30 January 2017




Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as soft drinks,tioletries,processed foods and many other consumerable.In contrast, durables or major appliances such as kitchen appliances are generally replaced over a period of several years.
FMCG have a short shelf life either as a result of high consumer demand or because the product deteriorates rapidly. Some FMCGs, such as meat, fruits and vegetables, dairy products, and baked goods, are highly perishable. Other goods, such as alcohol, toiletries, pre-packaged foods, soft drinks, chocolate, candies, and cleaning products, have high turnover rates. The sales are sometimes influenced by some holidays and season.
Though the profit margin made on FMCG products is relatively small (more so for retailers than the producers/suppliers), they are generally sold in large quantities; thus, the cumulative profit on such products can be substantial. FMCG is a classic case of low margin and high volume business

Predicting Sales Of Fast-Moving Consumer Goods In India
  • Nielsen predicts that India’s FMCG industry will grow from $37 billion in 2013 to $49 billion in 2016.
  • Indian FMCG industry expected to grow 7% in 2014, 10% in 2015 and about 12% in 2016, taking the sales in 2016 to $49 billion.
  • Distribution growth, innovations around sachet offerings, employment rates and index of industrial production (IIP) are key influencers of FMCG sales in India.
India’s FMCG industry is massive. In 2013, 8.4 million outlets served 1.26 billion people and accounted for US$37 billion in sales.
The last three years have been challenging for India’s FMCG industry. Sales have been affected by a weak economy and high inflation. Consumer confidence which we found has a strong correlation with FMCG sales, has also dipped in this period. In more recent months, however, confidence is rebounding and the sector appears to be one with perceptible signs of a sustained recovery.

The FMCG Industry

To understand the declining FMCG growth trend and predict how the future looks like, we must first understand the sales environment. There are several forces at play that affect the FMCG industry in India.
Through multivariate regression modelling and custom forecasting, Nielsen arrived at drivers-based FMCG forecasts incorporating a range of influencing variables. This helps in understanding market dynamics, gain foresight into current and emerging trends and to plan better.
Nielsen used a three step approach to forecast FMCG sales value.
  1. Identify the drivers impacting sales through regression modelling
  2. Quantify the impact of each of the drivers
  3. Finally, forecast FMCG sales for the next three years using the identified drivers and their future value
All the above variables were modelled against FMCG sales to attain sales drivers. Using these drivers and their impact on FMCG, we were able to forecast sales for 2014 - 2016. 
Drivers Of FMCG Sales
Overall 8 factors have emerged which play a direct role in influencing FMCG sales. We have classified these drivers of sales into two categories: those that marketers can control and those they cannot. The good news is marketers can directly influence more than half of the drivers of sales.
Given the Indian FMCG consumer’s preference for traditional trade outlets and the challenge for marketers in actually reaching the consumer, it’s understandable that availability is the biggest driver of FMCG sales. This is followed by employment rates, which generates income, and then proliferation of sachets (low volume packs), which have a low outlay and are easy on the wallet. Sachet packs also play a strong role in recruiting new buyers and in inducing trials.
Using Sales Drivers To Explain Growth On Decline
FMCG growth has been slowing for some time now, sliding by 8.1% from 2010 to 2013. In a clear indication that sales drivers have played a part in this decline, a slowdown was seen in the rate of distribution expansion and the rate of sachet launches during the same period. Admittedly, weakening macroeconomic variables also contributed to the overall FMCG slowdown.
Here is a closer look at how some of the drivers affect FMCG sales:
Availability: The slowdown in distribution expansion has held up growth. The distribution expansion in 2013 has slowed down to 1.1% from a healthy 2.3% in 2010.
Awareness: While the extent of the impact is smaller, yet, the effect of lower television gross rating points (GRP) has affected sales.
Macro factors: Declining FMCG growth seems to be reflective of the Indian economy as a whole. The key macroeconomic indicators have weakened; GDP slowed from 7.9% in 2009 to 5.7% as of Nov. 12, 2013. The Index of Industrial Production (IIP) has also plunged from 5.8% in 2009 to 1.7% in November 2013. This has affected the economy and the consumers’ purchasing power.
Sachet (Low volume packs): New product launches through sachets have fuelled growth over the years. The growth in the number of low-volume packs hit 31.1% from 2009 to 2010. The rate then dropped to 10.5% from 2012 to 2013. This drop in sachet innovations has impacted FMCG growth.
The primary factors expected to drive a spurt in sales are a stronger GDP and rise in employment. An increase in the rate of availability through distribution expansion is also expected to support sales growth.
Nielsen expects the Indian FMCG sector to touch US$49 billion by 2016. The early signs of revival include a recovering GDP, a strengthening economy and higher consumer sentiment about their employment opportunities.