The FMCG sector in India expanded due to consumer-driven growth and higher product prices, especially for essential goods. The FMCG market reached US$ 56.8 billion as of December 2022. The total revenue of the FMCG market is expected to grow at a CAGR of 27.9% from 2021-27, reaching nearly US$ 615.87 billion. In 2022, the urban segment contributed 65% whereas rural India contributed more than 35% to the overall annual FMCG sales. Good harvest, government spending expected to aid rural demand recovery in FY24. India’s fast-moving consumer goods (FMCG) sector grew 7.5% by volumes in the April-June 2023 quarter, the highest in the last eight quarters, led by a revival in rural India and higher growth in modern trade. The sector had grown 8.5% in revenues and 2.5% in volumes last fiscal year. In the January-June period of 2022, the sector witnessed value growth of about 8.4% on account of price hikes due to inflationary pressures. In Q2 of 2022, the FMCG sector clocked a value growth of 10.9% Y-o-Y — higher than the 6% Y-o-Y value growth seen in Q1. India includes 780 million internet users, where an average Indian person spends around 7.3 hours per day on their smartphone, one of the highest in the world. Resilience needs to be the key factor in the manufacturing process, daily operations, retail and logistic channels, consumer insights and communication that will help FMCG companies to withstand the test of time and create more value for consumers in the long run.
Indian food processing market size reached US$ 307.2 trillion in 2022 and is expected to reach US$ 547.3 trillion by 2028, exhibiting a growth rate (CAGR) of 9.5% during 2023-2028. Digital advertising will grow at 14.75% CAGR to reach Rs. 35,809 crore (US$ 4.3 billion) by 2023, with the FMCG industry being the biggest contributor at 42% share of the total digital spend. From April 2000-March 2023, the food processing industry received US$ 11,979.21 million in FDI. The Union government approved a new PLI scheme for the food processing sector, with a budget outlay of Rs. 109 billion (US$ 1.46 billion). Incentives under the scheme will be disbursed for six years to 2026-27.
In June 2023, Skincare brand VLCC acquires men's grooming brand Ustraa.
In May 2023, Reliance Retail Ventures completes the acquisition of a controlling stake in Lotus Chocolate.
In January 2023, ITC announced plans to acquire 100% of Sproutlife Foods, a D2C startup and parent company of health food brand 'Yoga Bar' over a period of three to four years. In December 2022, Hindustan Unilever Limited announced its foray into the ‘Health & Wellbeing’ category through strategic investments in Zywie Ventures Private Limited (“OZiva”) and Nutritionalab Private Limited (“Wellbeing Nutrition”).
Entrepreneurs interested in setting up the food-related FMCG industry can set up their processing units in the government-designated agro-processing clusters, which help cut down the plant setup costs. With the advent of online retail and e-commerce, FMCG businesses can market and sell their products across the country without investing much in marketing activities.
Union Budget 2023-24 has allocated US$ 976 million for PLI schemes that aim to reduce import costs, improve the cost competitiveness of domestically produced goods, increase domestic capacity, and promote exports. Union budget 2023-24 focuses on reviving rural demand by boosting disposable income, allocation to farms and higher fund allocation on rural infrastructure, connectivity, and mobility to create long-term jobs.
The FMCG sector employs around 3 million people accounting for approximately 5% of the total factory employment in India. FMCG sales in the country were expected to grow 7-9% by revenues in 2022-23. The key growth drivers for the sector include favourable Government initiatives & policies, a growing rural market and youth population, new branded products, and the growth of e-commerce platforms. The number of active internet users in India will increase to 900 million by 2025 from 622 million in 2020. In 2021, India’s consumer spending was US$ 1,891.90 billion. Indian villages, which contribute more than 35% to overall annual FMCG sales, are crucial for the overall revival of the sector. E-commerce now accounts for 17% of the overall FMCG consumption among evolved buyers, who are affluent and make average spending of about Rs. 5,620 (US$ 68).
The food and beverage sector is one of the essential components of the FMCG market, which accounts for about 3% of its GDP. In 2021, food and beverages accounted for 30% of total household spending in the country.
For 51% of Indians, spending on healthcare products increased in the 12 months to August 2021. The covid-19 pandemic has driven Indian consumers to focus their spending priorities on healthcare.
The personal and household care category in the FMCG sector grew from 32% in 2019 to 40% in 2020. Indian households spent nearly Rs. 47 Lakh crore (US$ 60 billion) on FCMG, in the year ending February 2021.
