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Wasim Ahmed Ansari
IMI, New Delhi
• Fast Moving Consumer Goods (FMCG), also
known as Consumer Packaged Goods (CPG),
are products that have a quick turnover and
relatively low cost.

• Though the absolute profit made on FMCG
products is relatively small, they generally sell in
large numbers and so the cumulative profit on
such products can be large.
FMCG – Evolution
• 1950’s-80’s – Low Investment in the sector
– Low purchasing power
– Govt’s emphasis on small scale sector
– HLL and other company’s urbane focus
• Post liberalization
– Entry of MNCs
– Focus shifted to getting to rural consumer first
– Others, like Nestle, remained with the urban
– Latest fad to hit the market is the ‘sachet’ bug.
• Mushrooming of regional brands
– Nirma enters and changes the focus to ‘Value for
Money’ in the 70’s
– Post liberalization, Jyothi Laboratories, ‘Ghari’
Detergent and ‘Anchor’ toothpaste giving the nation-
wide brands a run for their money.
Segments of FMCG
• Personal care
– Skin care
– Hair care
– Shampoos
– Oral Care
• Household care
– Personal wash
– Detergents
• Branded and Packaged foods and beverages
– Food segment
– Tea
– Coffee
• Spirits and tobacco
Behavior of FMCG market
• 3 very distinct characteristics like necessity, comfort
and luxury.

• Spends little time on the purchase decision. He
seldom ever looks at the technical specifications.

• Brand loyalties or recommendations of reliable
retailer/ dealer drive purchase decisions.

• Limited inventory of these products (many of which
are perishable) are kept by consumer.

• Brand switching is often induced by heavy
advertisement , recommendation of the retailer or
word of mouth.
Policies in FMCG sector
• Lifting up of quantitative restrictions
• Reducing excise duties
• Automated FDI
• License abolishment from food processing
• Easing prices of raw materials
• 100% FDI for NRIs and PIOs in India
• State government led interventions
– Resurgent Rajasthan
• Subsidies in taxes & excises.
Key players under FMCG
• 4th Largest sector in India.
Current issues
• Problematic distribution
• Managing the price increase
• Promotional pressure
• Price war
• Category leader
• Product introduction
• Concentration
• Local marketing
• Information lumber
Rays of hope
• Buoyant rural spending
• Favorable Pricing Strategies
• Decrease in Raw Material Prices
• Better Product mix
• Export – Cost advantage
• Sectoral advantages
– Dairy based
– Packed goods
– Oral care
Forecast 2010
• Rural and semi-urban
– Population thrice the urban
– Market size growth from 48k to 100k Crores (Growth of
50% at 10%CAGR)
– Increase penetration from the current less than 1%
– Problems in the rural sector
• Low per capita disposable incomes
• Large number of daily wage earners
• Acute dependence on vagaries of monsoon
• Seasonal consumption
• Poor infrastructure – roads and power supply
• Urban
– Market 16.5k to 35k Crores (Growth of 100% at
– Intense competition – severe pressure on margins –
Focus on newer products.
Some important links