysis: FMCG Sector in India

1. Political Factors:
Government policies and regulations: The FMCG sector in India is influenced by various
government policies and regulations, including taxation policies, foreign direct investment
(FDI) regulations, labeling and packaging requirements, and food safety regulations. Changes
in these policies can impact the operating environment and profitability of FMCG companies.
Political stability: Political stability is essential for business growth and investment. A stable
political environment in India promotes economic development and provides a conducive
environment for the FMCG sector.
2. Economic Factors:
i. GDP growth: The growth of the FMCG sector is closely linked to the overall
economic growth of the country. India's GDP growth rate, disposable income levels,
and consumer spending patterns play a significant role in determining the demand for
FMCG products.
ii. Inflation rate: Inflation affects the purchasing power of consumers and their ability
to afford FMCG products. High inflation can impact consumer spending and demand
for non-essential FMCG items.
iii. Exchange rates: The exchange rate fluctuations can influence the cost of imported
raw materials and impact the profitability of FMCG companies, especially those
relying on imports.

3. Social Factors:

i. Demographic profile: India's large and growing population, especially the young
demographic, presents a significant market for FMCG products. Changing lifestyles,
urbanization, increasing disposable income, and rising middle-class aspirations drive
the demand for FMCG items.
6|Page

ii. Consumer preferences and trends: Consumer preferences in terms of taste, health
consciousness, convenience, and sustainability impact the demand for FMCG
products. FMCG companies need to adapt to changing consumer preferences and
introduce innovative offerings to meet evolving needs.
iii. Cultural factors: India's diverse culture and regional preferences influence the
demand for FMCG products. Companies need to understand and cater to local
preferences and cultural nuances to succeed in different regions.

4. Technological Factors:

i. Digitalization and e-commerce: Technological advancements and the growth of e-

commerce platforms have transformed the FMCG sector in India. The rise of online
retailing has opened up new distribution channels and changed consumer buying
behavior.
ii. Manufacturing and automation: Technology plays a crucial role in manufacturing
processes, supply chain management, and quality control. Automation and
advancements in machinery enhance efficiency and reduce costs for FMCG
companies.

5. Environmental Factors:

i. Sustainability and eco-consciousness: Increasing awareness about environmental

issues and sustainability has led to a growing demand for eco-friendly and sustainable
FMCG products. FMCG companies need to adopt sustainable practices, reduce
packaging waste, and promote responsible sourcing to align with consumer
expectations.
ii. Climate change and natural resource availability: Climate change and the
availability of natural resources can impact the supply chain and availability of raw
materials. FMCG companies need to manage their environmental footprint and ensure
the sustainability of their operations.

6. Legal Factors:

i. Intellectual property rights: FMCG companies rely on trademarks, patents, and

copyrights to protect their brand identities and innovations. Intellectual property rights
and legal frameworks for their enforcement are important considerations.
ii. Labor laws and regulations: FMCG companies need to comply with labor laws,
including minimum wages, working hours, safety standards, and employee welfare
measures.

Understanding and adapting to these PESTEL factors is crucial for FMCG companies
operating in India. They need to stay abreast of political developments, economic indicators,
social trends, technological advancements, environmental concerns, and legal requirements to
navigate the dynamic landscape and capitalize on growth opportunities.

H. Frequently Asked Questions:

7|Page

1. What segments are covered in Indian FMCG Market report?

Ans. The segments covered in Indian FMCG Market report are based on
Product Type, Demographics, and Sales Channel.

2. Which region is expected to hold the highest share in the Indian FMCG
Market?

Ans. North India is expected to hold the highest share in the Indian FMCG
Market.

3. Who are the top key players in the Indian FMCG Market?

Ans. Hindustan Unilever Ltd., Nestlé India, Cadbury India, ITC (Indian
Tobacco Company), and Asian Paints (India) are the top key players in the
Indian FMCG Market.

4. Which segment holds the largest market share in the Indian FMCG
market by 2027?

Ans. Food & Beverages segment hold the largest market share in the Indian
FMCG market by 2027.

5. What is the market size of the Indian FMCG market by 2027?

Ans. The market size of the Indian FMCG market is US $615.87 Bn. by
2027.

I. Conclusion:
The Indian FMCG market has witnessed robust growth and holds significant potential for the
future. Rural consumption, the rise of e-commerce, government support, and investments are
key drivers of this growth. By leveraging technological advancements, distribution networks,
and product innovation, FMCG companies can tap into this potential and cater to the
evolving needs of Indian consumers. With a projected CAGR of 14.9%, the FMCG market in
India is expected to reach US$220 billion by 2025, indicating promising prospects for the
industry.

J. References:

 Indian FMCG Market: Industry Analysis and Forecast (2021-2027)

(maximizemarketresearch.com)
 Indian FMCG Industry Analysis | IBEF
8|Page