The FMCG sector’s revenue reached Rs. 4.7 lakh crore (US$ 56.8 billion) as of December 2022. FMCG sales in the country are expected to grow 7-9% by revenues in 2022-23. The FMCG industry has grown by 10.9% in the quarter ending June 2022, versus 6% in the previous quarter. The sector had grown 8.5% in revenues and 2.5% in volumes last fiscal year. In the January-June period of 2022, the sector witnessed value growth of about 8.4% on account of price hikes due to inflationary pressures. Consumption in urban markets sustained at 1.2% during the September 2022 quarter as compared to 0.6% in the quarter that ended June 2022. Rural households play an important role, contributing 35-36% Of India’s FMCG market. Small manufacturers (apart from the Top 400 players or manufacturers with less than US$ 13.6 million (Rs. 112 crore) offtake this year) are driving consumption and witnessed a positive volume growth of 0.5% in Q3 of 2022. The total revenue of the FMCG market is expected to grow at a CAGR of 27.9% from 2021 to 2027, reaching nearly US$ 615.87 billion. The Indian health-tech market is expected to grow at a CAGR of 39% and touch US$ 50 billion by 2033.
Accounting for a revenue share of around 65%, the urban segment is the largest contributor to the overall revenue generated by the FMCG sector in India in 2022. India's villages contributed more than 35% to overall annual FMCG sales in 2022. In Q2, 2022, the FMCG sector clocked a value growth of 10.9% year-on-year — higher than the 6 per cent y-o-y value growth seen in Q1. Urban markets clocked a positive volume growth of 0.6%. Good seasonal harvests, resulting in improved liquidity in the hands of farmers, higher government spending on infra, and the wedding season are aiding consumer sentiment in India's villages. Dabur India derived about 47% of its sales from rural India, and it is stepping up direct distribution to cover more than 100,000 villages as demand starts recovering in rural areas. Rural markets contribute about 45% to Emami's annual sales. Nestle India plans to expand its reach to 1,20,000 villages by the end of 2024. In 2022, the month of November saw rural volumes growing 6-7%, compared to 2-3% in the previous two quarters. Good harvest, government spending expected to aid rural demand recovery in FY24.
India’s e-commerce industry recorded a 36.8% year-on-year growth in 2022. The Indian e-commerce market is anticipated to reach a value of RS. 26,459.18 billion (US$ 319.3 trillion) by the end of 2027, expanding at a CAGR of ~26.71% during the 2022-27 period. The market has grown exponentially over the past five years due to the surge in internet and smartphone users, improved policy reforms, and an increase in disposable income. Mobile wallets, Internet banking, and debit/credit cards have become popular among customers for making transactions on e-commerce platforms. India includes 780 million internet users, where an average Indian person spends around 7.3 hours per day on their smartphone, one of the highest in the world. As of 2021, there were 1.2 million daily e-commerce transactions. The total value of digital transactions stood at US$ 300 billion in 2021 and is projected to reach US$ 1 trillion by 2026. The India online grocery market size has been projected to grow from US$ 4,540 million in 2022 to US$ 76,761.0 million by 2032, at a CAGR of 32.7% through 2032. In November 2022, Aditya Birla Fashion and Retail venture TMRW acquired a majority stake in e-commerce startup Bewakoof Brands for a total cash consideration of Rs. 200 crore (US$ 24 million). Among categories, beauty and personal care, and eyewear were the fastest growing, whereas fashion and apparel continued to lead in terms of order volumes. The beauty and personal care, and eyewear and accessories segments witnessed a year-on-year order volume growth of 76.6% and 55% respectively. India’s beauty and personal care market, presently valued at US$ 16.8 billion, is poised to grow at a compound annual rate of 11%, with cosmetics and perfumes categories growing at a faster clip.
India's economy continues to grow at the highest rate in the world, outpacing that of emerging and developing Asia and economic expectations for China. India has been ranked as the fifth-largest economy in terms of exchange rate and the third-largest economy in terms of purchasing power parity. In the fiscal year 2023, the Indian economy is expected to grow at 6.5% against 7% in 2022 and 8.7% in 2021. India’s GDP growth is projected in a range of 6-6.8% for the upcoming fiscal year 2023-24. India’s GDP per Capita reached US$ 2,301.42 in March 2022, compared with US$ 1,971.65 in March 2021. India’s GDP Per Capita data is updated yearly, available from March 1958 to March 2022, with an average number of US$ 323.24. India’s GDP can grow from the current US$ 3 trillion to US$ 9 trillion by 2030, and US$ 40 trillion by 2047, if the country’s working-age population — which is expected to increase by over 100 million people between 2020-30, is productively employed.
