Demographic Trend Size of the Indian population, rising incomes and changing lifestyle.
E-commerce Grofers, Big Basket, Nature's Basket, Reliance SMART.
E-tailing on Jabong, Flipkart, Amazon for easier access to products.
Rural Consumption Growing rural markets led by a combination of increasing income and higher aspirations.
New Categories Young brands: Paperboat (beverages), Epigamia (greekyogurt), Mojo (snacking bar), Raw Pressery (cold-pressed juices), MCaffeine and AVA (beauty), Cambay Tiger (seafood), Sresta Natural Bioproducts (organic ingredients), Slurrp Farm, Snackible (snacks)
• India's FMCG market is expected to grow at a CAGR of 20.6% to reach US$103 billion by 2020.
• According to IBEF Report of 2017, aggregate financial performance of the leading 10 FMCG companies over the past 8 quarters displays that the industry has grown at an average 16-21% in the past two years.
• Household and Personal Care is theprominent segment and accounts for 50% of the overall market share followed by Healthcare (23%), and Food and Beverages (19%).
• Urban segment contributed US$29 billion (60%) to the overall revenue in 2016-17. Semi-urban and rural segments also continue to grow at a rapid pace.
Government Initiatives / Action
• In Sep 2016 NITI Aayog announced that the Government is working towards bringing retail, FMCG and e-commerce within a single policy framework.
• As per the Amended Metrology Rules (July 2017), which aim to foster greater transparency, enhance consumer protection and bring more parity between online and offline retail spaces, ecommerce companies will be required to declare expiry dates and maximum retail prices of packaged consumer products online. The amended rules (related to uniform pricing of identical products, declaration of 'best before' and 'use by' dates, and mandatory declarations by e-commerce entities) will come into effect from January 1, 2018.
• A Food Regulatory Portal has been introduced to serve as a single interface. It would focus onfood standards, codified food safety practices, hassle-free food imports, consistent enforcementand credible food testing.
Foreign Direct Investment (FDI)
100% FDI is allowed in food processing and single-brand retail and 51% in multi-brand retail. The minimum capitalization for foreign companies to invest in India is US$100 million. Between April 2000 and March 2017 FMCG sector witnessed FDI inflow of US$11.84 billion.
Within FMCG, food processing was the largest recipient with a share of 63.73%. Some recent deals are:
Sept 2017 Baby and mothercare brand, Mamaearth, raised a second round of funding of US$1 million led by Fireside Ventures and other individuals.
Feb 2017 Britannia announced a joint venture with Greek baker,Chipita, to produce bakery items.
Jan 2017 Schreiber Dynamix Dairies, a subsidiary of American Schreiber International, opened an infant nutrition ingredient plant in Baramati, Maharashtra.
June 2016 Cremica Food raised US$15 million from Rabo Equity Advisors Pvt Ltd, by selling a minority stake.
May 2016 Maiyas Beverages and Foods raised US$30 million from Peepul Capital.
Impact of GST on FMCG Sector
Introduced on July 1, 2017 GST is expected to infuse greater overall efficiency and create a level-playing field for the larger, established players. For most FMCG majors, the GST rate structure is likely to be neutral or marginally positive, as their broad portfolios will witness a mixed impact. The firms which were aiming at introducing premium products to drive profitability, may experience a negative impact because of the higher taxes. Several may consider new strategies and realignment of portfolios.
GST rate reductions are being progressively implemented and many important raw materials required in the food processing industry are exempted. The highest tax rate of 28% is restricted to fewer items, including luxury, cement, paints, white goods and demerit goods like pan masala, cigars and cigarettes, aerated water and beverages.
In 2016, some of the leading Indian FMCG companies, by revenue, were
Companies Revenue (FY2016) PAT (FY2016)
ITC US$5.94 bn US$1.51 bn
Hindustan Unilever Ltd US$4.92 bn US$628 mn
Britannia Industries US$1.22 bn US$115 mn
Dabur US$884.62 mn US$144.54 mn
Patanjali Ayurved US$769.23 mn US$86.4 mn
Marico US$761.14 mn US$107.98 mn
Godrej Consumer Products US$740.24 mn US$113.8 mn
GlaxoSmithKline Consumer Healthcare US$662.88 mn US$105.68 mn
In 2015 the market size of the organised FMCG sector was 9% of the overall organised retail market. It is expected to reach 30% by 2020. A CII-BCG report suggests fundamental shifts towards premium products, e-commerce, Tier II/III area driven growth etc. Health and wellness is a prominent influencer in shaping consumer preferences and shopping habits; demand for Organic, Ayurveda and other specialty products is on the rise. There is also a focus on improving packaging and designing of products to enhance experiences and shelf life, and reduce costs.
With the emergence of e-commerce and digital connectivity, rural distribution is expanding. Partnerships with e-commerce players stand to gain. In order to maintain competitive advantage, there is emphasis on achieving high supply chain effectiveness through upstream/downstream partnership, revenue sharing etc.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)