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%. Rise in rural consumption will drive the FMCG market.
The Indian FMCG industry grew by 16% in CY21 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 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 resurgence in demand for discretionary items, are driving growth. The domestic FMCG market has grown at 12.6% YoY in Q3 2021.
Number of households shopping on modern-trade channel grew 29.15% YoY in the September quarter and shopping volume on the channel went up by 19.2% YoY.
In September 2021, rural consumption of FMCG increased 58.2% YoY; this is 2x more than the urban consumption (27.7%). The domestic FMCG market increased 36.9% YoY in April-June 2021.
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. 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 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. As of February 2021, out of 39 Mega Food Park projects, 22 are operational, 15 are under implementation and 2 are in-principle approval. Many FMCG brands partner with e-commerce platforms such as Dunzo, Flipkart, Grofers and BigBasket to deliver products at the doorstep of consumers during the COVID-19 pandemic. In the fourth quarter of FY21, e-commerce sales of Marico Ltd., Hindustan Unilever Ltd., Dabur India, ITC and Godrej Consumer Products Ltd. were 8%, 6%, 5%, 5%, and 4%, respectively, of the total FMCG sales. As of June 2021, e-commerce share has already touched 7-8% for some of the largest FMCG companies in the country, according to Accenture India.
The E-commerce market is estimated to reach US$ 200 billion in 2026 from US$ 38.5 billion in 2017, backed by growth in online users from 622 million in 2017 to 900 million in 2025. With festive season sales, Flipkart Group emerged as the leader with a 62% market share.
In November 2021, Flipkart signed an MoU with the Ministry of Rural Development of the Government of India (MoRD) for their ambitious Deendayal Antyodaya Yojana – National Rural Livelihood Mission (DAY-NRLM) programme to empower local businesses and self-help groups (SHGs) by bringing them into the e-commerce fold.
In October 2021, Procter & Gamble announced an investment of Rs. 500 crore (US$ 66.8 million) in rural India.
In October 2021, Setwel Industries entered the FMCG market with The Food Folks, a company specialising in gourmet formulations.
FMCG companies are looking to invest in energy efficient plants to benefit the society and lower cost in the long term. Dabur India has grown its rural network to over 52,000 villages in March 2020, from 44,000 villages in March 2019. For 2020-21, the company aims to have up to 60,000 villages. The sector recorded an FDI of US$ 18.59 billion between April 2000 and June 2021.
Beco, a startup in India, is revolutionising the FMCG market with low-cost, environmentally-friendly consumer goods.
In February 2022, Dabur India achieved its goal to collect, process, and recycle approximately 22,000MT of post-consumer plastic three months early.
In February 2022, Marico Ltd announced its aims to achieve net-zero emissions by 2040 in its global operations.
Advertising volumes on television recorded healthy growth in the July-September quarter, registering 461 million seconds of advertising, which is the highest in 2021. FMCG continued to maintain its leadership position with 29% growth in ad volumes against the same period in 2019. Even the e-commerce sector showed a healthy 26% jump over 2020.
In January 2021, Udaan raised US$ 280 million (~Rs. 2,048 crore) in funding from existing and new investors, including Lightspeed Venture Partners and Tencent. With the latest infusion of capital, Udaan has earned a total of US$ 1.15 billion to date. Although the company did not reveal the valuation information, sources stated that the valuation exceeded US$ 3 billion after this deal.
In September 2021, PepsiCo commissioned its Rs. 814 crore (US$ 109.56 million) Kosi Kalan foods facility in Mathura, Uttar Pradesh; it is the company's largest greenfield manufacturing investment in India.
Dabur India formed an exclusive partnership with energy provider Indian Oil, which will give Dabur's products direct access to around 140 million Indane LPG consumer households across India.
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 201920 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.
