What is FMCG?

Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods (CPG), is products that have a quick turnover, and relatively low cost. Consumers generally put less thought into the purchase of FMCG than they do for other products. Although the absolute profit made on FMCG products is comparatively small, they are generally sold in large numbers. Hence profit in FMCG goods generally scales with the number of goods sold, rather than the profit made per item. The FMCG product category generally includes a wide range of frequently purchased consumer products including toiletries, soaps, cosmetics, teeth cleaning products, shaving products and detergents FMCG may also include pharmaceuticals, packaged food products and drinks, although these are often categorized separately. FMCG products can be thought of in difference with consumer durables, which are generally replaced less than once a year (e.g. kitchen appliances). Three of the largest and best known examples of Fast Moving Consumer Goods companies are Nestl, Unilever and Procter & Gamble. Examples of FMCGs are soft drinks, tissue paper, and chocolate bars. Examples of FMCG brands are Coca-Cola, Kleenex, Pepsi and Believe.

They're called fast-moving because they are consumed with such frequency that the repurchase cycle is fast/short. People purchase FMCGs every few weeks or months. Think about bar soaps, laundry detergent, household cleaning products, snack food, personal care products, pet food, paper goods (like towelling paper, tissue, etc), and others of that milk. Most people purchase these items 6-12 times a year, or more. They move fast off the retail shelves into consumers' pantries. They are "fast moving" consumer goods. Books or CDs are not FMCGs because most people don't purchase the same item/brand/title multiple times in a short period of time. You buy one, and that's it. You don't consume them and need another one.

Technically produce and meat probably qualify as FMCGs, as do milk, bread, and other perishables, but they are not typically highly differentiated like ice cream, tortilla chips, pasta sauce, and other "packaged" (and branded) goods, so not everyone treats them as FMCGs. They are in the gray area.

Also note that store brands and private label products are "branded," or packaged, for this purpose. They qualify as FMCGs, just as brands owned and marketed by large companies/manufacturers. Few pointers that would define the scope of FM Consumer Goods - They have a high Frequency of purchase, and in turn, consumption - They reside in the household of a consumer. This is important, since goods that are not used for consumption in the households do not come under the Ambit of fastmoving consumer goods. - The purpose of the Goods is "Consumption", and they are not priced very high.

FMCG's mean Fast moving consumer goods... but y r they called so? is it because they move fast form the place of production to place of consumption...then so do CD's or agricultural produce, right? Before answering, compare it with agricultural products...and think, cant agricultural goods also are called FMCG's??

In other words the "customer" is the end-user, or consumer. In your agricultural goods example, if you're referring to products bought by farmers, then they would be classified as a business-to-business purchase; if you're referring to products sold by farmers, they're mainly sold to another business (such as a butcher) which processes them (often to turn them into FMCG's) rather than direct to the end-user or consumer. Now, if the farmer is selling direct to the consumer, then, yes, these could be considered FMCG products Fast-moving: Important, because the consumer's decision-making process when buying such goods will be different from the decision process when buying "durable" goods (eg. a television set)

As Consumption patterns change, classification of goods change - just like premium goods change to regular goods in the Rural Sector, in the same manner - Some of the goods that were earlier beyond the scope of this category are now defined under it. For instance - Dabur Chawanprash or Pond's Face Cream. These goods were not a part of the daily consumption of a consumer - but with rising incomes and growing confidence, they are now included. If you would have read recently, Goods have started being defined from FMCG to FMHG - Fast moving Health Goods - Pudina Hara, Vicco Turmeric Creams, Face Wash - these are some goods whose paterms have changed.

is an acronym for Fast Moving Consumer Goods which is defined as fast selling , low unit value consumer products normally in universal demand . This includes categories like toiletries , cosmetics and other non-durables. 10 FMCG Companies: 1. HINDUSTAN UNILEVER LTD. 2. ITC (INDIAN TOBACCO COMPANY) 3. NESTLE LTD 4. GCMMF (AMUL) 5. DABUR INDIA 6. ASIAN PAINTS (INDIA) 7. CADBURY INDIA 8. BRITANNIA INDUSTRIES 9. PROCTOR AND GAMBLE HYGIENE AND HEALTH CARE 10.MARICO INDUSTRIES

Role of FMCG.

The Fast Moving Consumer Goods (FMCG) sector is a corner stone of the Indian economy. This sector touches every aspect of human life. The FMCG producers now realize that there is a lot of opportunity for them to enter into the rural market. The sector is excited about the rural population whose incomes are rising and the lifestyles are changing. There are as many middle income households in the rural areas as there are in the urban. Thus the rural marketing has been growing steadily over the years and is now bigger than the urban market for FMCGs. Globally, the FMCG sector has been successful in selling products to the lower and middle income groups and the same is true in India. Over 70% of sales are made to middle class households today and over 50% of the middle class is in rural India. The sector is excited about a growing rural population whose incomes are rising and which is willing to spend on goods designed. Also with a near saturation and cut throat competition in urban India, many producers of FMCGs are driven to chalk out bold new strategies for targeting the rural consumers in a big way. But the rural penetration rates are low. This presents a tremendous opportunity for makers of branded products who can convert consumers to buy branded products. Many companies including MNCs and regional players started developing marketing strategies to lure the untapped market. While developing the strategies, the marketers need to treat the rural consumer differently from their counterparts in urban because they are economically, socially and psychographically different to each other. This paper covers the attractions for the FMCG marketers to go to rural, the challenges, the difference between the rural and the urban market, budget measures. Their positive and outcomes, need, major strategic roles and challenges and opportunities of FMCG companies in rural sector.

Importance of Merchandising and FMCG Sales Non-profit organization does not have to earn the budget. Their goal is to spend it. Of course, there are some rules and guidelines that should be respected. In such

organization reporting and expenditure justification to donors is crucial part, in order to make an organization eligible for future funding. On the other side, working in a profit oriented is something completely different. Still you have the funding. But in this case your stakeholder is also a shareholder, who expects profitable operation, with certain return on investment. Furthermore, goal of every successful company is to have continuous growth in all directions; expanding the portfolio, market share, increasing of sales, revenue and profit, while driving the business at the optimal cost. But for how long you can have continuous growth? Are there any limitations for market need? Of course that there are limitations, but they are imaginary, since the market demand is not something that is firm. It changes, as it evolves through time. But also it is changed by the influence of supplier, i.e. Company is creating a new demand of their potential consumer, by offering them a new and better offer of products and services. If succeeds, company provides itself the continuous growth. This offer is done through development of a new products and services, as well of suitable ATL and BTL campaign. ATL-Above the Line . All the advertising that is created to bring the brand awareness into the public mind, like TV, newspaper, magazines etc. Traditionally all that advertising brings commissions to the ad agencies

BTL-Below the Line. All the other brand building and promotional activities such as direct marketing, sales promotion, and online marketing etc.These are fee based projects for all the agencies involved On the other hand BTL campaign is something that is also very important for sustainable continuous growth. BTL marketing is very important, especially the companies that deal primarily with Fast Moving Consumer Goods (FMCG ). While capital expenditures as real estates or vehicles are on the one side of demand scale, FMCG commodities like food, soft drinks, alcohol drinks, cosmetics, etc are on the other side. FMCG products are subject of planned purchase, but are very often subject of impulse purchase. Impulse for purchase can be triggered by clever positioning and merchandising of product within the shopping area of the sale outlet. There are several basic rules for successful positioning in the sales outlet that will initiate the shopping need of

consumers, even when they didn't even thought about buying some item, therefore providing continuous growth of sales. So, how to develop your FMCG sales?

Corporate Block is the section on shelf or separate rack in sale outlet that is dedicated for product of one manufacturer or brands owner. Corporate block gives strength from brands synergy; it creates visual impact and increase brands value. Shopper is more likely to be attracted by impressive, well arranged section dedicated to one producer, than by the bunch of products scattered around on different shelves.

Eye Level Rule says that whatever is in the eye level and slightly below is at the reach of the hand. Whatever is at the reach of the hand is likely to be grabbed. People like easy and effortless shopping, without stretching up or leaning down. This is why you should avoid too low or to high positioning in the sale outlet.

