FMCG INDUSTRY IN INDIA

INTRODUCTION

Fast-moving consumer goods (FMCG) sector is India’s fourth-largest sector and has been
expanding at a healthy rate over the years as a result of rising disposable income, a rising
youth population, and rising brand awareness among consumers. With household and
personal care accounting for 50% of FMCG sales in India, the industry is an important
contributor to India’s GDP.

India is a country that no FMCG player can afford to ignore due to its middle-class
population which is larger than the total population of USA. The Indian FMCG market
continues to rise as more people start to move up the economic ladder and the benefits of
economic progress become accessible to the general public. More crucially, with a median
age of just 27, India's population is becoming more consumerist due to rising ambitions. This
has been further aided by government initiatives to increase financial inclusion and establish
social safety nets.

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 a rapid pace and FMCG products
account for 50% of the total rural spending.

The FMCG manufacturing business contains food items also and hence, prior approval from
the Food Safety and Standards Authority of India (FSSAI) along with Food And Drugs
Control Administrations required.

MAJOR FMCG CITIES

 CHANDIGARH
 MAHARASHTRA
 TAMIL NADU
 GUJARAT
 PUNJAB

TOP 6 FMCG COMPANIES IN INDIA IN 2022

 Adani Wilmar.
 Hindustan Unilever Limited (HUL)
 ITC Limited.
 Nestlé India.
 Britannia Industries.
 Marico.
 DEMAND/MARKET SIZE OF FMCG INDUSTRY IN INDIA

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. The FMCG market in India is expected to increase at a CAGR
of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020. The Indian FMCG
industry grew by 16% in CY21 a 9- year high, despite nationwide lockdowns, supported by
consumption-led growth and value expansion from higher product prices, particularly for
staples. The Indian processed food market is projected to expand to US$ 470 billion by 2025,
up from US$ 263 billion in 2019-20.

FMCG giants such as Johnson & Johnson, Himalaya, Hindustan Unilever, ITC, Lakmé and
other companies (that have dominated the Indian market for decades) are now competing
with D2C-focused start-ups such as Mamaearth, The Moms Co., Bey Bee, Azah, Nua and
Pee Safe. Market giants such as Revlon and Lotus took ~20 years to reach the Rs. 100 crore
(US$ 13.4 million) revenue mark, while new-age D2C brands such as Mamaearth and Sugar
took four and eight years, respectively, to achieve that milestone.

Advertising volumes on television recorded healthy growth in the July-September quarter,

registering 461 million seconds of advertising, which is the highest in 2021. FMCG
continued to maintain its leadership position with 29% growth in ad volumes against the
same period in 2019. Even the e-commerce sector showed a healthy 26% jump over 2020.

INVESTMENTS OF FMCG INDUSTRY IN INDIA

 The Government has allowed 100% Foreign Direct Investment (FDI) in food
processing and single-brand retail and 51% in multi-brand retail.
 This would bolster employment, supply chain and high visibility for FMCG brands
across organised retail markets thereby bolstering consumer spending and
encouraging more product launches.
 The sector witnessed healthy FDI inflows of US$ 20.11 billion from April 2000-
March 202

Some of the recent developments in the FMCG sector are as follows:

 In July 2022, Chief Minister of Uttar Pradesh Mr. Yogi Adityanath, inaugurated
HUL’s ultra-modern factory in Sumerpur with a total investment of Rs. 700 crore
(US$ 88.07 million) planned by 2025.
 In July 2022, Emami acquired 30% stake in Cannis Lupus to enter into the petcare
segment in India.
 In July 2022, Godrej Consumer Products Limited (GCPL), unveiled Godrej Magic
Bodywash, India’s first ready-to mix bodywash at just Rs. 45 (US$ 0.57).
 In June 2022, PepsiCo India announced its expansion plans for its largest greenfield
foods manufacturing plant that produces the popular Lay’s potato chips in Kosi
Kalan, Mathura in Uttar Pradesh with an investment of Rs. 186 crore (US$ 23.84
million).
 In April 2022, Dabur India announced plans to induct a fleet of 100 Electric Vehicles
in its supply chain for last-mile product distribution.
 In March 2022, Emami acquired Dermicool from Reckitt for Rs. 432 crore (US$
55.37 million)
 In February 2022, Dabur India, formed an exclusive partnership with energy provider
Indian Oil, which will give Dabur's products direct access to around 140 million
Indane LPG consumer households across India.
 In February 2022, Dabur India achieved its goal to collect, process, and recycle
approximately 22,000MT of post-consumer plastic three months early.
 In February 2022, Marico Ltd has announced aims to achieve net-zero emissions by
2040 in its global operations.
 In November 2021, Tata Consumer Products (TCPL) signed definitive agreements to
acquire 100% equity shares of Tata SmartFoodz Limited (TSFL) from Tata Industries
Limited for a cash consideration of Rs. 395 crore (US$ 53.13 million). This move was
in line with TCPL’s strategic intent to expand into the value-added categories.
 In November 2021, Unilever Plc agreed to sell its global tea business to CVC Capital
Partners for EUR 4.5 billion (US$ 5.1 billion. The business being sold—Ekaterra—
hosts a portfolio of 34 tea brands including Lipton, PG Tips, Pukka Herbs and TAZO.
 In November 2021, McDonald’s India partnered with an FMCG company ITC to add
a differentiated fruit beverage, B Natural, to its Happy Meal, which will be available
across all McDonald’s restaurants in South and West India, primarily catering to
children aged 3–12 years.
 In October 2021, Procter & Gamble announced an investment of Rs. 500 crore (US$
66.8 million) in rural India.
 In September 2021, Vahdam India, an Indian tea brand, raised Rs. 174 crore (US$ 24
million) as part of its Series D round led by IIFL AMC’s Private Equity Fund.
 In September 2021, RP-Sanjiv Goenka Group entered the personal-care segment by
launching skin and haircare products, aiming at a revenue of Rs. 400-500 crore (US$
53.84-67.30 million) in the next 4-5 years.
 In September 2021, Adani Wilmar announced the opening of physical stores under
the name ‘Fortune Mart’ that will exclusively sell Fortune and other Adani Wilmar
brand products.
 The rural market registered an increase of 14.6% in the same quarter and metro
markets recorded positive growth after two quarters. Final consumption expenditure
increased at a CAGR of 5.2% during 2015-20.
 According to Fitch Solutions, real household spending is projected to increase 9.1%
YoY in 2021, after contracting >9.3% in 2020 due to economic impact of the
pandemic.
 The FMCG sector's revenue growth will double from 5-6% in FY21 to 10-12% in
FY22, according to CRISIL Ratings.

GOVERNMENT INITIATIVES IN FMCG INDUSTRY IN INDIA

Some of the major initiatives taken by the Government to promote the FMCG sector in India
are as follows:

 As per the Union Budget 2022-23:

o Rs. 1,725 crore (US$ 222.19 million) has been allocated to the Department of
Consumer Affairs
o Rs. 215,960 crore (US$ 27.82 billion) has been allocated to the Department of
Food and Public Distribution.
o In FY 2021-22, the government approved Production Linked Incentive
Scheme for Food Processing Industry (PLISFPI) with an outlay of Rs. 10,900
crore (US$ 1.4 billion) to help Indian brands of food products in the
international markets.
 The government’s production-linked incentive (PLI) scheme gives companies a major
opportunity to boost exports with an outlay of US$ 1.42 billion.
 In November 2021, Flipkart signed an MoU with the Ministry of Rural Development
of the Government of India (MoRD) for their ambitious Deendayal Antyodaya
Yojana – National Rural Livelihood Mission (DAY-NRLM) programme to empower
local businesses and self-help groups (SHGs) by bringing them into the e-commerce
fold.
 Companies are counting on recent budget announcements like direct transfer of 2.37
lakh crore (US$ 30.93 billion) in minimum support payment (MSP) to wheat and
paddy farmers and the integration of 150,000 post offices into the core banking
system to expand their reach in rural India.
 The Government of India has approved 100% FDI in the cash and carry segment and
in single-brand retail along with 51% FDI in multi-brand retail.
 The Government 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 the 18% tax
bracket against the previous rate of 23-24%. Also, GST on food products and hygiene
products has been reduced to 0-5% and 12-18% respectively.
 GST is expected to transform logistics in the FMCG sector into a modern and
efficient model as all major corporations are remodelling their operations into larger
logistics and warehousing.

ROAD AHEAD FOR FMCG INDUSTRY IN INDIA

Rural consumption has increased, led by a combination of increasing income and higher
aspiration levels. There is an increased demand for branded products in rural India. 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, 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 urban regions. India has a large base of
young consumers who form 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.
Internet has contributed in a big way, facilitating a cheaper and more convenient mode to
increase a company’s reach. The number of internet users in India is likely to reach 1 billion
by 2025. It is estimated that 40% of all FMCG consumption in India will be made online by
2020. E-commerce share of total FMCG sales is expected to increase by 11% by 2030. It is
estimated that India will gain US$ 15 billion a year by implementing GST. 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 improved performance of
companies within the sector.