The governments’ incentives and the FDI funds have helped the FMCG sector strengthen employment, establish a more robust supply chain and capture high visibility for FMCG brands across established retail markets. In December 2022, Hindustan Unilever Limited announced its foray into the ‘Health & Wellbeing’ category through strategic investments in Zywie Ventures Private Limited (“OZiva”) and Nutritionalab Private Limited (“Wellbeing Nutrition”). In October 2022, Dabur India Limited announced the acquisition of a 51% stake in Badshah Masala Private Limited for Rs. 587.52 crore (US$ 71 million). In 2021, Britannia Industries planned to invest Rs. 94 crore (US$ 11.3 million) to add two new manufacturing lines that will increase its capacity by 85% from the current 35,000 metric tonnes to 65,000 metric tonnes per annum.
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% of the sector; healthcare, which accounts for 31% of the share; and household and personal care, which accounts for the remaining 50% share. The urban segment contributes to about 55% of the revenue share, while the rural segment accounts for 45%. The rise in rural consumption will drive the FMCG market. The Indian processed food market is projected to expand to US$ 470 billion by 2025, up from US$ 263 billion in 2019-20.
The Indian FMCG industry grew by 16% in 2021 a 9-year high, despite nationwide lockdowns, supported by consumption-led growth and value expansion from higher product prices, particularly for staples. Final consumption expenditure increased at a CAGR of 5.2% during 2015-20. According to Fitch Solutions, real household spending is projected to increase 9.1% YoY in 2021, after contracting >9.3% in 2020 due to the economic impact of the pandemic. The FMCG sector's revenue growth will double from 5-6% in FY21 to 10-12% in FY22, according to CRISIL Ratings. Price increases across product categories will offset the impact of rising raw material prices, along with volume growth and a resurgence in demand for discretionary items, which are driving growth. The domestic FMCG market has grown at 12.6% YoY in Q3 2021.
The Indian online grocery market is estimated to exceed sales of about Rs. 1,310.93 billion (US$ 17.12 billion) by 2026, at a CAGR of 28.99%. The gross merchandise value (GMV) of the online grocery segment in India is expected to increase 18 times over the next five years to reach US$ 37 billion by FY25.
The FMCG sector has received good investments and support from the Government in the recent past. The sector witnessed healthy FDI inflows of US$ 20.84 billion from April 2000-June 2022. Furthermore, as per the Union Budget 2022-23, Rs. 1,725 crore (US$ 222.19 million) has been allocated to the Department of Consumer Affairs, Rs. 215,960 crore (US$ 27.82 billion) has been allocated to the Department of Food and Public Distribution. In 2021-22, the government approved the Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) with an outlay of Rs. 10,900 crore (US$ 1.4 billion) to help Indian brands of food products in the international markets.
According to a joint report released by industry body FICCI and property consultancy firm Anarock, the Indian e-commerce market is expected to reach US$ 120 billion by 2026 from US$ 38 billion in 2021
In October 2022, Dabur acquired a 51% stake in Badshah Masala Private Limited for Rs. 587.52 crore (US$ 71.81 million) less proportionate debt as on the closing date, with the Badshah enterprise being valued at Rs. 1,152 crore (US$ 140.81 million).
In July 2022, the Chief Minister of Uttar Pradesh Mr. Yogi Adityanath, inaugurated HUL’s ultra-modern factory in Sumerpur with a total investment of Rs. 700 crore (US$ 88.07 million) planned by 2025.
In July 2022, Emami acquired a 30% stake in Cannis Lupus to enter the pet care segment in India.
In July 2022, Godrej Consumer Products Limited (GCPL), unveiled Godrej Magic Bodywash, India’s first ready-to-mix bodywash at just Rs. 45 (US$ 0.57).
The government’s production-linked incentive (PLI) scheme gives companies a major opportunity to boost exports with an outlay of US$ 1.42 billion.
As of February 2021, out of 39 Mega Food Park projects, 22 are operational, 15 are under implementation and 2 are in-principle approval.
The outlook of the FMCG sector looks on track with the pandemic easing out. Rural consumption has increased, led by a combination of increasing income and higher aspiration levels. There is an increased demand for branded products in rural India. On the other hand, with the share of the unorganised market in the FMCG sector falling, the organised sector growth is expected to rise with an increased level of brand consciousness, augmented by the growth in modern retail. The FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220 billion by 2025, from US$ 110 billion in 2020.