Multiple Shopping Points; more selling points in the sale outlet means more shopping opportunities for continuous growth. For small size sale outlet we apply triangle rule, while for the large sale outlets quadrant rule is more applicable.

Merchandising of FMCG products is the process of effective arranging of product at the selling point. Merchandising of FMCG products covers activities like stocking up, arranging according the corporate merchandising standards, placing the price tags, cleaning and rotating products according the expiry date (FEFO ). Merchandising of FMCG products is the most effective method for continuous growth in the sale outlet.

X-Merchandising of FMCG product (or Cross-Merchandizing of FMCG) is positioning the product next to the other product in the sale outlet that is complementary to your products. Examples: soft drinks next to snacks, or spices next to the meat.

These are basics of successful positioning in the shopping zone of the sale outlet. These are the guidelines of how to develop your FMCG product sales. This should be accompanied with an optimal inventory stock, changes in portfolio, smart price policy and fresh advertising material. If the sale outlet is worthwhile investing, then special promotions, presence of sales animators, surprises for shoppers and other add-ons can be used. Impulse purchase is the moment that must be used in the FMCG industry for the continuous growth. Just to be available in the sale outlet is not enough. It is necessary to be active and visible at same time. There are many similar products that can easily substitute your. Sometimes only the small difference in position in the sale

outlet can make the judgment of shopper about which product to buy. For shopper that may not present a big difference.

How FMCG industry works. Distribution and Channel Management Agenda Background Marketing Channels Functions of Marketing Channels Types of Channels Factors affecting Channel Decisions Channel Conflict Summary Background Distribution is a key external resource Logistics, Distribution and Channels Management are the less visible Side of marketing Nevertheless, it is as important, if not more India has millions of outlets Plus the increase in malls and large stores is a very big change in The making Marketing Channels The Network of partners in the value chain that cooperate to bring Products from producers to ultimate consumers All those who help in bringing shoes to the consumer from the Factories and in store These include wholesalers, retailers, agents, brokers etc They are called intermediaries, middlemen, dealers, resellers or Distributors However, the prevailing view is that channel members are more Than just middlemen They are marketers first customers and partners; they add value to The marketers offer dras

Functions of Channel Members Making Products Available This is the most obvious and first function Retailers are critical here Has also wholesalers in rural markets Information Retailers are a great source of information The retailer is closest to the consumer Hence knows more than you, the marketer Also very useful for certain institutional purchases like hotels for Tiles Promotion Channel members also indulge in sales promotion and advertising Deals, flyers, cooperative advertising Transfer of Title Management Science II Dr. S.Bharadwaj Indian Institut e of Technology Madras Risk Taking Now the responsibility is on Nilgiris to sell They are stuck with the product Hence perishables always carry a large margin e.g. vegetables This is a very big problem internationally since people get a kick out Of this Hence, Wal-Mart says RFID(Radio Frequency identification) Negotiation In case of institutional purchases again Think of the hotel-tile example Repeated follow-up and negotiation is done here by the retailer Value-Added Services Like Parking cars, bikes Like home delivery Important in a country like India Thus, several functions are performed by the channel member Hence, more than merely a dealer Hence, relationship marketing is very important Maintaining a good relationship is therefore highly important Especially for the value-added services Types of Channel Members Agents/Brokers Channel partners that match marketers with wholesalers or in Organization markets, with customers

 They are very important for international marketing, for exports Think of the success of EBay, Placement Consultants, and Online Dating/Matrimonial sites In a way, all are brokers Wholesalers A wholesaler is someone who primarily sells to other retailers Also may retail on own Typically, buys in bulk Very important in rural India Companies think of him a necessary evil Retailer The most visible face of the distribution system India has the largest number of retailers in the world Hence, the reluctance of the Govt in allowing FDI here fear of Unemploymentnagement Science II Dr. S.Bharadwaj Indian Institute of Technology Madras Types of Channel Members Vehicle dealer adds several accessories Used car dealers make the car new once more

Four Channels through which marketers can reach Customers Manufacturer Agent Wholesaler Wholesaler Retailer Customer Some Other Forms For Example, Multilevel Marketing - this is followed by companies Like Amway, Tupperware Here, Amway sells to independent distributors, who sell to still Others and so on There is a sort of a chain effect Marketers are free to use more than one channel, they can use Multiple forms of channels This is called Dual Distribution or Hybrid Distribution This involves the use of more than type of channel to sell to Different customer segments The furniture industry

 Think of Michelin selling tires to Ford and to you - different Channels Sometimes, even to the same types of customers, different Channels are used For example, Coke is available in stores, movie theatres, and video Rentals and through vending machines Then there are Strategic Channel Alliances The use of another marketers channel arrangement to reach end Customers In the International market, this is common Spic Fine Chemicals used Union Carbides Types of Distribution Exclusive Distribution A channel design through which products are marketed Through a few carefully selected partners Luxury products, premium brands Armani suits, Louis Vutton, The idea is create exclusivity If it is available everywhere, what is so exclusive about your Product? Factors Affecting Channel Decisions What are some factors affecting channel decisions like? What type of channels do we have? Online or offline? A retailer only? A wholesaler, then retailer and so on? Channel Length? What affects these decisions? What are the criteria influencing? These decisions? Management Science II Dr. S.Bharadwaj Indian Institute of Technology Madras Type of Product Industrial products will have a different type of distribution from a Consumer product A consumer durable will have a different type of distribution from an FMCG product Product positioning too will affect type of channel Premium products will have a shorter channel Type of Customer The same product when sold to an end or organizational customer Will have different channels For instance, computers will be sold direct to organizations but

Through resellers to end customers Market Environment While in Rome, do what the Romans do Do what is the industry standard If books are sold through exclusive book stores, do the same However, this also gives an opportunity to differentiate you Amazon.com going online Level of risk involved in high, hindsight is always 20/20 Internal Considerations Do I have enough money to add another channel member? is it compatible with my other businesses? Will any change cause more problems than solutions? For example, IBM, Compaq threatened by Dell Is it compatible with my business model e.g. Dell in China These internal considerations have a bearing on type of channel Legal Considerations A manufacturer cannot insist that they sell their own products only (Unless in case of a franchisee) A manufacturer cannot tie the sale of certain goods to certain others You buy 100 crates of Vanilla Coke, if you want 500 crates of Coke I am sure, though, that this is happening Cost and Profit Considerations A low profit margin, high volume company will have many channel Members A high profit margin, low volume member will have only a few Members Channel Conflict This is defined as tension/clashes between channel members as a Result of perceived unfairness Vertical conflict arises when there is a clash of interests between Members at 2 different levels (like wholesaler and retailer) Horizontal conflict is between members at the same level - Retailer A Vs. Retailer B Conflict can be caused by unfair manufacturer policies, a few Rotten apples, partisanship etc Conflict can be potentially dangerous and can snowball McDonalds franchisees for instance; if care is not taken, the

Grumbles might become a roar However, a little conflict is good Manufacturers must be fair Management Science II Dr. S.Bharadwaj Indian Institute of Technology Madras Summary Distribution is highly important Especially in consumer products More so in countries such as ours Managing channels is part of a salespersons job Conflict must never be allowed to get out of hand

Executive Summary Products which have a quick turnover, and relatively low cost are Known as Fast Moving Consumer Goods (FMCG). FMCG products are those That gets replaced within a year. Examples of FMCG generally include a wide Range of frequently purchased consumer products such as toiletries, soap, Cosmetics, tooth cleaning products, shaving products and detergents, as well As other non-durables such as glassware, bulbs, batteries, paper products, and Plastic goods. FMCG may also include pharmaceuticals, consumer electronics, Packaged food products, soft drinks, tissue paper, and chocolate bars. Indias FMCG sector is the fourth largest sector in the economy and Creates employment for more than three million people in downstream Activities. Its principal constituents are Household Care, Personal Care and Food & Beverages. The total FMCG market is in excess of Rs. 85,000 Cr. It Is currently growing at double digit growth rate and is expected to maintain a High growth rate. FMCG Industry is characterized by a well established Distribution network, low penetration levels, low operating cost, lower per Capita consumption and intense competition between the organized and Unorganized segments. The Rs 85,000-crore Indian FMCG industry is expected to register a Healthy growth in the third quarter of 2008-09 despite the economic downturn. The industry is expected to register a 15% growth in Q3 2008-09 as compared To the corresponding period last year. Unlike other sectors, the FMCG Industry did not slow down since Q2 2008. The industry is doing pretty well, Bucking the trend. As it is meeting the every-day demands of consumers, it Will continue to grow. In the last two months, input costs have come down And this will reflect in Q3 and Q4 results. Market share movements indicate that companies such as Marico Ltd And Nestle India Ltd, with domination in their key categories, have improved

