FMCG INDUSTRY

FMCG:

Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, household accessories and extends to certain electronic goods. These items are meant for daily of frequent consumption and have a high return. FMCG companies maintain intense distribution network. Companies spend a large portion of their budget on maintaining distribution networks. A recent phenomenon in the sector was entry of multinationals and cheaper imports. Also the market is more pressurized with presence of local players in rural areas and state brands.

INDIAN FMCG SECTOR:

The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13.1 billion. The FMCG market has been exhibiting more than 10 per cent growth since 2005 and is expected to grow at a CAGR of 10-12 per cent over the next few years. FMCG in India has a strong and competitive MNC presence across the entire value chain and home grown players like Marico, Dabur and ITC. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products.

FMCG -- OPPERTUNITY
• More than 1 Billion Consumers
• Growing Disposable Income
• Young age profile : 45% less than 20 years*
• Low levels of Per Capita Consumption
• Growing aspirations fuelled by media

From 46 mn households in 2003, to 124 Mn Households in 2015, would be in consuming class. Per Capita income would be 1150 $US pa from somewhere around 600 now. And FMCG market size would be 33.4 Bn by 2015. This makes it industry to watch by next 5 years.

Low penetrations in the key segments also give a brighter picture for future.
Toothpaste -43.5%
Skin- 24.7%
Hair Wash-23.3%
Talcum Powder-45.1%
Dishwash-24.4 %
Ketchups-4.2%
Source : Indian Readership Survey 2002
FMCG SECTOR CHALLENGES AND GROWTH:

2001 to 2003 saw a major shakeup for the sector, with negative growth. But oflate it has been growing at a faster pace. Year 2005-06 saw 11.5% growth and 2007-08 saw growth of around 14.5% and the with constraints of current economic recession, it is predicted to grow at a pace of about 16%, though with some dent in bottomline. Significantly, several Indian FMCG companies have also been aggressively exploring global markets through both acquisitions and alliances. In the past three years, they have acquired about 15 companies and have spread their presence to more than a dozen countries. With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas.

Major Players:
Hindustan Unilever Ltd.
ITC (Indian Tobacco Company)
Nestlé India
GCMMF (AMUL)
Dabur India
Cadbury India

ITC Ltd

Perfetti Van Melle
Britannia Industries
Procter & Gamble Hygiene and Health Care
Marico Industries

Indian companies have their presence across the value chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-processing sector. The foods category in FMCG is lead by HLL, ITC, Godrej, and Nestle and Amul. Amul, India's largest foods company, has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also, dominates the biscuits category and oflate ITC has been a tough competitor. In the household care category (like mosquito repellents), Godrej, Dabur and Reckitt are major players. In the shampoo category, HLL's Clinic and Sunsilk make it to the top 100, although P&G's Head and Shoulders and Pantene are also trying hard to be positioned on top. ITC has also forayed into Shampoo category and plans to have major dent in market share. Dabur with its Vatika range is already the highest growing player in shampoo category. Dabur is among the top five FMCG companies in India and is a herbal specialist. Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Marico is a leading Indian group in consumer products and services in the Global Beauty and Wellness space.

Cadbury India and Perfetti are the market leaders in the chocolate and confectionery market. Pepsi - Fritolays has made major gains in branded foods and ITC with launch of Bingo is already in counting.