Overview Of FMCG Sector

What are FMCGs?

WE regularly talk about things like butter, potato chips, toothpastes, razors, household care products, packaged food and beverages, etc. But do we know under which category these things come? They
are called FMCGs. FMCG is an acronym for Fast Moving Consumer Goods, which refer to things that we buy from local supermarkets on daily basis, the things that have high turnover and are
relatively cheaper.

FMCG Products and Categories 

- Personal Care, Oral Care, Hair Care, Skin Care, Personal Wash (soaps);

- Cosmetics and toiletries, deodorants, perfumes, feminine hygiene, paper products;

- Household care fabric wash including laundry soaps and synthetic detergents; household cleaners, such as dish/utensil cleaners, floor cleaners, toilet cleaners, air
fresheners, insecticides and mosquito repellents, metal polish and furniture polish;

FMCG in 2006

The performance of the industry was inconsistent in terms of sales and growth for over 4 years. The investors in the sector were not gainers at par with other booming sectors. After two years of sinking
performance of FMCG sector, the year 2005 has witnessed the FMCGs demand growing. Strong growth was seen across various segments in FY06. With the rise in disposable income and the economy in
good health, the urban consumers continued with their shopping spree.

- Food and health beverages, branded flour, branded sugarcane, bakery products such as bread, biscuits, etc., milk and dairy products, beverages such as tea, coffee, juices, bottled
water etc, snack food, chocolates, etc.

- Frequently replaced electronic products, such as audio equipments, digital cameras, Laptops, CTVs;other electronic items such as Refrigerator, washing machines, etc. coming
under the category of White Goods in FMCG; 

Sector Outlook
FMCG is the fourth largest sector in the Indian Economy with a total market size of Rs. 60,000 crores. FMCG sector generates 5% of total factory employment in the country and is creating employment for
three million people, especially in small towns and rural India.

Analysis of FMCG Sector 

Strengths:
1. Low operational costs
2. Presence of established distribution networks in both urban and rural areas
3. Presence of well-known brands in FMCG sector

Weaknesses:
1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors
2. Low exports levels
3. "Me-too" products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market.  

Opportunities:

1. Untapped rural market

2. Rising income levels, i.e. increase in purchasing power of consumers
3. Large domestic market- a population of over one billion.
4. Export potential
5. High consumer goods spending 

Threats: 
1. Removal of import restrictions resulting in replacing of domestic brands
2. Slowdown in rural demand
Tax and regulatory structure 

Deodorants and Perfumes

Cosmetics and Toiletries market also include deodorant and antiperspirant category. The fragrance market in India is growing at an annual average rate of 12.17%.

Deodorants market in India is valued at Rs 3 million only HLL has launched various products in deodorants category. Fragrance market is valued at Rs 3 billions, out of which 50% is accounted by
Alcoholic and Attar perfumes (alcohol free perfumes) each. In Alcoholic perfumes, one-third is represented by unorganized market while rest is mainly imported.

Deodorants and Perfumes are the major product niches with promising prospects. Increase in media exposure (fashion magazines and cable television) has also raised awareness of foreign fragrance
brands. With the reduction of tariff on premium fragrances from 30% to 10% in 2005, new brands are encouraged to enter the market. However, black market, fake goods, and the enduring popularity of
traditional Indian perfumes, such as attar, hamper sales in India. 

From The Economist Intelligence Unit 

Sales Value (US $ m) 

2005 2006 2007 2008 2009 2010

 
Perfumes & Fragrances 2,103 1,291 2,464 2,696 2,941 3,169
Skin Care

The skin care market is valued at $180 million in India. With safe and effective procedures, advancement in medical technology, increase in awareness, the Indian Skin care solutions business is growing
very fast.

The skin care market can be segregated into toners, cleansers, sunscreens, anti-wrinkle creams, dark circle removing creams, astringents, facial creams, moisturizers, fairness creams, day and night
creams, etc. Out of these, facial creams, moisturizers, fairness creams, day and night creams, etc. are the most popular products and account for approximately 60% of the skin care segment.

The skin care market is at a primary stage in India. The penetration level for both the urban and rural market is low. Many people still prefer to use home made and traditional products to cure the skin
problems. However, within a period of five-six years, the use of skin care products has increased significantly in India. With changing life styles, increase in disposable incomes, greater product choice and
availability, and influence of satellite television, more people are taking interest in personal grooming. The facial skin care market is booming. Products are competing with one another to take shelf space in
the retail stores. Facial skin care products have become an essential part of the beauty market. Like western countries, creams and potions are applied in India also, in an effort to remove the pimples and
the acne, fight stress and worry lines, and to remain young. Since the penetration level is still relatively low, growth is expected to be around 25% over the next five years.