Their market shares and outperformed peers in the FMCG sector. This has Been also aided by the lack of competition in the respective categories. Single product leaders such as Colgate Palmolive India Ltd and Britannia Industries Ltd have also witnessed strength in their respective categories, aided by Innovations and strong distribution. Strong players in the economy segment Like Godrej Consumer Products Ltd in soaps and Dabur in toothpastes have Also posted market share improvement, with revived growth in semi-urban And rural markets. Swot Analysis Strengths: Low operational costs Presence of established distribution networks in both urban and rural Areas Presence of well-known brands in FMCG sector Weaknesses: Lower scope of investing in technology and achieving economies of Scale, especially in small sectors Low exports levels "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: Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Large domestic market- a population of over one billion. Export potential High consumer goods spending Threats: Removal of import restrictions resulting in replacing of domestic Brands Slowdown in rural demand Tax and regulatory structure Industry Category and Products Household Care Personal Wash:The market size of personal wash is estimated to be around Rs. 8,300 Cr. The Personal wash can be segregated into three segments: Premium, Economy And Popular. The penetration level of soaps is ~92 per cent. It is available in 5 Million retail stores, out of which, 75 per cent are in the rural areas. HUL is the Leader with market share of ~53 per cent; Godrej occupies second position with market share of ~10 per cent. With increase in disposable incomes, Growth in rural demand is expected to increase because consumers are Moving up towards premium products. However, in the recent past there has

Not been much change in the volume of premium soaps in proportion to Economy soaps, because increase in prices has led some consumers to look for Cheaper substitutes. Detergents:The size of the detergent market is estimated to be Rs. 12,000 Cr. Household Care segment is characterized by high degree of competition and high level of Penetration. With rapid urbanization, emergence of small pack size and sachets, the demand for the household care products is flourishing. The demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market. In washing powder HUL is the leader with ~38 per cent of mar-ket share. Other major players are Nirma, Henkel and Proctor & Gamble. Personal Care Skin Care:The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care Market is at a primary stage in India. The penetration level of this segment in India is around 20 per cent. With changing life styles, increase in disposable Incomes, greater product choice and availability, people are becoming aware About personal grooming. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent, fol-lowed by CavinKare with a Market share of ~12 per cent and Godrej with a market share of ~3 per cent. Hair Care:The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care Market can be segmented into hair oils, shampoos, hair colorants & Conditioners and hair gels. Marico is the leader in Hair Oil segment with Market share of ~ 33 per cent; Dabur occupies second position at ~17 per cent. Shampoos:The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the Penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of The total shampoo sale. It has low penetration level even in metros. Again the Market is dominated by HUL with around ~47 per cent market share; P&G Occupies second position with market share of around ~23 per cent. Antidandruff segment constitutes around 15 per cent of the total shampoo market. The market is further expected to increase due to increased marketing by Players and availability of shampoos in affordable sachets. Business in India India's business environment has evolved and transformed itself at a much faster pace in the recent years. India has become one of the most attractive destinations for

doing business owing to boosting economy, good GDP and other economic indicators. Indian business directory brings to you all that relates to doing business in Indian scenario- Indian business events, Industry analysis reports, business news, financial term glossary, mutual fund and investment tools, you name it and we have it here. Oral Care:The oral care market can be segmented into toothpaste - 60 per cent; Toothpowder - 23 per cent; toothbrushes - 17 per cent. The total toothpaste Market is estimated to be around Rs. 3,500 Cr. The penetration level of Toothpowder/toothpaste in urban areas is three times that of rural areas. This Segment is dominated by Colgate-Palmolive with market share of ~49 per cent, While HUL occupies second position with market share of ~30 per cent. In Toothpowders market, Colgate and Dabur are the major players. The oral care Market, especially toothpastes, remains under penetrated in India with Penetration level ~50 per cent.

Food & Beverages Food Segment:The foods category in FMCG is gaining popularity with a swing of launches by HUL, ITC, Godrej, and others. This category has 18 major brands Aggregating Rs. 4,600 Cr. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, ready to Eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury. Tea:The major share of tea market is dominated by unorganized players. More Than 50 per cent of the market share is capture by unorganized players. Leading branded tea players are HUL and Tata Tea. Coffee:The Indian beverage industry faces over supply in segments like coffee and Tea. However, more than 50 per cent of the market share is in unpacked or Loose form. The major players in this segment are Nestl, HUL and Tata Tea. Growth Prospect Large Market India has a population of more than 1.150 Billions which is just behind China. According to the estimates, by 2030 India population will be around 1.450 Billion and will surpass China to become the World largest in terms of Population. FMCG Industry which is directly related to the population is Expected to maintain a robust growth rate.

Spending Pattern An increase is spending pattern has been witnessed in Indian FMCG market. There is an upward trend in urban as well as rural market and also an increase In spending in organized retail sector. An increase in disposable income, of Household mainly because of in-crease in nuclear family where both the Husband and wife are earning, has leads to growth rate in FMCG goods. Changing Profile and Mind Set of Consumer People are becoming conscious about health and hygienic. There is a change in The mindset of the Consumer and now looking at Money for Value rather Than Value for Money. We have seen willingness in consumers to move to Evolved products/ brands, because of changing lifestyles, rising disposable Income etc. Consumers are switching from economy to premium product even We have witnessed a sharp increase in the sales of packaged water and water Purifier. Findings according to a recent survey by A. C. Nielsen shows about 71 per Cent of Indian take notice of packaged goods labels containing nutritional Information compared to two years ago which was only 59 per cent. Advantages to The Sector Governmental Policy Indian Government has enacted policies aimed at attaining international Competitiveness through lifting of the quantitative restrictions, reducing excise Duties, automatic foreign in-vestment and food laws resulting in an Environment that fosters growth. 100 per cent ex-port oriented units can be set up by government approval and use of foreign brand names is now freely permitted. Central & State Initiatives Recently Government has announced a cut of 4 per cent in excise duty to fight with the slowdown of the Economy. This announcement has a positive impact on the industry. But the benefit from the 4 per cent reduction in excise duty is not likely to be uniform across FMCG categories or players. The changes in excise duty do not impact cigarettes (ITC, Godfrey Phillips), biscuits (Britannia Industries, ITC) or Ready-to-eat foods, as these products are either subject to specific duty or are Exempt from excise. Even players with manufacturing facilities located mainly in tax-free zones will also not see material excise duty savings. Only large FMCG-makers may be the key ones to bet and gain on excise cut. Foreign Direct Investment (FDI) Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI). There is a continuous growth in net FDI Inflow. There is an increase of about

150 per cent in Net Inflow for Vegetable Oils & Vanaspati for the year 2008. Market Opportunities Vast Rural Market:Rural India accounts for more than 700 Million consumers, or ~70 per cent of the Indian population and accounts for ~50 per cent of the total FMCG market. The working rural population is approximately 400 Millions. And an average citizen in rural India has less than half of the purchasing power as compare to his urban counterpart. Still there is an untapped market and most of the FMCG Companies are taking different steps to capture rural market share. The market for FMCG products in rural India is esti-mated ~ 52 per cent and is projected to touch ~ 60 per cent within a year. Hindustan Unilever Ltd is the largest player in the industry and has the widest market coverage. Export - Leveraging the Cost Advantage Cheap labour and quality product & services have helped India to represent as a cost ad-vantage over other Countries. Even the Government has offered zero import duty on capital goods and raw material for 100% export oriented units. Multi National Companies out-source its product requirements from its Indian company to have a cost advantage. India is the largest producer of livestock, milk, sugarcane, coconut, spices and Cashew apart from being the second largest producer of rice, wheat, fruits & vegetables. It adds a cost advantage as well as easily available raw materials. Sectoral Opportunities Major Key Sectoral opportunities for Indian FMCG Sector are mentioned Below: Dairy Based Products India is the largest milk producer in the world, yet only around 15 per cent of the milk is processed. The organized liquid milk business is in its infancy and also has large long-term growth potential. Even investment opportunities exist in value-added products like desserts, puddings etc. Packaged Food Only about 10-12 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for expansion of this industry. Oral Care The oral care industry, especially toothpastes, remains under penetrated in India with penetration rates around 50 per cent. With rise in per capita incomes and awareness of oral hygiene, the growth potential is huge. Lower price and smaller packs are also likely to drive potential up trading. Beverages Indian tea market is dominated by unorganized players. More than 50% of the market share is capture by unorganized players highlighting high potential for organized players. Company Prospects

