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Topics: Fast moving consumer goods, Hygiene, Personal care Pages: 16 (5189 words) Published: September 25, 2014
Research report::Indian FMCG Industry
July 30, 2013

OVERVIEW
.
With a population of over one billion, India is one of the largest economies in the world in terms of purchasing power and increasing consumer spending, next to China. The Indian FMCG industry, with an estimated market size of ~`2 trillion, accounts for the fourth largest sector in India. In the last decade, the FMCG sector has grown at an average of 11% a year; in the last five years, annual growth accelerated at compounded rate of ~17.3%. The sector is characterized by strong presence of global businesses, intense competition between organized and unorganized players, well established distribution network and low operational cost. Availability of key raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage. During 2012, the country witnessed high inflation, muted salary hikes and slowing economic growth, which affected the FMCG sector with companies posting deceleration in volume growth in their quarterly results. However, the trend seen in 2012 is likely to accelerate in 2013 as growth will come from rural dwellers that are expected to see a rise in their disposable incomes. Fast Facts: Indian FMCG Industry

 The Indian FMCG industry represents nearly 2.5% of the country’s GDP.  The industry has tripled in size in past 10 years and has grown at ~17%CAGR in the last 5 years driven by rising income levels, increasing urbanisation, strong rural demand and favourable demographic trends.

 The sector accounted for 1.9% of the nation’s total FDI inflows in April 2000- September 2012. Cumulative FDI inflows into India from April 2000 to April 2013 in the food processing sector stood at `9,000.3 crore, accounting for 0.96% of overall FDI inflows while the soaps, cosmetics and toiletries, accounting for 0.32% of overall FDI at `3,115.5 crore.

 Food products and personal care together make up two-third of the sector’s revenues.  Rural India accounts for more than 700 mn consumers or 70% of the Indian population and accounts for 50% of the total FMCG market.

 With changing lifestyle and increasing consumer demand, the Indian FMCG market is expected to cross $80 bn by 2026 in towns with population of up to 10 lakh.

 India's labor cost is amongst the lowest in the world, after China & Indonesia, giving it a competitive advantage over other countries.

 Unilever Plc's $5.4 billion bid for a 23% stake in Hindustan Unilever is the largest Asia Pacific cross border inbound merger and acquisition (M&A) deal so far in FY’14 and is the fifth largest India Inbound M&A transaction on record till date.

 Excise duty on cigarette has been increased in the Union Budget for 2013-14, which would hit major industrial conglomerates like ITC, VST Industries in the short term.
Opportunities in FMCG Sector:

 Untapped rural market
 India is one of the world’s

biggest producers of a
number of FMCG products but the country’s exports
account for a very small proportion of the overall
output.

 Food-processing

Industry: With 200 mn people
expected to shift to processed and packaged food,
India needs around USD 30 bn of investment in the
food processing industry.

Key Concerns for the sector:

 High inflation
 Rising cost of inputs
 Emergence of private labels
 Counterfeits and pass-offs
 Rupee depreciation may hit margins of companies
 Infrastructure bottlenecks

Research report::Indian FMCG Industry
July 30, 2013

FMCG sector – Overview
The fast-moving consumer goods (FMCG) sector is an important contributor to India’s GDP and it is the fourth largest sector of the Indian economy. Items in this category are meant for frequent consumption and they usually yield a high return. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories and extends to certain electronic...
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