FMCG SECTOR ANALYSIS

The Indian FMCG industry represents nearly 2.5% of the countrys GDP.
The industry has tripled in size in past 10 years and has grown at 17%CAGR in the
last 5 years driven by rising income levels, increasing urbanisation, and strong rural
demand and favourable demographic trends.
The sector accounted for 1.9% of the nations total FDI inflows in April 2000September 2012. Cumulative FDI inflows into India from April 2000 to April 2013 in
the food processing sector stood at 9,000.3 crore, accounting for 0.96% of overall
FDI inflows while the soaps, cosmetics and toiletries, accounting for 0.32% of overall
FDI at `3,115.5 crore.
Food products and personal care together make up two-third of the sectors
revenues.
Rural India accounts for more than 700 million consumers or 70% of the Indian
population and accounts for 50% of the total FMCG market.
With changing lifestyle and increasing consumer demand, the Indian FMCG market
is expected to cross $80 billon by 2026 in towns with population of up to 10 lakh.
India's labour cost is amongst the lowest in the world, after China & Indonesia,
giving it a competitive advantage over other countries.
Unilever Plc.s $5.4 billion bid for a 23% stake in Hindustan Unilever is the largest
Asia Pacific cross border inbound merger and acquisition (M&A) deal so far in FY14
and is the fifth largest India Inbound M&A transaction on record till date.
Excise duty on cigarette has been increased in the Union Budget for 2014-15, which
would hit major industrial conglomerates like ITC, VST Industries in the short term.

TOTAL REVENUE IS 288.1 BILLION DOLLARS

USA; 17
INDIA; 46.6

87

CHINA; 65.6
JAPAN; 71.9

USA

INDIA

CHINA

JAPAN

UK

Advantages of India
Large and growing youth population
India is among the world's youngest nations, with a median age of 25 years as
compared to 43 in Japan and 36 in the US.
This coupled with a large population and rapidly evolving consumer preferences,

has translated into a large market opportunity for FMCG players .

The youth segment (1024 years age group) constitutes nearly 25 per cent of the
population and is of significant interest to all FMCG companies .
Emergence of organized retail business
Real estate development in the country, such as the construction of shopping malls
and hypermarkets, are opening up new business channels for FMCG companies.

Growing Urbanization
Indian cities are expected to add 379 million people to the consumer base for FMCG
companies, as the urbanization rate is expected to increase from the current 30 to
45 per cent in the next 40 years.
Increasing disposable income

1. According to recent industry estimates, household income in the top 20 boom

cities in India is projected to grow at 10 per cent annually by 2018.
2. Further, the top 100 cities in India contribute between 5060 per cent of the
overall consumption spends.
3. Rural areas expected to be the major driver for FMCG, as growth continues to
be high in these regions. Rural areas saw a 16 per cent, as against 12 per
cent rise in urban areas.

GROWTH PATTERN OF THE FMCG SECTOR FOR PAST 5 YEARS

47.3

FINANCIAL YEAR 2014

36.8

FINANCIAL YEAR 2012

34.8

FINANACIAL YEAR 2011

30.2

FINANACIAL YEAR 2010

24.2

FINANCIAL YEAR 2009

0

10

15

20

25

30

35

40

45

50

Column1

PORTERS FIVE FORCES MODEL

Rivalry among competitors- Its vary fierce as market is saturated and all
sorts of tactics like price wars, promotional activities etc. are done to snatch
the market share.

Potential entry of new entrants- Highly viable as price effectiveness is only

factor.

Substitute products- Plenty of substitute products are available.

Bargaining power of suppliers- Low as a number of suppliers are present
for this sector.

Bargaining power of consumer- Very high as switching costs are very low
and customers are never reluctant to try new things off the shelf.