History of Fmcg Sectore

Only available on StudyMode
  • Topic: Fast moving consumer goods, India, Investment
  • Pages : 11 (2434 words )
  • Download(s) : 494
  • Published : June 30, 2012
Open Document
Text Preview
FMCG (Fast Moving Consumer Goods) Sector
Analyst: Ms. Binal R. Vora Indian FMCG sector
is the fourth largest sector in
the economy characterized by
strong MNC presence, well
established distribution
network, intense competition
between the organised and
unorganised players and low
operational cost. Easy
availability of important raw
materials, cheaper labor costs
and presence across the entire
value chain gives India a
competitive advantage.
Penetration level and per
capita consumption in many
product categories is very low
compared to world average
standards representing the
unexploited market potential.
Mushrooming Indian
population, particularly the
middle class and the rural
segments, presents the huge
untapped opportunity to
FMCG players.
he Indian FMCG sector is the fourth largest sector in the economy with an estimated size of Rs.1,300 billion. The sector has shown an average annual growth of about 11% per annum over the last decade. Unlike the developed markets, which are prominently dominated by few large players, India’s FMCG market is highly fragmented and a considerable part of the market comprises of unorganized players selling unbranded and unpackaged products. There are approximately 12-13 million retail stores in India, out of which 9 million are FMCG kirana stores.

India FMCG sectors’ significant characteristics can be listed as strong MNC presence, well established distribution network, intense competition between the organised and unorganised players and low operational cost. Easy availability of important raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage.

Products which have a swift turnover and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG items are those which generally get replaced within a year. Examples of FMCG commonly include a wide range of repeatedly purchased consumer products such as toiletries, soap, cosmetics, oral care products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products etc. Penetration level and per capita consumption in many product categories is very low compared to world average standards representing the unexploited market potential. Mushrooming Indian population, particularly the middle class and the rural segments, presents the huge untapped opportunity to FMCG players. Growth is also likely to come from consumer 'upgrading' in the matured product categories like processed and packaged food, mouth wash etc. A distinct feature of the FMCG industry is the presence of international players through their subsidiaries (HLL, P&G, Nestle), which ensures innovative product launches in the market from their parent's portfolio.

Our country has a varied agro-climatic condition which enables to offer extended raw material base suitable for many FMCG sub sections like food processing industries etc. India is the one of the major producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits & vegetables. Similarly, India has an abundant supply of caustic soda and soda ash, the chief raw materials required in the production of soaps and detergents, which enables the household section of the industry to excel and grow. The accessibility of these raw materials gives India the locational advantage.

TSource: IMF World economic Outlook Database, Oct 2010
As can be seen from the above diagram, labor cost in India is amongst the lowest in emerging Asian countries. Easy raw material availability and low labor costs have resulted in a lower cost of production. Many multi-nationals...
tracking img