A Study On Fast Moving Consumer Goods (FMCG) by Tushar N. Chole Project copy to help Students in their Study

1. A Study On
Fast Moving Consumer Goods (FMCG)
Tushar N. Chole
MGM’s Institute of Management,
Aurangabad, Maharashtra.

2. Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods
(CPG), are products that are sold quickly at relatively low cost. Though the absolute
profit made on FMCG products is relatively small, they generally sell in large
quantities, so the cumulative profit on such products can be large.
Examples of FMCG generally include a wide range of frequently purchased consumer
products such as toiletries, soap, cosmetics, teeth cleaning products, shaving
products and detergents, as well as other non-durables such as glassware, light bulbs,
batteries, paper products and plastic goods. FMCG may also include pharmaceuticals,
consumer electronics, packaged food products and drinks, although these are often
categorized separately.
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, and cleaning products have high turnover
rates. An excellent example is a newspaper—every day's newspaper carries different
content, making one useless just one day later, necessitating a new purchase every
day.
Main characteristics of FMCGs:
From the consumers' perspective:
o Frequent purchase
o Low involvement (little or no effort to choose the item – products with
strong brand loyalty are exceptions to this rule)
o Low price
From the marketers' angle:
o High volumes
o Low contribution margins
o Extensive distribution networks
o High stock turnover
Scope of FMCG Industry In India-
FMCG Sector in India is one of the four largest sectors in Indian economy. The FMCG
(Fast Moving Consumer Goods) companies have faced tough competition among
themselves over the years which is continuously increasing. This is due to the increase
in per capita income among individuals and also various developments in rural
economy. The FMCG sector has changed its strategies and has opted for a more well-
planned marketing of the products to penetrate both the rural and urban markets. To
execute these tasks, the FMCG companies are hiring more and more people which has
led to an increase in the job prospects in this sector. Thus, FMCG sector is creating
massive employment with good career prospects. Marketing, retail, sales, services and
supply are the key areas which generates maximum career scopes in FMCG Industry
in India.

3. Prospects in the FMCG Sector in India-
FMCG sector in the Indian rural market is one of the most booming sectors in Indian
economy. The villages of India account for 12.2% of the world's population. The farm
sector has been one of the significant sectors which boosted the rural economy
resulting in the higher consumption of FMCG products. The consumers in both rural
and urban sectors can afford high-priced branded products nowadays with the high
disposable income.
The FMCG sector in India has grown significantly in the year 2007 and this gave rise
to huge prospects in the sector. The rural and urban sectors fared equally well in the
processed food items in the year 2007. The rural market separately performed well in
the personal care, fabric care, and hot beverages while the urban market did well in
home care, personal care, bakery, dairy products, and the like.
FMCG Brands in India - Overview
The burgeoning middle class Indian population, as well as the rural sector, present a
huge potential for this sector. The FMCG sector in India is at present, the fourth
largest sector with a total market size in excess of USD 13 billion as of 2012. This
sector is expected to grow to a USD 33 billion industry by 2015 and to a whooping
USD 100 billion by the year 2025.
This sector is characterized by strong MNC presence and a well established
distribution network. In India the easy availability of raw materials as well as cheap
labour makes it an ideal destination for this sector. There is also intense competition
between the organised and unorganised segments and the fight to keep operational
costs low.
Factors that will drive growth in this sector:
Increasing rate of urbanization, expected to see major growth in coming years.
Rise in disposable incomes, resulting in premium brands having faster growth
and deeper penetration.
Innovative and stronger channels of distribution to the rural segment, leading
to deeper penetration into this segment.
Increase in rural non-agricultural income and benefits from government welfare
programmes.
Investment in stock markets of FMCG companies, which are expected to grow
constantly.
Some of the challenges this sector is likely to face are:

