INDIAN
FMCG INDUSTRY:
What is Industry analysis ?
Structured
study to provide a good understanding of an industry
involves
reviewing the economic, political and market
factors that influence the way the industry develops
Focuses
on issues like : overview of industry, trends, growth drivers, swot analysis,
regulations, major players
Supports
strategy formulation, know the industry attractiveness, create differential
advantage
Overview
FMCG
- consumables (other than groceries/pulses) people buy at regular intervals
toilet
soaps, detergents, shampoos, toothpaste, shaving products, shoe polish,
packaged foodstuff, and household accessories and extends to certain electronic
goods
The
size of the Indian FMCG industry is estimated at
around Rs. 250000 crores representing nearly 2.5% of
the country’s GDP
In
the last decade the FMCG sector has grown at an average of 11% a year; grown at approximately 17%
CAGR in the last 5 years
The
industry is volume driven and is characterized by low margins.
The products are branded and backed by skilled marketing, heavy advertising,
slick packaging and strong distribution networks. Also, raw material
prices play an important role in determining the pricing of the final
product
The
urban market
accounts for a major
chunk of revenues
However,
high inflation, muted salary hikes, and slowing economic growth have slowed
down the industry growth rate since late 2012
Combined
sales of companies including Hindustan Unilever , Dabur, GodrejConsumers,
Emami, Marico, GSK Consumer, Nestle India, ITC and Colgate India grew
13% during the quarter ended June ‘13, down from 15% a year earlier and 22% in
June quarter 2011
Growth
will come from rural dwellers that are expected to see a rise in disposable
incomes due to the direct cash transfer scheme, while urban consumers will
continue to be affected by the macroeconomic environment.
Trends:
•Product innovation
•Indian FMCG companies are consolidating
their existing business portfolios
•Focus on rural market
•Companies are now focusing on the rural
market segment which is growing at a rapid pace and contributes about 33 per
cent to the total FMCG market
•Expanding distribution networks
•Companies are now focused on improving their
distribution networks to expand their reach in rural India
•Rising importance of smaller-sized packs
•Companies are increasingly introducing
smaller stock keeping units at reduced prices. This helps them to sustain
margins, maintain volumes from price-conscious customers and expand their consumer base
•Focus on enhancing presence in Africa
•FMCG companies entering Africa as it helps
to be close to consumption markets within Africa
•Such foreign investments are encouraged by
local governments, as they offer incentives to enter the markets
•Reducing carbon footprint and eco-friendly
products
•FMCG players in India are increasingly focusing on reducing their carbon footprint by creating eco-friendly products.
They generate the required energy from renewable sources and earn CER credits
for the same
•Premiumization
•Consumers
are becoming more brand conscious and prefer lifestyle and premium range
products given their increasing disposable income
Growth Drivers:
•
Rise of rural consumers
•
Increasing per capita income of urban and rural
population
•
Growing popularity of organised retail
•
Government’s pro-industry policies
•
Education and urbanization
•
Greater awareness of products, brands
•
Changing Profile and mind set of consumer
•
Led to new product launches
Changing mind set of consumer
• shift towards quality products, rather than
just the cheaper ones
• Growth
will come from the fringes—categories that are not among the mainstays—such as
oats, conditioners, liquid fabric conditioners, and liquid soaps and face
wash
• Focus
on health and wellness is going to fuel the demand for health based food
products viz. Britannia launched
Nutrichoice biscuits, Danone launching probiotic yogurt, Dabur introduced a
juice with fiber and HUL introduced Soya and multigrain atta, iodized salt, energy drinks
Sales of olive oil, for instance, exceed that of Saffola,
a premium cooking oil from Marico, at grocery retail chain Big Bazaar.
Oats, which didn't exist as a category until three years
ago, are now a Rs.200 crore market.
Need for Innovation
India’s FMCG market is mature, competitive, and crowded with
local and global brands. In this market, innovation is critical for:
Market
• Remaining
competitive
• Generating
new avenues for sales and profits
• Driving
growth by entering new categories through relevant innovation
• Increasing
market share and moving towards market dominance positions in:
Brand
share
Overall
FMCG market share
Category
share
• Growing
product and category penetration
Consumer
• Creating
products that match consumers’ evolving tastes, preferences and needs
• Reaching
new customers
• Growing
the share of wallet from current customers
Product
• Launching
new products and keeping the product portfolio fresh
Channel
• Leveraging
new distribution channels to boost revenue and penetration (e g. social media,
multi-channel, omnichannel)
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