Hindustan Unilever Limited Unilever is lowering its expenditure on packaging across its portfolio of food brands as part of a wider cost-cutting drive. HUL has pared down the colour palette used for print-ing across many products. The system has been used to reduce printed packaging costs for Unilevers products. It is also eco-friendly because it reduces waste in the printing process. HUL is taking different steps to reduce the cost and increase the margin. Hindustan Unilevers product - Pureit (a water purifier) has received the UNESCO Water Digest Water Award 2008-2009 in the category of best domestic non-electric water puri-fier. Pureit received the award for outstanding contribution in the field of water in India. The product is available across 21 Indian states and has reached more than 1 million homes in India giving them access to microbiologically safe drinking water. Pureits performance has been tested by leading international & national medical, scien-tific & public health institutions and meets the germ-kill criteria of the Environmental Pro-tection Agency, the drinking water regulatory agency in the USA. Procter & Gamble Hygiene & Health Care Limited (P&G) The Company has 21 product categories out of which only 8 product have presence in India. The company is planning to launch the rest 13 product in India. The company expects to see a growth in other categories. The company has an aggressive plan to set up 20 new factories across the World out of which 19 is expected to come in emerging markets and most of them would be seen in Brazil, Russia, India, and China (BRIC) nations. Whisper which is one of the companys power brands has recorded 50 per cent market share in urban India. Godrej Consumer Products Limited (Godrej) The Board of Directors of Godrej Consumer Products Limited (GCPL) has approved the acquisition of 50 per cent stake of its joint venture partner SCA Hygiene Products stake in Godrej SCA Hygiene Limited. After the transaction, the Joint Venture which owns the Snuggy brand of baby diapers will become a 100 per cent subsidiary of GCPL. Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky Group Limited, South Africa. Kinky is among one of the largest brand into hair segment with product portfolio. Dabur India Limited (Dabur) Dabur has entered into the malted food drink market with the launch of a new health drink Dabur Chyawan Junior. According to the company, they expect to capture a market share of 10 per cent of the Rs. 1,900 Crores malted food drink market over the next two years.

 Dabur has acquired 72.15 per cent of Fem Care Pharma Ltd (FCPL), a leading player in the womens skin care products market, for Rs 203.7 Crores in an all-cash deal. The Company is expected to create synergy by this deal. Dabur got approval from Government of Himachal Pradesh to set up another medicine manufacturing unit. The project has an expected investment of Rs. 130 Crores. Colgate-Palmolive (India) Limited Colgate Palmolive (India) Ltd, which is currently holding 75 per cent of the share capital of SS Oral Hygiene Products Private Ltd, Hyderabad, has acquired the remaining 25 per cent share capital from the local shareholders at an aggregate price of Rs 77.70 lakh. Consequently, SS Oral Hygiene Products has become a wholly owned subsidiary of the company. Nestle India Limited Nestle is planning to invest Rs 6 billion in India in 2009 for expansion of its business in the country.The company which has allotted an investment of Rs 3 billion in the Indian market in 2008, would be doubling the investment in 2009 as part of its business strategy. Nestle International is reinvesting and expanding in India and Nestle India will have all the financial resources to expand and grow from the parent company. Nestle India reported a good increase in its standalone net profit for the second quarter.During the quarter, the profit of the company rose 26.54% to Rs 1,210.90 million from Rs 956.90 million in the same quarter, last year. The company posted earnings of Rs 12.56 a share during the quarter, registering 26.61% growth over prior year period. Net sales for the quarter rose 23.45% to Rs 10,356.30 million, while total income for the quarter rose 23.78% to Rs 10,423.40 million, when compared with the prior year period.

Rural FMCG Market of India - Overview

The Rural FMCG Market of India is on the border of registering large expansion across the country. The Indian Rural FMCG market is mostly unorganized and it is generally dominated by small time retailers. The organized FMCG market is only confined to the urban areas of India. Rural India mostly depends on agriculture, directly or indirectly for livelihood. Further, almost 70% of Indian population lives in

rural India in around 6, 00,000 villages. Rural India offers tremendous growth prospects for the FMCG industry. Facilitation of better rural infrastructure like roads, telecommunication, electricity, supply chain, and transportation would propel the growth of Rural FMCG Market of India. Further, very low per capita consumption of FMCG products also provide tremendous opportunity for the growth of Rural FMCG markets in India. The FMCG sector, which offers tremendous growth prospects are Food and beverage sector, health care and personal care. Presently, rural India accounts for 34% of total FMCG consumption, but it accounts for more than 40% consumption in major FMCG categories like as personal care, hot beverages, and fabric care. The government of India new road map for the development of Indian agricultural sector will facilitate growth of rural FMCG industry. The Government of India's latest decision to waive-off loan (Union Budget 2008-2009) to the tune of ` 60,000 Cr would help better crop production in India, which in turn would definitely help the Indian Rural FMCG market grow to new heights.

FMCG Market in Maharashtra - Overview

FMCG Market in Maharashtra is one of the strongest among the states of India. The most economically important city of India - Mumbai is located in Maharashtra. The city of Mumbai is regarded as the economic powerhouse of India. The state of Maharashtra also has other cities that are important in terms of economic activities like Pune, Nagpur, Aurangabad, Thane, Nasik, Kolhapur etc. Each of these cities of Maharashtra has made substantial contribution towards the growth of the state. The state of Maharashtra is one of the most industrially developed states of India and is home to most of the corporate offices in India. The state has one of the highest numbers of industries in India and it is regarded as one of the richest states in India. There has been a substantial increase in the rate of consumerism in Maharashtra in the recent years and such that the trend is still growing with the increase in income. The cities of Maharashtra have been one of the important driving forces for the development of FMCG markets.

FMCG Market in Maharashtra - Major Companies and Brands

Food products and beverage - Nestle, Kelloggs, PepsiCo, Coca Cola, Uni Lever, Cadbury India, Parle, Hienz, ITC, MTR, Perfetti, Tata Tea, Parrys Confectionery, Venkey's Chicken, Goodricke, Nilgiris, Mother Dairy,Amul India, Gits Food Products Pvt. Ltd, Kwality Walls, Vadilal Ice cream, Goodricke, SmithKlineBecham,

Cleaning and household insecticides - Reckitt Benckiser, Jyothy Laboratories, Godrej Sara Lee

Healthcare and Personal care - Johnson & Johnson, Himalaya Health Care, Modi Revlon, Cavin care, Lakme, L'Oreal, Lotus Herbals, Shehnaz Hussain, Habibs, Procter and Gamble, JK Helene, Gillette, Vatika, Colgate Palmolive

Electronics - LG, Samsung, Sony, Phillips, Videocon, Electrolux, Whirlpool, Kelvinator, Godrej, IFB, TCL, Haier, Panasonic, Sharp, Motorola, Nokia, Sony Eriksson, Compaq, Lenevo, Hewlett Packard, Wipro, Acer.

FMCG Market in Delhi - Overview

The FMCG Market in Delhi is very well developed. The income of the populace is quite high in comparison to many other cities in India and so is the cost of living. The developments in Delhi and its surrounding are due to the fast emerging industries and services sector. Some of Delhi's sunrise sectors are Construction, Information Technology and IT Enabled Services, Food Processing, Manufacturing, Biotechnology, Pharmaceuticals, FMCG, etc. FMCG Market in Delhi - Major Areas

The major cities in Delhi and surrounding areas where the FMCG market is concentrated are :

New Delhi: The capital of India and one of the most planned cities in India. It is the home to all Central Government offices. It is highly developed city and the cost of the living in this area is quite high as it is one of the most economically developed cities in India.. The city has rich heritage of history

and culture. This city is famous for its monuments such as Red Fort, Qutab Minar, Purana Quila, Rashtrapati Bhavan, and Gateway of India.