ADVANTAGES OF FMCG INDUSTRY IN INDIA

ADVANTAGE INDIA

GROWING
DEMAND

*The FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220 billion by 2025,
from US$ 110 billion in 2020.

*Indian packaged food market is expected to double to US$ 70 billion by 2025.

*Rising digital connectivity in cities and rural areas is driving the demand for FMCG (through e-commerce
portals).

ATTRACTIVE
OPPORTUNITIES

*Increase in disposable income in rural India and low penetration levels in rural market offers room for growth.
*E-commerce segment is forecast to contribute 11% to the overall FMCG sales by 2030.

POLICY
SUPPORT

*Investment approval of up to 100% foreign equity in single brand retail and 51 % in multi-brand retail.

*The union government’s production-linked incentive (PLI) scheme gives companies a major opportunity to
boost exports with an outlay of US$ 1.42 billion.

HIGHER
INVESTMENTS

*Investment in this sector attract investors as FMCG products have demand throughout the year.

*The sector witnessed healthy FDI inflow of US$ 20.11 billion from April 2000-March 2022.

KEY PLAYERS IN THE FMCG INDUSTRY IN INDIA

EMAMI

Emami Limited is one of the leading and fastest growing personal and healthcare businesses
in India with an enviable portfolio of household brand names such as BoroPlus, Navratna,
Fair and Handsome, Zandu Balm, Mentho Plus Balm, Fast Relief and Kesh King. Established
in 1974, it has a portfolio of over 300 products based on ayurvedic formulations. Its current
operations comprise more than 60 countries including GCC, Europe, Africa, CIS countries
and the SAARC. Over 121 Emami products are sold every second somewhere around the
world. It employs nearly 3,200 people, has a reach across 4.5 million plus retails outlets
through a network of 3,200 distributors and has invested in eight plants, four regional offices,
one overseas unit, eleven overseas subsidiaries, 31 distribution centres and one associate
across India.

Company Website: http://www.emamigroup.com/

ITC

ITC is one of India's foremost multi-business enterprises and is rated among the World's Best
Big Companies, Asia's 'Fab 50', and the World's Most Reputable Companies by Forbes
magazine. It is also rated as 'India's Most Admired Company' in a survey conducted by
Fortune India magazine and Hay Group. ITC also features as one of the world's largest
sustainable value creators in the consumer goods industry in a study by the Boston
Consulting Group. ITC has been listed among India's Most Valuable Companies by Business
Today magazine. The Company is among India's '10 Most Valuable (Company) Brands'
according to a study conducted by Brand Finance and published by the Economic Times. ITC
also ranks among Asia's 50 best performing companies compiled by Business Week.

Company Website: https://www.itcportal.com/

DABUR

Dabur India Ltd. is one of India’s leading FMCG companies and recorded Rs. 8,703.59 crore
(US$ 1.23 billion) in revenue in FY20. Built on a legacy of quality and experience of over
132 years, Dabur is today India’s most trusted name and the world’s largest Ayurvedic and
Natural Health Care Company. Dabur India is also a world leader in Ayurveda with a
portfolio of over 250 Herbal/Ayurvedic products. Dabur's current FMCG portfolio includes
five flagship brands with distinct brand identities -- Dabur as the master brand for natural
healthcare products; Vatika for premium personal care; Hajmola for digestives; Real for fruit
juices and beverages; and Fem for fairness bleaches and skin care products. Dabur operates in
key consumer product categories like hair care, oral care, healthcare, skin care, home care
and foods. The ayurvedic company has a wide distribution network, covering 6 million retail
outlets with a high penetration in both urban and rural markets.

Company Website: https://www.dabur.com/

 FIG- SNAPSHOT OF FMCG INDUSTRY IN INDIA

FMCG INDUSTRY IN INDIA REPORT

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. The urban segment contributes to about
55% of the revenue share, while the rural segment accounts for 45%. Rise in rural
consumption will drive the FMCG market. The Indian processed food market is projected to
expand to US$ 470 billion by 2025, up from US$ 263 billion in 2019-20.

