IBEF印度快速消费品行业分析英文20181032页1mb

Summary of the Indian FMCG Sector

Core Content

The Fast Moving Consumer Goods (FMCG) sector in India is experiencing significant growth driven by favorable demographics, rising income levels, and increasing brand consciousness. The sector is expected to grow at a CAGR of 27.86% and reach US$103.70 billion by 2020 from US$52.75 billion in FY18. Final consumption expenditure is projected to grow at a CAGR of 25.44% and reach US$3.6 trillion by 2020 from US$1.82 trillion in 2017. The rural FMCG market is expected to grow to US$220 billion by 2025, with rural consumption increasing rapidly due to higher disposable incomes and improved distribution networks.

Main Market Segments

The FMCG market is divided into three main segments:

• Household and Personal Care (50%): Includes oral care, hair care, skin care, cosmetics, and cleaning products.
• Healthcare (31%): Over-the-counter (OTC) products and ethical medicines.
• Food and Beverages (19%): Covers staples, snacks, tea, coffee, and branded food items.

Growth Drivers

• Rising incomes: Both urban and rural segments are seeing increased disposable income, with rural per capita income expected to grow at a CAGR of 4.4% to US$631 by 2020.
• Urbanization and modern trade: Urban market accounts for 55% of FMCG revenues, while modern trade is growing at 20-25% annually, boosting FMCG sales.
• Online growth: The number of online users in India is expected to reach 200 million by 2020, with 40% of FMCG consumption likely to be digitally influenced by 2020.
• Policy support: The Goods and Services Tax (GST) and FDI liberalization are expected to improve logistics, reduce costs, and enhance the sector's efficiency.

Key Strategies Adopted

• Promotions and offers: Companies like ITC and Amazon India are using combo deals and digital platforms to drive sales.
• Online research and offline purchase: A significant portion of consumers research products online before purchasing them in physical stores.
• Product innovation: Companies are launching new products to meet changing consumer preferences, such as Britannia's 50 new products by 2018-19.
• Customisation and expansion: Brands are customising their offerings and expanding into new markets and categories.
• Green initiatives: Companies like HUL are investing in energy-efficient manufacturing to lower costs and reduce environmental impact.
• Joint ventures and M&A: Several M&A deals and joint ventures are taking place, such as Colgate's acquisition of Bombay Shaving Company and Dabur's expansion plans.

Opportunities

• Rural market expansion: With rural FMCG market size expected to reach US$220 billion by 2025, companies are focusing on increasing their presence in this segment.
• Premium products: As disposable incomes rise, consumers are shifting towards premium products, with brands like Dove and Nestle capitalizing on this trend.
• E-commerce growth: Online FMCG sales are expected to reach US$45 billion by 2020, driven by digital maturity and improved logistics.
• Strategic sourcing: India is becoming a key sourcing hub for FMCG companies due to its cost-competitive manufacturing base.
• Start-up investments: Venture capital funds are supporting FMCG start-ups, with the RP-Sanjiv Goenka Group investing Rs 1 billion in May 2018.

Industry Organizations

• Indian Dairy Association: Provides support and advocacy for the dairy sector.
• All India Bread Manufacturers' Association: Focuses on bread and bakery products.
• All India Food Preservers' Association: Represents food preservatives manufacturers.
• Indian Soap and Toiletries Manufacturers' Association: Supports the soap and toiletries industry.

Useful Information

• FDI in FMCG: 100% FDI is allowed in single-brand retail and food processing, while 51% is allowed in multi-brand retail.
• Exchange rates: Provided for both fiscal and calendar years, which are essential for financial analysis.
• Glossary: Includes definitions for key terms such as FDI, FY, NREGA, and SEZ.

Key Figures

• FMCG sector revenue (FY18): US$52.75 billion.
• Rural FMCG market (FY18): US$23.6 billion.
• Online FMCG market (2020): Expected to reach US$45 billion.
• Total consumption expenditure (2020): US$3.6 trillion.
• FDI inflows (April 2000–June 2018): US$13.63 billion, with food processing being the largest recipient.

Conclusion

The Indian FMCG sector is poised for substantial growth due to demographic shifts, rising incomes, and supportive policies. Rural markets are becoming increasingly important, and the integration of digital platforms is transforming the way consumers interact with FMCG products. Companies are adopting diverse strategies such as product innovation, M&A, and green initiatives to stay competitive and capitalize on emerging opportunities.