Gurgaon: One of the capitals of Information Technology in India. The city is a developed one and the increase in the employment opportunities, is helping the growth of the FMCG sector.

Noida: New Okla. Industrial Development Authority (NOIDA) is one of the most developed industrial hubs in the country. Several manufacturing units from different industries are located in this area.

Ghaziabad: It is an important city within the surrounding areas of Delhi.

FMCG Market in Gujarat - Overview

FMCG Market in Gujarat is important for the state. Gujarat is one of the most industrially developed states in India. The state of Gujarat is famous for its traditional and organized business class. The state has a rich history of successful business men in India and it has one of the highest per capita incomes in India. Due to the process of industrialization, there is a general rise income and consumers are spending more on FMCG based goods. Cities like Ghandhinagar, Ahmadabad, Vadodara, etc are some of the most important cities in the state of Gujarat. These urbanized cities have facilitated the rise of FMCG consumerism in Gujarat. FMCG products in Gujarat are offered through organized retailing and through small time retail shops.

The organized retail markets in India cater FMCG products like

Toiletries Soaps and detergents Cleaning and disinfecting agents Cosmetics

Non-durables Pharmaceuticals

Further, the packaged food products and drinks is also sold under the FMCG, since these items are consumed or bought at regular intervals. Furthermore, recently the electronic items like mobile phones, MP3 players, external hard drives, etc, which has less life owing to its technological development, has also been brought under the gamut of FMCG sector.

FMCG Brands in India - Overview

FMCG Brands in India are some of the leading revenue earners. The FMCG Industry in India ranks fourth in the country's economy. The FMCG brands require wellestablished distribution networks as the competition between the different brands are tremendous. The FMCG market in India is expected to be worth USD 33.4 billion by the year 2015. Different FMCG Brands in India targets different echelons of the society, the elite class, the middle class, and the lower class, as well as the rural populace in India. The FMCG sector in India has huge growth potential. Some of the FMCG products such as jams, toothpaste, skin care, shampoos, etc, have potential growth opportunities but still these products have high growth opportunities in terms of per capita consumption. Hindustan Lever is one of the leaders in the FNCG Industry in India. Personal care, cigarettes, and soft drinks are among biggest categories in the Indian FMCG Industry. FMCG Brands in India - Major Companies

1. Hindustan Unilever Ltd. - Lux, Lifeboy, Brookebond, Kawality Walls, Surf Excel, Pepsodent, Close Up, Vaseline, and many more 2. ITC (Indian Tobacco Company)- W. D. & H. O. Wills, Insignia, India Kings, Classic, Gold Flake, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake 3. Nestl India - Kitkat, Milkmaid, Milky Bar, Maggie, Nescafe, Nestle Slim Milk, Barone, And Nestea 4. GCMMF (AMUL) - Amul Kool, Masti Butter Milk, Kool Cafe, Amul's sugar-free Pro-Biotic Ice-cream, etc.

5. Dabur India - Hajmola, Real, Vatika, Nature Care, Lal Dantmanjan, Chyawanprash, Pudin Hara, Amla, Etc. 6. Asian Paints (India) 7. Cadbury India - Gems, 5 Star, Perk, Celebrations, Eclairs, And Dairy Milk 8. Britannia Industries - Tiger, good day, 50-50, treat, milk bar, and nutra choice 9. Procter & Gamble Hygiene and Health Care - Vicks Action 500+, Vicks VapoRub, Vicks Cough Drops, Vicks Formula 44 Cough Syrup and Vicks Inhaler 10. Marico Industries - Parachute, Saffola, Mediker, Silk-n-Shine, Revive, Hair & Care, Sweekar, Nihar, Manjal, etc

A Short Note on the Scope of FMCG Industry In India-

FMCG Sector in India is one of the four largest sectors in Indian economy. The FMCG (Fast Moving Consumer Goods) companies have faced tough competition among themselves over the years which is continuously increasing. This is due to the increase in per capita income among individuals and also various developments in rural economy. The FMCG sector has changed its strategies and has opted for a more well-planned marketing of the products to penetrate both the rural and urban markets. To execute these tasks, the FMCG companies are hiring more and more people which has led to an increase in the job prospects in this sector. Thus, FMCG sector is creating massive employment with good career prospects. Marketing, retail, sales, services and supply are the key areas which generates maximum career scopes in FMCG Industry in India.

Prospects in the FMCG Sector in India-

FMCG sector in the Indian rural market is one of the most booming sectors in Indian economy. The villages of India account for 12.2% of the world's population. The farm sector has been one of the significant sectors which boosted the rural economy resulting in the higher consumption of FMCG products. The consumers in both rural and urban sectors can afford high-priced branded products nowadays with the high

disposable income. The FMCG sector in India has grown significantly in the year 2007 and this gave rise to huge prospects in the sector. The rural and urban sectors fared equally well in the processed food items in the year 2007. The rural market separately performed well in the personal care, fabric care, and hot beverages while the urban market did well in home care, personal care, bakery, dairy products, and the like. A Short Note on the Consumer Class in FMCG Sector in India-

Consumers play a crucial role in the Indian FMCG sector as the price band of each FMCG product is fixed depending largely on the consumer class which the particular company is targeting. A number of variants is offered by each brand in the FMCG sector. For example, the personal care, home care, bakery products, dairy products, processed foods are more consumed by the urban classes whereas the personal care items and fabric care are consumed more by the rural population. Some of the FMCG companies like Nestle India, Cadbury, Procter & Gamble (P&G) and SmithKline Beecham offer high-priced branded products as these companies target the elite and upper middle class consumers. These high-priced branded products do not have high sales in the rural regions as much as it does in the urban section of India. Processed food manufacturers gain more profit in the urban areas as the urban population has a higher preference for ready-to-eat meals. The consumption of personal care items is high in the rural regions. High literacy rates and an increase in the per capita income of the inhabitants led to a rise in the consumption of the FMCG products in the country.

Some Facts about the FMCG Market in India-

The FMCG sector has attracted a large number of consumers in both the urban and rural sectors in India the past few decades through better penetration and lowpriced products. Various manufacturers of FMCG products are absorbed on increasing the sales volume due to the rising demand of the consumers. Creativity and innovation are the major attributes required for success in the sector. Large-scale FMCG companies have won the hearts of consumers by delivering high-end and innovative products at affordable range.

FMCG Sector in India - A Brief Note

The FMCG Sector in India is the fourth largest sector in the Indian economy. As per the reports of the 2005-06 financial year, the market size of the sector was registered as USD 13.1 billion. The FMCG Sector in India involves a strict competition between the organized and unorganized sector of consumer durables. India offers an abundance of raw materials, low-priced labor costs, and also has a presence across the entire value chain. The market size of the Indian FMCG Sector is expected to reach USD 33.4 billion by the year 2015. Some product categories such as jams, toothpaste, skin care products, hair care products, etc have experienced a low per capital consumption as per a report presented in 2006. As per the recent developments in FMCG it is assumed that the consumption of the FMCG products will have a satisfactorily growth with the rising income level of Indian populace in both the rural and urban areas. Around 200 million people are expected to become the consumers of processed and packaged foods by the year 2010. The major activities of the food-processing sector are permitted 100% foreign equity or 100% NRI and Overseas Corporate Bodies (OCB) investment to meet the rising demand of the consumers.

