Fast moving consumer goods (FMCG) are the 4th 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 and household and personal care which accounts for the remaining 50 per cent.
The FMCG sector has grown from Rs 2,20,852.4 crore (US$ 31.6 billion) in 2011 to Rs 3,68,669.75 crore (US$ 52.75 billion) in 2017-18. The sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 27.86 per cent to reach Rs 7,24,759.3 crore (US$ 103.7 billion) by 2020. The sector is projected to grow 11-12 per cent in 2019. It witnessed growth of 16.5 per cent in value terms between June–September 2018; supported by moderate inflation, increase in private consumption and rural income. FMCG’s urban segment is expected to have a steady revenue growth at 8 per cent in FY19 and the rural segment is forecasted to contribute 11-12 per cent of total income in FY19. Post GST and demonetisation, modern trade share grew to 10 per cent of the overall FMCG revenue, as of August 2018.
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 going up in rural areas of India, on the back of improved distribution channels of manufacturing and FMCG companies. Urban segment accounted for a revenue share of 55 per cent in the overall revenues recorded by FMCG sector in India.
FMCG Companies are looking to invest in energy efficient plants to benefit the society and lower costs in the long term. Patanjali will spend Rs 5,197.85 crore (US$ 743.72 million) in various food parks in Maharashtra, Madhya Pradesh, Assam, Andhra Pradesh and Uttar Pradesh. Dabur is planning to invest Rs 250-300 crore (US$ 38.79-46.55 million) in FY19 for capacity expansion and is also looking for acquisitions in the domestic market. Tata’s are also planning to expand its home and personal care products in FMCG sector. In FY19, ITC made more than 60 launches in the fast-moving consumer goods (FMCG) segment in India. Investment intentions, related to FMCG sector, arising from paper pulp, sugar, fermentation, food processing, vegetable oils and vanaspathi, soaps, cosmetics and toiletries industries, worth Rs 91,613 crore (US$ 15.55 billion) were implemented between January–December 2018. In 2019, RP-Sanjiv Goenka Group to invest capital fund of Rs 103.01 crore (US$ 14.74 million) in FMCG start-ups. Nestle plans to invest Rs 700 crore (US$ 100.16 million) to open a new plant in Sanand for Maggi.
Growing awareness, easier access, and changing lifestyles are the key growth drivers for the consumer market. The focus on agriculture, MSMEs, education, healthcare, infrastructure and tax rebate under the Union Budget 2019-20 is expected to directly impact the FMCG sector. These initiatives are expected to increase the disposable income in the hands of the common people, especially in the rural area, which will be beneficial for the sector.