Fast-Moving Consumer Goods (FMCG) sector is the fourth largest industry of the Indian economy. Characterized by high turnover, these products are produced, distributed, marketed, and consumed within a short span of time. Detergents, toiletries, tooth cleaning products, cosmetics are the top FMCG products that dominate the market. The FMCG sector in India also includes pharmaceuticals, consumer electronics, soft drinks packaged food products and chocolates. Since the sector encompasses a diverse range of products, different companies dominate the market in various sub-sectors. Here is a quick overview of key players in the industry.
Industry Trends
FMCG industry in India was able to traverse the last two years unscathed due to the demand for staples, daily use items and health and hygiene categories shot up during COVID, even though the discretionary goods and beauty and personal care products took a back seat. Fast forward to 2023, the FMCG industry faces another problem – persistent inflation and shrinking demand in the short to medium term. While FMCG companies must deal with the immediate challenges, they must also be mindful of the long-term trends shaping the industry in a post-pandemic world.
On one side, consumers have formed new habits and preferences; on the other, the competition is only getting fiercer in the consumer products industry, with new players emerging and adopting aggressive strategies to destabilize the incumbents. With these factors in mind, the industry is still showing huge growth potential, some of the growth divers that is propelling the industry are:
Value and convenience have emerged as the key drivers.Increase in rural consumption, increased demand for branded products.The rise in D2C brands – Products/ services backed with innovation and direct customer relationships are gaining share Digital commerce and advertising are mainstream now, even in the business to business (B2B) space.Industry structure gets shaped by new and existing players – The industry is going through a structural change with the entry of the new type of players and consolidation by the incumbent players.Sustainability in the new trend and for a sustainable future – Multiple FMCG Companies have started serious sustainability plans such as: net zero emissions for operations, plastic-neutral, etc.The industry is attracting major investments as follows.
100% FDI is allowed in food processing and single-brand retail and 51% in multi-brand retail.The sector recorded an FDI of US$20.11 billion between April 2000- March 2022.In June 2022, PepsiCo India announced its expansion plans for its largest greenfield foods manufacturing plant that produces the popular Lay’s potato chips in Kosi Kalan, Mathura in Uttar Pradesh with an investment of Rs. 186 crore (US$ 23.84 million)
The FMCG industry fared well in India in the recent years with consumer food services, household and personal care segments experiencing a tremendous growth with the increasing disposable income and the growing economy. Most of the consumer goods products are moving to online platforms and most of the major supermarkets have their own online ordering portals and mobile apps making it convenient for the consumers to order online with just a click of a button during their busy schedules. An increasing demand from the rural and tire-2 population can be witnessed given the increasing annual income and the awareness for the products and the increasing digitization making them one of the major influencers of the FMCG sector.
Given these facts, the industry is likely to double the reported growth rate and is expected to exhibit CAGR of 9.6% in the next five years from 2023 to 2027.
DART Consulting provides business consulting through its network of Independent Consultants. Our services include preparing business plans, market research, and providing business advisory services. More details at https://www.dartconsulting.co.in/dart-consultants.html
Sign in to leave a comment.