The Indian FMCG industry grew by 16% in CY21 a 9- year high, despite nationwide
lockdowns, supported by consumption-led growth and value expansion from higher product
prices, particularly for staples. Final consumption expenditure increased at a CAGR of 5.2%
during 2015-20. According to Fitch Solutions, real household spending is projected to
increase 9.1% YoY in 2021, after contracting >9.3% in 2020 due to economic impact of the
pandemic. The FMCG sector's revenue growth will double from 5-6% in FY21 to 10-12% in
FY22, according to CRISIL Ratings. Price increases across product categories will offset the
impact of rising raw material prices, along with volume growth and resurgence in demand for
discretionary items, are driving growth. The domestic FMCG market has grown at 12.6%
YoY in Q3 2021.

The Indian online grocery market is estimated to exceed sales of about Rs. 1,310.93 billion
(US$ 17.12 billion) by 2026, at a CAGR of 28.99%. The gross merchandise value (GMV) of
the online grocery segment in India is expected to increase 18 times over the next five years
to reach US$ 37 billion by FY25.

The FMCG sector has received good investments and support from the Government in the
recent past. The sector witnessed healthy FDI inflows of US$ 20.11 billion from April 2000-
March 2022. Furthermore, as per the Union Budget 2022-23, Rs. 1,725 crore (US$ 222.19
million) has been allocated to the Department of Consumer Affairs, Rs. 215,960 crore (US$
27.82 billion) has been allocated to the Department of Food and Public Distribution. In FY
2021-22, the government approved Production Linked Incentive Scheme for Food Processing
Industry (PLISFPI) with an outlay of Rs. 10,900 crore (US$ 1.4 billion) to help Indian brands
of food products in the international markets.

In July 2022, Chief Minister of Uttar Pradesh Mr. Yogi Adityanath, inaugurated HUL’s ultra-
modern factory in Sumerpur with a total investment of Rs. 700 crore (US$ 88.07 million)
planned by 2025.

In July 2022, Emami acquired 30% stake in Cannis Lupus to enter into the petcare segment in
India.

In July 2022, Godrej Consumer Products Limited (GCPL), unveiled Godrej Magic
Bodywash, India’s first ready-to mix bodywash at just Rs. 45 (US$ 0.57).
The government’s production-linked incentive (PLI) scheme gives companies a major
opportunity to boost exports with an outlay of US$ 1.42 billion.

As of February 2021, out of 39 Mega Food Park projects, 22 are operational, 15 are under
implementation and 2 are in-principal approval.

The future outlook of the FMCG sector looks on track with pandemic easing out. Rural
consumption has increased, led by a combination of increasing income and higher aspiration
levels. There is an increased demand for branded products in rural India. 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, augmented by the growth in
modern retail. The FMCG market in India is expected to increase at a CAGR of 14.9% to
reach US$ 220 billion by 2025, from US$ 110 billion in 2020.

CASE STUDY- INDIA’S FOOD PROCESSING INDUSTRY

The Indian food processing industry is among the largest in the nation in terms of growth,
production, consumption and exports. The industry produces several food products such as
meat, poultry, fisheries, fruits, vegetables, spices, milk and milk products, alcoholic
beverages, plantations and grains. It also manufactures cocoa products and chocolates,
confectionery, mineral water, soya-based items and high-protein foods. Since the
liberalisation in August 1991, the government proposed and accepted multiple projects, for
instance, creating foreign collaborations, joint ventures, 100% export-oriented units and
industrial licenses to encourage growth and investment in the food processing industry.
Foreign direct investment (FDI) in India was estimated at Rs. 2,934.1 crore (US$ 368.8
million) in FY21.

India is a major producer of food in the world, with a large and growing market. The food
and grocery retail market, valued at US$ 11.3 trillion in 2021, is also among the largest in the
global economy.

India's food processing sector is a sunrise sector that has gained prominence in recent years.
Major processed food products exported from India include processed fruits and juices,
pulses, guar gum, groundnuts, milled products, cereals preparations, oil meals and alcoholic
beverages. India created history in agriculture and processed food exports by exporting
products worth US$ 25.6 billion in FY22 . Export of APEDA products stood at US$ 7.4
billion as of April-June 2022, up 31% compared with US$ 5.7 billion over the same period
last fiscal, according to the Directorate General of Commercial Intelligence and Statistics.
Furthermore, exports of processed fruits and vegetables grew by 59.1%; cereals and
miscellaneous processed items grew by 37.66%; meat, dairy and poultry products grew by
9.5%; basmati rice grew by 25.5%; non-basmati rice grew by 5%; and miscellaneous
products grew by 50%.