Recent Developments in FMCG Sector in India

Finance Minister, Mr. P. Chidambaram declared several tax sops for the FMCG sector in India along with putting due emphasis on the infrastructure developments in the same

The usual growth drivers such as penetration, per capita consumption, population, and household income were quite strong in 2007 and also the consumption of the FMCG products has been increased outstandingly in 2007

Biscuits worth ` 50 per kilogram are fully exempted from excise duty, customs duty on food processing machineries were reduced from 7.5% to 5%, excise duties on food mixes were reduced from 16% to 8%, and taxes were reduced on edible oils. ITC, Dabur, HUL and Marico were directly benefited from these

The consumption of health and personal care products in FMCG sector has increased in the recent past with rise in disposable income especially among the youth group in India

Budget 2008-2009 for FMCG Sector

Budget 2008-2009, presented by the Finance Minister, Mr. P. Chidambaram on Parliament on 29th February, 2008 had some significant implications for the FMCG (Fast Moving Consumer Goods) sector. Mr. P. Chidambaram declared that a special fund of 40Cr would be provided for tea plantation purposes and a sum of 18Cr will be provided to serve the purpose of coffee plantation. The tea companies in India will be entitled to Crop Insurance Scheme. The tea and coffee mixes will have no excise duties as per the declarations in Budget 2008-09. The cost of breakfast food items such as corn flakes, sharbat, coffee and tea pre-mixes and packaged tender coconut are expected to decline. The excise duties has either been exempted or reduced massively on a number of processed food items in Budget 2008-09. Packaged tender coconut water, paws, puffed rice, milk containing edible nuts and tea and coffee pre-mixes have been completely exempted from excise duties. The excise duty has been halved to 8% on muesli, corn flakes and sharbat. The Central Sales Tax rate has been reduced from 3% to 2% which is effective from 1st April 2008 on the retail sector in India. However, the excise duties for cigars, cheroots and cigarillos have been increased from 30% to 60% in Budget 2008-2009.

Impact of Budget 2008-2009 on FMCG Companies in India-

Some leading brands are produced by ITC Limited in the non-filter segment namely Scissors, Hero, Bristol, and Capstan and the increase in excise duty on the same would reduce its sales volume. The excise duty on filtered cigarettes has also been increased which might affect sales.

The reduction in excise duties on tea, coffee and breakfast cereals as well as the funds provided for crop plantation would boost up companies like Tata Tea, HUL, Nestle, and McLeod Russell.

The income tax slab has been revised in Budget 2009-09. The threshold limit for all income tax assesses has been raised by 40,000 for men to 1.5 lakh, by 35,000 for women to 1.8 lakh and by 30,000 for senior citizens to 2.25 lakh. This has increased the disposable income of people in India which in turn will increase the consumption of FMCG goods. Most of the income groups have been given tax relaxations, as a result of which, people will freely spend on various consumer goods. As a whole, the budget fixed for the financial year 2008-09 is expected to be beneficial for the FMCG sector in India.

FMCG Industry in India - Overview

The FMCG Sector in India is one of the leading sectors in India. The FMCG sector is worth around USD 13.1 billion as reported during the Financial Year 2005-06. The Indian FMCG Sector has got a strong MNC presence in the entire value chain. The FMCG sector is expected to reach USD 33.4 billion by the end of 2015. The competition between the organized and unorganized sectors of FMCG is quite intensive. A wide range of factors is responsible for this massive growth of the FMCG sector in India. Some of the factors, which boosted the FMCG sector in India, are the increase in the awareness levels, rapid urbanization of some regions, and growth in the per capita income. Major Brands Produced by the FMCG Companies in India-

Hindustan Unilever Ltd. - Lux, Life boy, Brooke bond, Kwality Walls, Surf Excel, Pepsodent, Close Up, Vaseline

ITC (Indian Tobacco Company)- W. D. & H. O. Wills, Insignia, India Kings, Classic, Gold Flake, Navy Cut, Scissors, Capstan, Berkeley, Bristol And Flake

Nestle & India - Kit Kat, Milkmaid, Milky Bar, Maggie, Nescafe, Nestle Slim Milk, Bar One, And Nestea

GCMMF (AMUL) - Amul Kool, Masti Butter Milk, Kool Cafe, Amul's SugarFree Pro-Biotic Ice-Cream

Dabur India - Hajmola, Real, Vatika, Nature Care, Lal Dantmanjan, Chyawanprash, Pudin-Hara, Amla

Cadbury India - Gems, 5 Star, Perk, Celebrations, Eclairs, and Dairy Milk

Britannia Industries - Tiger, Good Day, 50-50, Treat, Milk Bar, and Nutri Choice

Procter & Gamble Hygiene And Health Care - Vicks Action500+, Vicks Vaporub, Vicks Cough Drops, Vicks Formula 44 Cough Syrup And Vicks Inhaler

Marico Industries - Parachute, Saffola, Mediker, Silk-N-Shine, Revive, Hair & Care, Sweekar, Nihar, Manjal

Some of the major MNCs in the FMCG sector of India are -

Amway India is one of the largest direct selling companies in India. The company is the fully owned subsidiary of the Amway Corporation, located at Ada, Michigan, USA.

Reckitt Benckiser is one the leading house care products manufacturer and supplier in India. The brands such as Harpic, Lizol, etc are extremely popular in households for their effectiveness.

L'Oreal is a world famous cosmetic manufacturing company. The company owns some of the famous brands such as Garnier, Mabeyline, etc.

Nike is a world famous sport goods and accessories manufacturer and supplier. The quality statement of the company is very strong. The company is based in USA.

Reebok is another American Sport Goods manufacturer and supplier, which provides top of the line sport accessories for all kinds of sports.

Adidas is one of the most well known and perhaps the oldest sports goods producer in the world. The company was founded by Adi Dassler in Germany.

Puma is another famous sport goods manufacturer.

Pepsi Co is a world famous beverage and processed food manufacturer known for its famous Pepsi Cola drink.

Growth Prospects With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the

FMCG companies. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. It is expected that the rural income will rise in 2007, boosting purchasing power in the countryside. However, the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas. Indian Competitiveness and Comparison with the World Markets The following factors make India a competitive player in FMCG sector: Availability of raw materials Because of the diverse agro-climatic conditions in India, there is a large raw material base suitable for food processing industries. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits &vegetables. India also produces caustic soda and soda ash, which are required for the production of soaps and detergents. The availability of these raw materials gives India the location advantage. Labor cost comparison

Low cost labor gives India a competitive advantage. India's labor cost is amongst the lowest in the world, after China & Indonesia. Low labor costs give the advantage of low cost of production. Many MNC's have established their plants in India to outsource for domestic and export markets. Presence across value chain Indian companies have their presence across the value chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-processing sector. This brings India a more cost competitive advantage. For example, Amul supplies milk as well as dairy products like cheese, butter, etc.

FMCG industry eyes 15% growth FMCG industry is expected to witness a lot of action in 2010. With the economy showing signs of revival, the industry is expected to register a 15% growth in 2010 as compared to the previous year. The industry will witness a spate of acquisitions & mergers in the 2010. There will be a renewed focus on rural consumers too, said an analyst based in Mumbai. The countrys FMCG industry registered a 12% growth in 2009 despite the economic downturn. The captains of the FMCG sector are optimistic about the industrys performance in the New Year. Godrej Group chairman Adi Godrej said, With 8% GDP growth and GST implementation, we feel it will be a great year for the FMCG sector in India. The focus area for the Godrej Group will be on FMCG business in 2010. Sharing similar sentiments, Amit Burman, vice-chairman of Dabur India said the industry is expected to register a 14% growth this year as India is getting out of the recessionary blues. Our focus would be on OTC healthcare and skincare brands to sustain our growth in this sector, he added. According to Wipro Consumer Care & Lighting CEO Vineet Agarwal, the industry is expected to perform better in the new year as compared to the previous year. Even during the economic slowdown, the FMCG industry registered a 12% growth. When you see buoyancy in economy, the industry will further grow in 2010. Our core focus will continue to be on rural consumers, he said. Harsh Agarwal, director of Emami Ltd said Emami is looking at both organic and inorganic growth strategy in 2010. The industry is poised for a double digit growth as the overall growth rate of the country is growing, he said. Echoing similar views, Saugata Gupta, CEO, Consumer Products, Marico Ltd said the industry will register a 15 % growth in 2010 as compared to the previous year. I expect the topline growth of the industry to register 15-20 % this year, he added.

Nikhil Vora, managing dirctor , IIDFC SSKI Securities Ltd said the topline of the FMCG is likely to grow by 14.2% y-o-y in Q3FY2010, substantially driven by volume growth. Despite the rise in input costs, FMCG industry is likely to sustain its robust growth momentum aided by increased rural incomes, taxation benefits and gradual shift from the unorganised sector/regional players.

