FAST MOVING CONSUMER GOODS (FMCG) - IBEF · PDF filecompany aims to expand globally in the...

For updated information, please visit www.ibef.org October 2017
FAST MOVING
CONSUMER GOODS
(FMCG)

Table of Content
Advantage India.... 4
Market Overview and Trends...6
Strategies adopted.......16
Growth Drivers.............18
Case Studies........30
Industry Organisations........34
Porters Five Forces Framework.15
Executive Summary...3
Opportunities........27
Useful Information...........36

For updated information, please visit www.ibef.org FMCG 3
EXECUTIVE SUMMARY
Total consumption expenditure (US$ billion)
1,595
3,600
0
1,000
2,000
3,000
4,000
2016 2020F
Rural FMCG market in India (US$ billion)
29
100
0
50
100
150
2016 2020F
FMCG market in India (US$ billion)
Source: World Bank, Emami Reports, Dabur Reports, AC Nielsen
Notes: F- Forecast
49 104
0
50
100
150
2016 2020F
Favourable demographics and rise in income level to boost FMCG
market
FMCG market in India is expected to grow at a CAGR of 20.6 per
cent and is expected to reach US$ 103.7 billion by 2020 from US$
49 billion in 2016
Total consumption expenditure is set to increase at a CAGR of 22.57
per cent from 2016-2021.
Total consumption expenditure is expected to reach nearly US$
3600 billion by 2020 from US$ 1,595 billion in 2016
Rise in rural consumption to drive the FMCG market
The rural FMCG market in India is expected to grow at a CAGR of
14.6 per cent, and reach US$ 220 billion by 2025 from US$ 29.4
billion in 2016
CAGR 20.6%
CAGR 22.6%
CAGR 14.6%

FMCG
ADVANTAGE INDIA

ADVANTAGE INDIA
Rising incomes and growing youth
population have been key growth drivers
of the sector. Brand consciousness has
also aided demand
1st Time Modern Trade Shoppers spend
was estimated to be tripled to US$1 billion
by 2015
Tier II/III cities are witnessing faster
growth in modern trade
Low penetration levels in rural market offers
room for growth
Disposable income in rural India has
increased due to the direct cash transfer
scheme
Exports is another growing segment
E-commerce companies like Amazon are
strengthening their business in FMCG
sector, by positioning their platform pantry
as front line offering to drive daily products
sales.
Many players are expanding into new
geographies and categories
Modern retail share is expected to triple its
growth from US$60 billion in 2015 to US$180
billion in 2020
With an investment of US$254.50 million,
Wipro is diversifying and expanding its product
range in energy drinks, detergents and fabric
conditioners.
Patanjali will spend US$743.72 million in
various food parks in Maharashtra, M.P.
Assam, Andhra Pradesh and Uttar Pradesh.
Investment approval of up to 100 per cent
foreign equity in single brand retail and 51
per cent in multi-brand retail
Initiatives like Food Security Bill and direct
cash transfer subsidies reach about 40 per
cent of households in India
The minimum capitalisation for foreign
FMCG companies to invest in India is
US$100 million
ADVANTAGE
INDIA
Source: Emami
Note: E Estimated, F - Forecast

FMCG
MARKET
OVERVIEW AND
TRENDS

EVOLUTION OF FMCG IN INDIA
Source: Dabur Annual Report, Economic Times, Emami Annual Report, McKinsey Global Institute, CII, Boston Consulting Group Report
FY00 FY17
Indian FMCG Industry US$ 9
billion
Market size of chocolates -

THREE MAIN SEGMENTS OF FMCG
Food and Beverages Healthcare Household and Personal
Care
It accounts for 19 per cent
of the sector.
This segment includes
health beverages,
staples/cereals, bakery
products, snacks,
chocolates, ice cream,
tea/coffee/soft drinks,
processed fruits and
vegetables, dairy
products, and branded
flour
It accounts for 31 per
cent of the sector.
This segment includes
OTC products and
ethicals.
It accounts for 50 per cent
of the sector.
This segment includes oral
care, hair care, skin care,
cosmetics/deodorants,
perfumes, feminine
hygiene and paper
products, Fabric wash,
household cleaners
FMCG
Note: OTC is over the counter products; ethicals are a range of pharma products,
Data as of March 2016
Source: Dabur