The food sector is currently undergoing a transition in India. The Agricultural and Processed
Food Products Export Development Authority (APEDA) forecasts that the sector will grow at
a compounded annual growth rate (CAGR) of 3% between 2022 and 2030.
 IMPACT OF COVID ON FMCG MARKET
HIGHLIGHTS-

1. The demand for FMCG products increased at first due to panic buying of essential
items, which was followed by supply chain, distribution and logistics disruptions
2. Demand for health, hygiene and essential products increased compared to non-
essential items
3. Customers have largely been shifting to the use of e-commerce platforms for
purchases
4. Sector players are working towards improving their operating models, and the
industry expects the essential items market to recover faster than that of non-essential
items
5. Shortage of products, inflated prices, limitations to online delivery are some of the
challenges faced by consumers
6. The GOI needs to work on managing supply chain and facilitating e-commerce
deliveries
7. FMCG players need to revamp their operating, financial and technology models.

REPORT-

Food & beverage industry has also not been spared by the impacts of COVID-19. For
instance, companies involved in manufacturing of processed food and non-perishable goods
have seen a robust increase in sales owing to the lack of availability of fresh fruits and
vegetables. However, restaurants and retail food establishments are facing challenges owing
to shortage of food supplies, employees and stringent government lockdowns. Additionally,
demand for organic and natural ingredient infused food products are increasing at an
exponential growth rate. For instance, Nourish Organic Foods Pvt Ltd., an India based
organic food supplier, specialized in selling of organic, gluten-free and vegan food items has
experienced 30% sales growth during February-March 2020.

Demand for cosmetic & color products, amid the COVID-19 outbreak is anticipated to see a
steep downfall. Apart from those products that are deemed to be essential during such a
crisis, other non-essential products are anticipated to cater huge losses in the later half of the
year. For example, post Covid-19 outbreak, U.S. consumers are changing their buying
behaviours with 27.5% saying that the outbreak has resulted in limiting itself and avoiding
public gatherings, thereby resulting in a steep decline in demand for cosmetic products. On
the other hand, demand for personal hygiene products such as hand sanitizers and hand
washes is growing at an exponential rate across the globe.

Although amongst the last few countries globally to have been infected by coronavirus
(COVID-19), the Indian government’s announcement on 24 March to lockdown 1.3 billion
Indians in the second-most populous country globally for a period of 21 days initially, and
then extended by an additional 15 days, has led to the shutdown of factories, crippled the
supply chain and made around 278 million sq m of retail space redundant.
This comes on the back of the worst economic slowdown in a decade that the government
was trying to revive prior to the COVID-19 outbreak. Euromonitor International predicts that
Indian real GDP could dip into negative territory in 2020 depending on the severity of the
COVID-19 crisis.

Those FMCG industries selling necessity-driven and essential products, such as fresh food,
packaged food and bottled water, are being impacted due to supply chain breakdowns,
stockpiling and stockouts. The COVID-19 pandemic has resulted in a slight shift in the
paradigm of what we consider to be essentials; hygiene products have entered this category,
whereas industries like apparel have shifted to discretionary.

Discretionary products more generally have taken a backseat. Travel, consumer foodservice,
luxury, apparel and footwear, consumer electronics, alcoholic drinks and tobacco have been
severely impacted, as most companies have halted or scaled down their operations during the
lockdown. However, some companies have transformed their facilities to produce products
like masks, hand sanitisers, ventilators, etc, that aid the government and community in
fighting the pandemic.

Our on-ground team of analysts in India tracking these industries has summarised the impact
of COVID-19 on India’s top FMCG industries and services.

Retailing: consumers develop online grocery shopping habit

During the lockdown, grocery retailers, which account for more than 60% of store-based
retailing sales, have been permitted by the government to continue operations as they sell
essential and consumer healthcare products. While grocery retailers saw an initial uptick in
demand due to panic buying, they struggled to replenish stocks due to disruption in supply
chains, resulting in stockouts.

E-commerce companies focusing on grocery sales also recorded an initial spike in sales due
to people being confined to their homes, but many later had to halt operations due to logistics
issues. E-commerce is expected to benefit over the long run, with a greater number of
consumers developing an online grocery shopping habit.

Non-grocery specialists, especially apparel and footwear specialist retailers, which went into
complete shutdown, will witness a larger impact on their revenues. It will take a few more
months after the lockdown for retailing operations to normalise, while a period of
precautionary measures would lead to a shift in consumers’ shopping channel preferences.