Last Updated: August 09, 2018
Last Updated: June, 2018
Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with Household and Personal Care accounting for 50 per cent of FMCG sales in India. Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector. The urban segment (accounts for a revenue share of around 40 per cent) is the largest contributor to the overall revenue generated by the FMCG sector in India and recorded a market size of around US$ 52.75 billion in 2017-18. However, in the last few years, the FMCG market has grown at a faster pace in rural India compared with urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50 per cent of total rural spending.
The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion in 2017, with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is likely to boost revenues of FMCG companies. In 2016-17, revenue for FMCG sector have reached US$ 49 billion and is expected to grow at 9-9.5 per cent in FY18 supported by expectations of the total consumption expenditure reaching nearly US$ 3,600 billion by 2020 from US$ 1,595 billion in 2016. Direct selling sector in India is expected to reach Rs 159.3 billion (US$ 2.5 billion) by 2021, if provided with a conducive environment through reforms and regulation. #
The government has allowed 100 per cent Foreign Direct Investment (FDI) in food processing and single-brand retail and 51 per cent in multi-brand retail. This would bolster employment and supply chains, and also provide high visibility for FMCG brands in organised retail markets, bolstering consumer spending and encouraging more product launches. The sector witnessed healthy FDI inflows of US$ 13.07 billion, during April 2000 to December 2017. Some of the recent developments in the FMCG sector are as follows:
Some of the major initiatives taken by the government to promote the FMCG sector in India are as follows:
Rural consumption has increased, led by a combination of increasing incomes and higher aspiration levels; there is an increased demand for branded products in rural India. The rural FMCG market in India is expected to grow at a CAGR of 14.6 per cent, and reach US$ 220 billion by 2025 from US$ 29.4 billion in 2016. In FY18, FMCG’s rural segment contributed an estimated 10 per cent of the total income and it is forecasted to contribute 15-16 per cent in FY 19. ^
On the other hand, with the share of unorganised market in the FMCG sector falling, the organised sector growth is expected to rise with increased level of brand consciousness, also augmented by the growth in modern retail.
Another major factor propelling the demand for food services in India is the growing youth population, primarily in the country’s urban regions. India has a large base of young consumers who form the majority of the workforce and, due to time constraints, barely get time for cooking.
Online portals are expected to play a key role for companies trying to enter the hinterlands. The Internet has contributed in a big way, facilitating a cheaper and more convenient means to increase a company’s reach. It is estimated that 40 per cent of all FMCG purchases in India will be online by 2020, thereby making it a US$ 5-6 billion business opportunity. By the year 2025, e-commerce will contribute around 10-15 per cent sales of few categories in the FMCG sector*.
Mr Mark Mobius, Executive Chairman, Templeton EM, opined that the Goods and Services Tax (GST) will lead to mergers and rise of world class consumer companies in India. GST and demonetisation are expected to drive demand, both in the rural and urban areas, and economic growth in a structured manner in the long term and improve performance of companies within the sector.
Exchange Rate Used: INR 1 = US$ 0.016 as on FY2018
References: Media Reports, Press Information Bureau (PIB), Union Budget 2017-18
Note - * According to a CII-BCG report, # - according to a study by Assocham, ^ - According to CRISIL report
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
Last Updated: August 09, 2018
In India, agriculture and its allied sectors are the primary source of livelihood for a large chunk of domestic population. In 2017...
Improvements in human resources (HR) practices and technology are a key reason for the continuous rise of India's technology sector. However, the growth of the tech s...
Most businesses are dynamic, with processes and objectives that are constantly developing. In order to keep the processes within a business streamlined and efficient as w...
Leather is a prominent industry in India. The main sectors from which its demand is derived are fashion, footwear, furniture, interiors and automotive. While the Indian l...
NBFCs are quickly adopting to the best-in-class technology to bring about disruption and foster future growth
The Indian lending industry, significantl...
Founder and Managing Director of The Mobile Wallet, Vinay Kal...
Zuper: Dynamic Disruptor
Zuper is a B2B Software as a Service (SaaS) offering for organizations, irrespective of shape and size. It is the first in Asia to offer voice biometrics-based timesheet management of workforce. Zuper offers an end to end platform to bring together the power of people, process, product and promise. ...