4. Increasing rate of inflation, which is likely to lead to higher cost of raw
materials.
The standardization of packaging norms that is likely to be implemented by the
Government by Jan 2013 is expected to increase cost of beverages, cereals,
edible oil, detergent, flour, salt, aerated drinks and mineral water.
Steadily rising fuel costs, leading to increased distribution costs.
The present slow-down in the economy may lower demand of FMCG products,
particularly in the premium sector, leading to reduced volumes.
The declining value of rupee against other currencies may reduce margins of
many companies, as Marico, Godrej Consumer Products, Colgate, Dabur, etc
who import raw materials.
FMCG Brands in India - Major Companies
1. Hindustan Unilever Ltd. - Lux, Lifeboy, Brookebond, Kawality Walls, Surf Excel,
Pepsodent, Close Up, Vaseline, and many more
2. ITC (Indian Tobacco Company)- W. D. & H. O. Wills, Insignia, India Kings, Classic,
Gold Flake, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake
3. Nestlé India - Kitkat, Milkmaid, Milky Bar, Maggie, Nescafe, Nestle Slim Milk,
Barone, And Nestea
4. GCMMF (AMUL) - Amul Kool, Masti Butter Milk, Kool Cafe, Amul's sugar-free Pro-
Biotic Ice-cream, etc.
5. Dabur India - Hajmola, Real, Vatika, Nature Care, Lal Dantmanjan, Chyawanprash,
Pudin Hara, Amla, Etc.
6. Asian Paints (India)
7. Cadbury India - Gems, 5 Star, Perk, Celebrations, Eclairs, And Dairy Milk
8. Britannia Industries - Tiger, good day, 50-50, treat, milk bar, and nutra choice
9. Procter & Gamble Hygiene and Health Care - Vicks Action 500+, Vicks VapoRub,
Vicks Cough Drops, Vicks Formula 44 Cough Syrup and Vicks Inhaler
10. Marico Industries - Parachute, Saffola, Mediker, Silk-n-Shine, Revive, Hair & Care,
Sweekar, Nihar, Manjal, etc
Top 10 FMCG Companies in India - 2012

5. 1) ITC Ltd. - Market Cap (Rs.Cr): 151,078.
2) Hindustan Unilever - Market Cap (Rs.Cr): 67,858.
3) Nestle India - Market Cap (Rs.Cr): 39,819.
4) Dabur India - Market Cap (Rs.Cr): 18,632.
5) Godrej Consumer Products - Market Cap (Rs.Cr): 13,335.
6) Proctor and Gamble India(Includes P&G Health and Hygiene and Gillette India) -
Market Cap (Rs.Cr): 12,838.
7) Colgate-Palmolive - Combined Market Cap (Rs.Cr): 12,764.
8) Glaxosmithkline Consumer Healthcare - Market Cap (Rs.Cr): 9,842.
9) Marico - Market Cap (Rs.Cr): 9,078.
10) Emami - Market Cap (Rs.Cr): 6,836.
Industry Category and Products
Household Care
Personal Wash:-
The market size of personal wash is estimated to be around Rs. 8,300 Cr. The
personal wash can be segregated into three segments: Premium, Economy and
Popular. The penetration level of soaps is 92 per cent. It is available in 5 million retail
stores, out of which, 75 per cent are in the rural areas. HUL is the leader with market
share of ~53 per cent; Godrej occupies second position with market share of 10 per
cent. With increase in disposable incomes, growth in rural demand is expected to
increase because consumers are moving up towards premium products. However, in
the recent past there has not been much change in the volume of premium soaps in
proportion to economy soaps, because increase in prices has led some consumers to
look for cheaper substitutes.
Detergents:-
The size of the detergent market is estimated to be Rs. 12,000 Cr. Household care
segment is characterized by high degree of competition and high level of penetration.
With rapid urbanization, emergence of small pack size and sachets, the demand for
the household care products is flourishing. The demand for detergents has been
growing but the regional and small unorganized players account for a major share of
the total volume of the detergent market. In washing powder HUL is the leader with 38
per cent of market share. Other major players are Nirma, Henkel and Proctor &
Gamble.