Indian Consumer Buying Habits As Indian's we hold a lot of value for the 'old', maybe it is also culturally driven where we have been asked to respect 'old' rather than look for new. Though this is changing very fast especially among the younger generation of consumers, but it will take a lot of time before we actually catch up with our western counter parts. And it is even questionable whether such a transition is a good one. Anyway without getting into 'consumerism' debate I will like to look into this aspect in detail from a marketer's perspective. Most of us have an uncle who would proudly show of his old watch, " I have been using this watch for the last 30 years , this was gifted to me when I was in class 10" . This is a nightmare come true for a marketer, if every consumer were to use his watch for eternity then ...... Similarly most housewives collect the used containers of flour, ghee ,,, which she would clean and use it to store cereals , and other items in the kitchen and so on till it is sold to the scrap dealer . Companies like Pilot , when they launched their Pilot pens in India, were surprised by the demand from consumers that they wanted a refill for their pens. This was unheard of in the Japaneses market as the pens were designed as 'use and throw' . The local partner of the company had to produce inks locally which could be used to refill the pens. This value which we hold for anything old in our house has been quite successfully exploited by many marketers. Their solution to this issue is offer an 'exchange' scheme' to the consumer. By doing so the company is giving some value to the consumers in return for the old. Most successful was Akai and it's exchange scheme which ended up changing the face the TV market in India. Even Bajaj use to bank on this value for a long time, its ads use to exclusively talk about the money one would get when it is sold later. A more recent example is the annual "The Great Exchange Offer" by BigBazaar, with an offer to buy all the old scrap material (Kabaad) at prices much higher than what prevails in the open market, like Rs 25 per kilo of newspapers , old tires at Rs 50 and so on. The condition being that one has shop four times the value of the old scrap which they sell there to able to redeem the value of exchange. There are many more unique consumer buying habits which i would try and cover in my later posts, but will look forward to suggestions and observations from readers...

A more recent example is the annual "The Great Exchange Offer" by BigBazaar, with an offer to buy all the old scrap material (Kabaad) at prices much higher than what prevails in the open market, like Rs 25 per kilo of newspapers , old tires at Rs 50 and so on. The condition being that one has shop four times the value of the old scrap which they sell there to able to redeem the value of exchange. There are many more unique consumer buying habits which i would try and cover in my later posts, but will look forward to suggestions and observations from readers...

A more recent example is the annual "The Great Exchange Offer" by BigBazaar, with an offer to buy all the old scrap material (Kabaad) at prices much higher than what prevails in the open market, like Rs 25 per kilo of newspapers , old tires at Rs 50 and so on. The condition being that one has shop four times the value of the old scrap which they sell there to able to redeem the value of exchange. There are many more unique consumer buying habits which i would try and cover in my later posts, but will look forward to suggestions and observations from readers...

Reading the consumers mind and making sense of his spending habits is never an easy task. This is one of the reasons why marketers have such voracious appetites for consumer surveys and fancy reports. All those who are betting on Indian consumer trends would do well plough through new data published on Monday by the Asian Development Bank (ADB). It tells us that household spending on consumer goodies in India is about 28% lower than the regional averagea reflection of the fact that average Indian incomes are lower than those of most other countries in the region. ADB data also show that the Indian consumer today is relatively more likely to buy nondurables rather than durables; spent on transport rather than communications; on health rather than education. Looking at comparative spending patterns in richer Asian countries such as Taiwan or Singapore suggests that these patterns may shift, as India grows richer. A fair bit of attention has already been focused on the big findings of the International Comparison Programme (ICP), a huge project that, as the name suggests, tries to compare national economies across the world. The comparisons are based on purchasing power parity (PPP). ADB is handling the Asian end of this research project, which is important because this is the first time that China has taken part in such an endeavour.

The headlines have focused on the macro findings, especially the fact that India and China lag behind the regional averages as far as per capita income goes. This despite their impressive growth records in recent years. Last month, Carnegie Endowment for International Peace scholar Albert Keidel said the new comparison programme would eventually show that Chinas economy is 40% smaller than what is currently assumed. These are grand debates and important ones. But there are other nuggets to be mined as well. ADB has sliced the data into the individual consumption and investment components of national economies. This is where it gets really interesting. The average Indian consumer spends HK$3,234 a year in nominal terms and HK$8,506 in real terms. (The Hong Kong dollar is the currency used for Asian PPP comparisons; it is the so-called numeraire currency.) As a result, the index of Indias per capita final consumption expenditure is 72, as against a regional average of 100. China is 87, Pakistan 102, Thailand 223 and Singapore 772. Thats not surprising, given that Indian incomes are lower than that in these countries. But the micro data tell us a lot more. Take one issue: The relative importance of expenditure on consumer non-durables and durables. Indians consume less than the average Asian. But are they more likely to buy stuff such as soaps and shampoos or gadgets such as television sets and washing machines? ADB offers index values. As against an overall index value of 72 for consumption expenditure, the index for non-durables is 84, while that of durables in as abysmal 29. In other words, India is closer to the regional average when it comes to spending on soaps and shampoos, but it is way behind when it comes to buying television sets and washing machines.

India's shoppers want only best, lots of it From the market perspective, people of India comprise different segments of consumers, based on class, status, and income. An important and recent development in Indias consumerism is the emergence of the rural market for several basic consumer goods. Threefourths of Indias population lives in rural areas, and contribute one-third of the national income. This rural population is spread all over India, in close to 0.6 million villages. India is a lucrative market even though the per capita income in India is low and it remains a huge market, even for costly products. Among the total 164.8 million households in India, 80.7 million households comes under low income group ( <US$ 581 ), followed by 50.4 million lower middle income households ( US$ 581 to US$ 1162), 19.7 million middle income group (US$ 1162 to US$ 1190 ), 8.2 million upper middle income group (US$ 1790 to US$ 2465 ) and 5.8 million high income group (>US$ 2465).

Characteristics of the Indian Consumer Behaviour

The Indian consumers are noted for the high degree of value orientation. Such orientation to value has labelled Indians as one of the most discerning consumers in the world. Even, luxury brands have to design a unique pricing strategy in order to get a foothold in the Indian market. Indian consumers have a high degree of family orientation. This orientation in fact, extends to the extended family and friends as well. Brands with identities that support family values tend to be popular and accepted easily in the Indian market. Indian consumers are also associated with values of nurturing, care and affection. These values are far more dominant that values of ambition and achievement. Product which communicate feelings and emotions gel with the Indian consumers. A part from psychology and economics, the role of history and tradition in shaping the Indian consumer behavior is quite unique. Perhaps, only in India, one sees traditional products along side modern products. For example, hair oils and tooth powder existing with shampoos and toothpaste.

Different Segments of Indian Consumers The Socialites Socialites belong to the upper class. They prefer to shop in specialty stores, go to clubs on weekends, and spend a good amount on luxury goods. They are always looking for something different. They are the darlings of exclusive establishments. They go for high value, exclusive products. Socialites are also very brand conscious and would go only for the best known in the market.

The Conservatives The Conservatives belong to the middle class. The conservative segment is the reflection of the true Indian culture. They are traditional in their outlook, cautious in their approach towards purchases, spend more time with family than in partying and focus more on savings than spending. Slow in decision making, they seek a lot of information before making any purchase. They look for durability and functionality but at the same time are also image conscious.They prefer high value consumer products, but often have to settle for the more affordable one. These habits in turn affect their purchasing habits where they are trying to go for the middle and upper middle level priced products.

The Working Women The working woman segment is the one, which has seen a tremendous growth in the late nineties. This segment has opened the floodgates for the Indian retailers. The working woman today has grown out of her long-standing image of being the homemaker. Today, she is rubbing shoulders with men, proving herself to be equally good, if not better. Working women have their own mind in decision to purchase the products that appeal to them.

Indias Rich Indias rich can be categorized into five major categories as follows: The Rich The rich have income greater than US$11,000/- per annum. Total household having such incomes are 1,058,961. These people are upwardly mobile. Some of them in this category are Double Income No Kids (DINK) households. They spend more on leisure and entertainment-activities than on future looking investments. Across the category, backgrounds are distinctly middle class. They aspire, therefore, to attain the super-rich status.

