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.
According to Nielsen, the Indian FMCG industry grew 9.4% in the January-March quarter of 2021, supported by consumption-led growth and value expansion from higher product prices, particularly for staples. The rural market registered an increase of 14.6% in the same quarter and metro markets recorded positive growth after two quarters. E-commerce is likely to contribute 5% or US$ 4 billion to FMCG sales by 2022
The rural FMCG market is expected to expand to US$ 220 billion by 2025. The Indian processed food market is projected to expand to US$ 470 billion by 2025, up from US$ 263 billion in 2019-20.
Indian online grocery market is estimated to exceed sales of about Rs. 22,500 crore (US$ 3.19 billion) in 2020, a significant jump of 76% over the previous year. 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.
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 witnessed healthy FDI inflows of US$ 17.8 billion from April 2000 to September 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.
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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