FMCG

fmcgBy:Thushar NairSection:cFMCG

INTRODUCTIONFMCG stands for fast moving consumer goodsAlso called as consumer packaged goods (CPG)Fast-moving consumer goods(FMCG) orconsumer packaged goods(CPG) are products that are sold quickly and at relativelylow cost.Examples include non-durable goods such assoft drinks,over the counter drugs,toys,processed foods.In contrast, durable goods or major appliances such as kitchen appliances are generally replaced over a period of several years.

FMCG have a shortshelf life.High consumer demand Product deteriorates rapidly. Some FMCGssuch as meat, fruits and vegetables, dairy products, and baked goodsare highly perishable. Other goods such as alcohol, pre-packaged foods ,soft drinks, and cleaning products have high turnoverratesThe profit margin made on FMCG products is relatively small They are generally sold in large quantities.The cumulative profit on such products can be substantial. FMCG is probably the most classic case of low margin and high volume business.

CHARACTERISTICSThe following are the main characteristics of FMCGs:From the consumers' perspective:Frequent purchaseLow involvement (little or no effort to choose the item)Low priceFrom the marketers' angle:High volumesLow contribution marginsExtensivedistribution networksHighstock turnoverTOP COMPANIESAccording to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan UniLever.The top ten India FMCG brands are:1.Hindustan Unilever Ltd.2. ITC (Indian Tobacco Company)3. Nestl India4. GCMMF (AMUL)5. Dabur India6. Asian Paints (India)7. Cadbury India8. Britannia Industries9. Procter & Gamble Hygiene and Health Care10. Marico Industries

Rural set to riseRural areas expected to be the major driver for FMCG, as growth continues to be high in these regions. Rural areas saw a 16 per cent, as against 12 per cent rise in urban areas. Companies are also working towards creating specific products specially targeted for the rural market.These measures have helped in reducing poverty inrural Indiaand given a boost to rural purchasing power.Hence rural demand is set to rise with rising incomes and greater awareness of brands.Urban trendsWith rise in disposable incomes, mid- and high-income consumers in urban areas have shifted their purchasing trend from essential to premium products. In response, firms have started enhancing their premium products portfolio. Indian and multinational FMCG players are leveraging India as a strategic sourcing hub for cost-competitive product development and manufacturing to cater to international markets.

Indian scenarioThe overall fast moving consumer goods (FMCG) market is expected to increase at a compound annual growth rate (CAGR) of 14.7 per cent to touch US$ 110.4 billion in the period 2012-2020, with the rural FMCG market anticipated to increase at a CAGR of 17.7 per cent to US$ 100 billion during 2012-2025.The market size of the Indian FMCG sector is expected to reach US$ 135 billion by 2020 from US$ 44.9 billion in 2013. It is also the fourth largest sector in the Indian economy and has grown at an annual average of about 11 per cent over the last decade. Food products, the leading market segment with 43 per cent of the overall market revenue together with personal care at 22 per cent make up two-thirds of the sector's revenue.The Government of India's policies and regulatory frameworks such as relaxation of license rules and approval of 51 per cent foreign direct investment (FDI) in multi-brand and 100 per cent in single-brand retail are some of the major growth drivers in this sector. The government has also amended the Sugarcane Control Order, 1966, and replaced the Statutory Minimum Price (SMP) of sugarcane with Fair and Remunerative Price (FRP) and the State Advised Price (SAP).There is a lot of scope for growth in the FMCG sector from rural markets with consumption expected to grow in these areas as penetration of brands increases. Also, with rising per capita income, which is projected to expand at a CAGR of 7.4 per cent over the period 2013-19, the FMCG sector is anticipated to witness some major growth.

Trends in fmcg in india since years

Road aheadFMCG brands would need to focus on R&D and innovation as a means of growth. Companies that continue to do well would be the ones that have a culture that promotes using customer insights to create either the next generation of products or in some cases, new product categories.One area that we see global and local FMCG brands investing more in is health and wellness. Leading global and Indian food and beverage brands have embraced this trend and are focused on creating new emerging brands in health and wellness.According to the PwC-FICCI report Winds of change, 2013: the wellness consumer, nutrition foods, beverages and supplements comprise a INR 145 billion to 150 billion market in India, is growing at a CAGR of 10 to 12%.