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Indian FMCG Industry Analysis

March, 2020

Fast moving consumer goods (FMCG) is the fourth largest sector in the Indian economy. There are three main segments in the sector – food and beverages, which accounts for 19 per cent of the sector; healthcare, which accounts for 31 per cent of the share; and household and personal care, which accounts for the remaining 50 per cent share.

FMCG market is expected to grow 9-10 per cent in 2020. FMCG’s urban segment grew by 8 per cent, whereas, its rural segment grew 5 per cent in the quarter ending September 2019, supported by moderate inflation, increase in private consumption and rural income.

Accounting for a revenue share of around 45 per cent, rural segment is a large contributor to the overall revenue generated by the FMCG sector in India. Demand for quality goods and services have been in demand in rural areas on the back of improved distribution channels of manufacturing and FMCG companies. Urban segment accounted for a revenue share of 55 per cent of the overall revenue recorded by the FMCG sector in India.

FMCG companies are looking to invest in energy efficient plants to benefit the society and lower cost in the long term. Dabur had plans to invest Rs 250-300 crore (US$ 38.79-46.55 million) in FY19 for capacity expansion and possible acquisitions in the domestic market. The sector witnessed healthy FDI inflow of US$ 16.28 billion during April 2000-March 2020. Investment intentions related to FMCG sector arising from paper pulp, sugar, fermentation, food processing, vegetable oils and vanaspati, soaps, cosmetics, and toiletries industries worth Rs 19,846 crore (US$ 2.84 billion) was implemented until December 2019.

Growing awareness, easier access, and changing lifestyle are the key growth drivers for the consumer market. The focus on agriculture, MSMEs, education, healthcare, infrastructure and tax rebate under Union Budget 2019-20 was expected to directly impact the FMCG sector. Initiatives undertaken to increase the disposable income in the hands of common man, especially from rural areas, will be beneficial for the sector.

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