Note: F - Forecast
Source: TechSci, Dabur, AC Nielsen
The FMCG sector in India generated revenues worth US$ 49 billion
in 2016.
By 2020, the revenues of the sector are forecasted to reach US$ 104
billion
In 2016, revenues for FMCG sector stood at US$ 49 billion.
In the long run, with the system becoming more transparent and
easily compliable, demonetisation is expected to benefit organised
players in the FMCG industry.
Visakhapatnam port traffic (million tonnes) Trends in FMCG revenues over the years (US$ billion)
31
.6
33
.3
35
.7
38
.8
43
.1
49
.0 5
7.4
68
.4
83
.3
10
3.7
0.0
20.0
40.0
60.0
80.0
100.0
120.0
201
1
201
2
201
3
201
4
201
5
201
6
201
7F
201
8F
201
9F
202
0F
STRONG GROWTH IN INDIAN FMCG SECTOR

FOOD AND PERSONAL CARE ACCOUNT FOR 2/3rd
SHARE IN REVENUES
Source: Dabur
Visakhapatnam port traffic (million tonnes) Revenue share of India (FY20E) Hair Care is the leading segment, accounting for 23 per cent of the
overall market in terms of revenue.
Food Products is the 2nd leading segment of the sector accounting
for 19 per cent followed by health supplements and oral care which
has a market share of 16 per cent and 15 per cent, respectively.
23%
19%
16%
15%
9%
6%
7% 5%
Haircare Foods Health Supplements
Oral Care OTC & Ethicals Home Care
Digestives Skin Care
23%

URBAN MARKET ACCOUNTS FOR MAJOR CHUNK OF
REVENUES
Source: BCG , KPMG- indiaretailing.com, Deloitte Report, Winning in Indias Retail Sector
Urban Rural industry Breakup (FY 2016-17)
Note: E estimate
Accounting for a revenue share of around 60 per cent, urban
segment is the largest contributor to the overall revenue generated
by the FMCG sector in India and recorded a market size of around
US$ 29.4 billion in 2016-17.
Semi-urban and rural segments are growing at a rapid pace and
accounted for a revenue share of 40 per cent in the overall revenues
recorded by FMCG sector in India.
In the last few years, the FMCG market has grown at a faster pace in
rural India compared with urban India.
FMCG products account for 50 per cent of total rural spending.
60%
40%
US$ 49 billion
Urban Rural

RURAL SEGMENT IS QUICKLY CATCHING UP
In FY17, rural India accounted for 40 per cent of the total FMCG
market.
Total rural income, which is currently at around US$ 572 billion, is
projected to reach US$ 1.8 trillion by FY21. Indias rural per capita
disposable income is estimated to increase at a CAGR of 4.4 per
cent to US$ 631 by 2020.
As income levels are rising, there is also a clear uptrend in the
share of non-food expenditure in rural India.
The Fast Moving Consumer Goods (FMCG) sector in rural and
semi-urban India is estimated to cross US$ 220 billion by 2025
Amongst the leading retailers, Dabur generates over 40-45 per
cent of its domestic revenue from rural sales. HUL rural revenue
accounts for 45 per cent of its overall sales while other companies
earn 30- 35 per cent of their revenues from rural areas.
Note: F-Forecast
Source: AC Nielsen, Dabur Reports, Goderej Group, McKinsey Global Institute
Rural FMCG Market (US$ billion)
9.0
10
.4
12
.3
12
.1
14
.8
18
.9
29
.4
10
0.0
0.0
20.0
40.0
60.0
80.0
100.0
120.0
200
9
201
0
201
1
201
2
201
3
201
5
201
6
202
5F

INCREASING SALES OF TOP FMCG COMPANIES
Sales (US$ million)
Source: Company Websites
Consumer products manufacturers ITC, Godrej Consumer
Products Limi

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