Some of the major players in this segment are Hindustan Lever (Fair & Lovely, Lakme, Ponds) with a market share of 53%, followed by CavinKare- Fairever with a market share of over12 % and Godrej-Fair
Glow with a market share of 3.4 %. The other players that have a presence in the market are Emami (Gold Turmeric and Naturally Fair), Revlon (Fair & Glow).  

Household Cleaners

The household cleaning market is valued at around Rs. 400 crores and is estimated to be growing at the rate of 20% per annum. According to AC Nielson (world's leading marketing information provider),
the consumer's desire for germ-free, healthy environment is increasing and is driving good sales for household cleaning products. The focus of household cleaner products is to keep disease-free
environment. Now-a-days consumers are looking forward not only to improving upon their eating habits but also to practising healthy living.

Products Covered

Dish/utensil cleaners
Floor cleaners
Toilet cleaners

Toilet cleaners
The toilet cleaning market is valued at around Rs 40 crores only. The penetration level of toilet cleaners is still very low because it has been estimated that most of the people even in urban areas are still
using cheap products like acids, or phenols to clean their toilets. The major share in Toilet Cleaning market is of Harpic from Reckitt Benckisser and its biggest competitor is Sanifresh from Balsara (now
Dabur). 

Dish/Utensil cleaners
The dish/utensil cleaning market is valued at around 44 crores. In the dish/utensil-cleaning segment, bars have dominated over 60% of the market, while dish wash powder accounts for 32% only.
Research shows that 50% and 80% of urban and rural population respectively are still using substitute products like ash, bricks and other detergents for dish-washing purposes.  

Floor cleaners
The floor cleaners are very less popular in India. Only 3% of Indian households use floor-cleaning products, whereas 97% use phenyl or a combination of bleaching powders, detergents, and acids.  

The penetration of house cleaning products is still very low. The challenge of players in Household Cleaners market is to enter into the households that are still using cheap products. The opportunity is
huge enough as there are millions of households. 

Major players
The major players in Household Cleaning Segment are:

HLL
Reckitt & Colman India (RCI)
Bayer India
Balsara Hygiene
Henkel Spic

Bakery Products
The market for bakery industry is valued at Rs. 69 billion. The two major bakery products, i.e. breads and biscuits hold for about 82 % of the market share.

Product coverage
 Bread
Biscuits
Pastries
Cakes
Buns
Rusk

Bread
The bread market has a business volume of 1.5 million tonnes. The bread industry has a production of approximately 27 lakh tonnes. This segment is characterized by
high level of fragmentation, and high margin. The major factors for growth in this segment are:

Brand loyalty
Volumes
Strong distribution networks

The major challenge faced by the organized bread sector at present is low margins of profit. Hike in the prices of major raw materials like sugar, vegetable oil, milk,
and wheat flour has been accounted for the industry's low margins of profit. 

Major Players

The major players in the bread industry that holds about 90% of the market share are:

Britannia
Modern Industries Ltd.

Biscuits

The biscuit market has a total production volume of 1.1 million tonnes. The growth drivers for the biscuit industry are focused advertising, urban market, and new
launches. 

Major Players
The major players in the biscuit segment are:

Britannia
Parle
Bakeman
ITC Foods Ltd.
Surya Food and Agro Pvt. Ltd.
HLL

Major Brands
The major brands of biscuit are:

Britannia
Parle
Bakeman
Priya Gold
Elite
Cremica
Dukes
Anupam
Horlicks

FMCG Sector

FMCG SECTOR
Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular
intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, household accessories and extends to certain electronic
goods. These items are meant for daily of frequent consumption and have a high return. 

A major portion of the monthly budget of each household is reserved for FMCG products. The volume of money circulated in the economy against FMCG products is very high, as the

number of products the consumer use is very high. Competition in the FMCG sector is very high resulting in high pressure on margins.

FMCG companies maintain intense distribution network. Companies spend a large portion of their budget on maintaining distribution networks. New entrants who wish to bring their products in the
national level need to invest huge sums of money on promoting brands. Manufacturing can be outsourced. A recent phenomenon in the sector was entry of multinationals and cheaper imports. Also the
market is more pressurized with presence of local players in rural areas and state brands. 

Naukri hub analyzes FMCG sector in detail.

FMCG Sector 

Overview Of FMCG Sector

Scope of FMCG Industry In India
Top Players in FMCG
Career Opportunities
Secondary Players
Indian Consumer Class
Recent Developments