6. Personal Care
Skin Care:-
The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care
market is at a primary stage in India. The penetration level of this segment in India is
around 20 per cent. With changing life styles, increase in disposable incomes, greater
product choice and availability, people are becoming aware about personal grooming.
The major players in this segment are Hindustan Unilever with a market share of 54
per cent, followed by CavinKare with a market share of 12 per cent and Godrej with a
market share of 3 per cent.
Hair Care:-
The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care
market can be segmented into hair oils, shampoos, hair colorants & conditioners, and
hair gels. Marico is the leader in Hair Oil segment with market share of 33 per cent;
Dabur occupies second position at 17 per cent.
Shampoos:-
The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the
penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of the
total shampoo sale. It has low penetration level even in metros. Again the market is
dominated by HUL with around ~47 per cent market share; P&G occupies second
position with market share of around ~23 per cent. Antidandruff segment constitutes
around 15 per cent of the total shampoo market. The market is further expected to
increase due to increased marketing by players and availability of shampoos in
affordable sachets.
Oral Care:-
The oral care market can be segmented into toothpaste - 60 per cent; toothpowder - 23
per cent; toothbrushes - 17 per cent. The total toothpaste market is estimated to be
around Rs. 3,500 Cr. The penetration level of toothpowder/toothpaste in urban areas
is three times that of rural areas. This segment is dominated by Colgate-Palmolive
with market share of ~49 per cent, while HUL occupies second position with market
share of ~30 per cent. In toothpowders market, Colgate and Dabur are the major
players. The oral care market, es-pecially toothpastes, remains under penetrated in
India with penetration level ~50 per cent.
Food & Beverages
Food Segment :-
The foods category in FMCG is gaining popularity with a swing of launches by HUL,
ITC, Godrej, and others. This category has 18 major brands aggregating Rs. 4,600 Cr.
Nestle and Amul slug it out in the powders segment. The food category has also seen
innovations like softies in ice creams, ready to eat rice by HUL and pizzas by both
GCMMF and Godrej Pillsbury.
Tea :-

7. The major share of tea market is dominated by unorganized players. More than 50 per
cent of the market share is capture by unorganized players. Leading branded tea
players are HUL and Tata Tea.
Coffee :-
The Indian beverage industry faces over supply in segments like coffee and tea.
However, more than 50 per cent of the market share is in unpacked or loose form. The
major players in this segment are Nestlé, HUL and Tata Tea.
Growth Prospect
Large Market
India has a population of more than 1.150 Billions which is just behind China.
According to the estimates, by 2030 India population will be around 1.450 Billion and
will surpass China to become the World largest in terms of population. FMCG Industry
which is directly related to the population is expected to maintain a robust growth
rate.
Spending Pattern
An increase is spending pattern has been witnessed in Indian FMCG market. There is
an upward trend in urban as well as rural market and also an increase in spending in
organized retail sector. An increase in disposable income, of household mainly
because of in-crease in nuclear family where both the husband and wife are earning,
has leads to growth rate in FMCG goods.
Changing Profile and Mind Set of Consumer
People are becoming conscious about health and hygienic. There is a change in the
mind set of the Consumer and now looking at ―Money for Value‖ rather than ―Value for
Money‖. We have seen willingness in consumers to move to evolved products/ brands,
because of changing lifestyles, rising disposable income etc. Consumers are switching
from economy to premium product even we have witnessed a sharp increase in the
sales of packaged water and water purifier.
Findings according to a recent survey by A. C. Nielsen shows about 71 per cent of
Indian take notice of packaged goods labels containing nutritional information
compared to two years ago which was only 59 per cent.
Advantages To The Sector
Governmental Policy
Indian Government has enacted policies aimed at attaining international
competitiveness through lifting of the quantitative restrictions, reducing excise duties,
automatic foreign in-vestment and food laws resulting in an environment that fosters
growth. 100 per cent ex-port oriented units can be set up by government approval and
use of foreign brand names is now freely

8. Central & State Initiatives
Recently Government has announced a cut of 4 per cent in excise duty to fight with
the slowdown of the Economy. This announcement has a positive impact on the
industry. But the benefit from the 4 per cent reduction in excise duty is not likely to
be uniform across FMCG categories or players. The changes in excise duty do not
impact cigarettes (ITC, Godfrey Phillips), biscuits (Britannia Industries, ITC) or ready-
to-eat foods, as these prod-ucts are either subject to specific duty or are exempt from
excise. Even players with manu-facturing facilities located mainly in tax-free zones will
also not see material excise duty savings. Only large FMCG-makers may be the key
ones to bet and gain on excise cut.
Foreign Direct Investment (FDI)
Automatic investment approval (including foreign technology agreements within
specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and
Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food
processing sector except malted food, alcoholic beverages and those reserved for small
scale industries (SSI). There is a continuous growth in net FDI Inflow. There is an
increase of about 150 per cent in Net Inflow for Vegetable Oils & Vanaspati for the
year 2008.
Market Opportunities
Vast Rural Market
Rural India accounts for more than 700 Million consumers, or 70 per cent of the
Indian population and accounts for 50 per cent of the total FMCG market. The
working rural population is approximately 400 Millions. And an average citizen in
rural India has less then half of the purchasing power as compare to his urban
counterpart. Still there is an untapped market and most of the FMCG Companies are
taking different steps to capture rural market share. The market for FMCG products in
rural India is estimated 52 per cent and is projected to touch ~ 60 per cent within a
year. Hindustan Unilever Ltd is the largest player in the industry and has the widest
market coverage.
Export - “Leveraging the Cost Advantage”
Cheap labor and quality product & services have helped India to represent as a cost
ad-vantage over other Countries. Even the Government has offered zero import duty
on capital goods and raw material for 100% export oriented units. Multi National
Companies out-source its product requirements from its Indian company to have a
cost advantage.
India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew
apart from being the second largest producer of rice, wheat, fruits & vegetables. It
adds a cost advantage as well as easily available raw materials.
Sectoral Opportunities
Major Key Sectoral opportunities for Indian FMCG Sector are mentioned
below:

9. Dairy Based Products
India is the largest milk producer in the world, yet only around 15 per cent of the milk
is processed. The organized liquid milk business is in its infancy and also has large
long-term growth potential. Even investment opportunities exist in value-added
products like desserts, puddings etc.
Packaged Food
Only about 10-12 per cent of output is processed and consumed in packaged form,
thus highlighting the huge potential for expansion of this industry.
Oral Care
The oral care industry, especially toothpastes, remains under penetrated in India with
penetration rates around 50 per cent. With rise in per capita incomes and awareness
of oral hygiene, the growth potential is huge. Lower price and smaller packs are also
likely to drive potential up trading.
Beverages
Indian tea market is dominated by unorganized players. More than 50% of the market
share is capture by unorganized players highlighting high potential for organized
players.
SWOT Analysis
Strengths:
• Low operational costs
• Presence of established distribution networks in both urban and rural areas
• Presence of well-known brands in FMCG sector
Weaknesses:
• Lower scope of investing in technology and achieving economies of scale, especially
in small sectors
• Low exports levels
• "Me-too‖ products, which illegally mimic the labels of the established brands. These
products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
• Untapped rural market
• Rising income levels, i.e. increase in purchasing power of consumers
• Large domestic market- a population of over one billion.
• Export potential
• High consumer goods spending
Threats:
• Removal of import restrictions resulting in replacing of domestic brands
• Slowdown in rural demand
• Tax and regulatory structure

10. FMCG Market in Maharashtra
The development of FMCG Market in Maharashtra was facilitated by the economic
viability of the state. It is one of the richest states of India with one of the highest per
capita income.
Overview
FMCG Market in Maharashtra is one of the strongest among the states of India. The
most economically important city of India - Mumbai is located in Maharashtra. The
city of Mumbai is regarded as the economic powerhouse of India. The state of
Maharashtra also has other cities that are important in terms of economic activities
like Pune, Nagpur, Aurangabad, Thane, Nashik, Kohlapur etc. Each of these cities of
Maharashtra has made substantial contribution towards the growth of the state. The
state of Maharashtra is one of the most industrially developed states of India and is
home to most of the corporate offices in India. The state has one of the highest
numbers of industries in India and it is regarded as one of the richest states in India.
There has been a substantial increase in the rate of consumerism in Maharashtra in
the recent years and such that the trend is still growing with the increase in income.
The cities of Maharashtra have been one of the important driving forces for the
development of FMCG markets.
FMCG Market in Maharashtra - Major Companies and Brands
Food products and beverage - Nestle, Kellogs, PepsiCo, Coca Cola, Uni Lever,
Cadbury India, Parle, Hienz, ITC, MTR, Perfetti, Tata Tea, Parrys Confectionery,
Venkey's Chicken, Goodricke, Nilgiris, Mother Dairy,Amul India, Gits Food
Products Pvt. Ltd, Kwality Walls, Vadilal Ice cream, Goodricke,
SmithKlineBecham,
Cleaning and household insecticides - Reckitt Benckiser, Jyothy
Laboratories, Godrej Sara Lee
Healthcare and Personal care - Johnson & Johnson, Himalaya Health Care,
Modi Revlon, Cavin care, Lakme, L'Oreal, Lotus Herbals, Shehnaz Hussain,
Habibs, Procter and Gamble, JK Helene, Gillette, Vatika, Colgate Palmolive
Electronics - LG, Samsung, Sony, Phillips, Videocon, Electrolux, Whirlpool,
Kelvinator, Godrej, IFB, TCL, Haier, Panasonic, Sharp, Motorola, Nokia, Sony
Eriksson, Compaq, Lenevo, Hewlett Packard, Wipro, Acer.