The Super Rich The Super Rich have income greater than US$22,000/- per annum. Total number of households is 320,900. There are less DINK families here than in the rich category. The Super Rich are mainly professionals and devoted to consumerism. They buy many durables and are status conscious.

The Sheer Rich The Sheer Rich is made up by households having income exceeding US$110,000/- per annum. Such households are 20,863. They do not have a homogenous profile. There are joint families as well as nuclear families in this category. They consume services greatly. They own multiple cars and houses. They aspire to social status and power.

The Obscenely Rich The Obscenely Rich is made up of households having income exceeding US$222,000/- per annum. There are hardly 6,515 such households in India. They are first-generation entrepreneurs who have made it big. Some of them are techies. A variety of people belong to this category. They are just equivalent to the rich in the developed countries. They crave for exclusivity in what they buy. Most premium brands are relevant to them.

Rural Consumer About three quarters of the Indian population are in the rural areas and with the growing middle class, specially in the Indian cities, the spill over effect of the growing urban middle class is also felt in the rural areas.

The Indian rural market has been growing at 3-4% per annum, adding more than 1 million new consumers every year and now accounts for close to 50% of the volume consumption of fast-moving consumer goods (FMCG) in India. The market size of the fast moving consumer goods sector is projected to more than double to US$ 23.25 billion by 2010 from the present US$ 11.16 billion. As a result, it is becoming an important market place for fast moving consumer goods as well as consumer durables.

Increasing Awareness of Indian Consumers Over the years, as a result of the increasing literacy in the country, exposure to the west, satellite television, foreign magazines and newspapers, there is a significant increase of consumer awareness among the Indians. Today more and more consumers are selective on the quality of the products/services. This awareness has made the Indian consumers seek more and more reliable sources for purchases such as organized retail chains that have a corporate background and where the accountability is more pronounced. The consumer also seeks to purchase from a place where his/her feedback is more valued. Indian consumers are now more aware and discerning, and are knowledgeable about technology, products and the market and are beginning to demand benefits beyond just availability of a range of products that came from trusted manufacturers. The Indian consumers are price sensitive and prefer to buy value for money products.

Marketing Strategies Online Marketing A study by the Confederation of Indian Industry (CII) and the International Trade Centre predicts that e-commerce activity in India will rise from US$ 0.10 million in 2000-01 to US$ 5.8 billion in 2005-06, of which the business to business segment will account for US$ 5.41 billion. Currently, the products Indian consumers are buying through online are greeting cards, clothes, CDs/VCDs/DVDs, cassettes, books, magazines, medicine and educational material. The popular online shops in India include: www.ebay.in www.shopping.rediff.com www.reliablegreetings.com

www.shopping.expomarkets.com

Celebrity Influence This is an important tool which is able to influence Indian consumer buying behaviour. In India, celebrities are being increasingly used in marketing communication by marketers to lend personality to their products. With the visual media becoming more popular the use of celebrities in the TV media has increased. Celebrities create headlines. Their activities and movements are being closely watched and imitated. What they endorse sell like hot cakes. It is not surprising therefore that using celebrities in advertisements has become common practice. In India especially, it is not difficult to look for the reasons as to why companies are increasingly using celebrities. Indians always love their heroes and heroines. Consumers like advertisements more if they are admirers of the celebrities in the advertisements. When a consumer likes the celebrity in the advertisement, he or she is more likely to accept what the celebrity says about the advertised product and therefore will develop more positive feelings toward the advertisement and the brand itself. Famous celebrities are able to attract attention and retain attention by their mere presence in the advertisements. In the midst of the advertisement clutter, the advertisements that celebrities endorse also achieve high recall rates. When people see their favoured reference group members or celebrities in the advertisements, they pay more attention to them. Celebrities may also help reposition products. Products with sagging sales needs some boosting and in this Indian celebrities can help by way of they endorsing the product concerned. The Malaysian businessmen can contact celebrities for endorsing their products through advertising agencies. The contact addresses are given in the appendixQuality Oriented Outlets Indian consumers looking for quality choose expensive brands as they feel that price is an indicator of quality. However, in the absence of well known brands in selected product range, consumers are likely to take cues from well established retail outlets hoping that these outlets carry quality products. Malaysian businessmen who prefer not to go for high-visibility, costly campaigns may embark on the strategy to engage well known retail outlets to capture the segment of Indian consumers looking for

quality products. Some of the established retail outlets in India for selected products are found in Appendix Freebies Indian consumer buying behaviour is influenced by freebies. Freebies are consumer products given free of charge as gifts to purchases of selected products above a certain value. TVs, washing machines, refrigerators, and ready made clothes are some of the product categories in which freebies are given to Indian consumers. Freebies generally comprise tooth paste, soaps, detergent, cooking oil etc. Malaysian companies wanting to penetrate the Indian market, perhaps should consider giving freebies for the purchases made by the Indian consumers. Malaysians can work with the local business partners to attract the consumers by way of such promotion campaigns.

Eco-Friendly Products The environmental awareness in India has started affecting marketing of products based upon their eco-friendliness. In general, Indian consumers are likely to buy environmentally responsible products and packs. The future key for marketing could be to select more ethical and ecological responsible products and packaging, which is also convenient for consumers, thus, balancing environmental concerns with commercial considerations. Consumers in India are taking lead in prompting manufacturers to adopt technologies to produce eco-friendly products.

Changing Trends in Indian Consumer Behaviour Bulk Purchasing Urbanisation is taking place in India at a dramatic pace and is influencing the life style and buying behaviour of the consumers. The working urbanites are depending more on fast and ready-to-serve food, they take less pain in traditional method of cooking and cleaning. Bulk purchases from hyper stores seems to be the trend these days with purchasing becoming more of a once-a-week affair, rather than frequent visits to the neighbourhood market/store/vendor. The popular growing shopping trend among urbanities is purchasing from super markets to hyper stores.

Trendy Lifestyles The current urban middle and upper class Indian consumer buying behaviour to a large extent has western influence. There is an increase in positive attitude towards

western trends. The Indian consumer has become much more open-minded and experimental in his/her perspective. There is now an exponential growth of western trend reaching the Indian consumer by way of the media and Indians working abroad. Foreign brands have gained wide consumer acceptance in India, they include items such as; Beverages Packed food Ready to eat food Pre-cooked food Canned food Personal care products Audio/video products Garment and apparel Footwear Sportswear Toys Gift items Foreign brands vie increasingly with domestic brands for the growing market in India. Foreign made furniture is well accepted by the Indian consumers. Malaysian, Chinese, Italian furniture are growing in popularity in India.

Indian consumers have also developed lifestyles which have emerged from changing attitudes and mind sets; exposure to western influences and a need for selfgratification. Beauty parlours in cities, eateries, designer wear, watches, hi-tech products are a few instances which reflect these changes.

Buyers Market In The Making The sellers market is slowly moving towards becoming the buyers market. Since, Indias economic liberalization policies were initiated in 1991, many new product offerings have entered the Indian market and product variety has also increased manifold. Import licensing restrictions are being eliminated and tariffs significantly reduced and this has led to large range of consumer goods made available in India. Indian consumers have always preferred foreign goods and with the liberalization, they now have a choice of foreign products vis--vis the local products.

Consumer Spending Behaviour The Indian consumer spending has increased from US$ 133.60 in 1992-93 to US$ 350.74 in 2002-03, a compound annual growth of 10.13 per cent at current prices. The way Indian consumers are spending their money on various items has changed in

recent years. The share being spent on the basis (food and beverages) has fallen from 54.07 per cent in 1992-93 to 44.8 per cent in 2002-03. Other items have increased in importance, for example, medical and healthcare spending has increased from 3.5 per cent to 8.5 per cent of total expenditure over the same period, a compound growth rate of 19.71 per cent. Similarly spending on transport and communication has grown at 13.2 per cent. While the Compound Annual Growth Rate (CAGR) in total consumer spending has been around 12 per cent a year over the past decade, there have been sharp ups and downs. Consumer expenditure has been in tandem with the annual GDP growth. For rural India, per capita 30 days' consumer expenditure of US$ 12.34 was split up into US$ 6.78, on an average, for food, and US$ 5.56 for non-food. Food expenditure included US$ 2.25 for cereals and cereal substitutes, and US$ 2.37 for milk, milk products, vegetables, edible oil and US$ 2.16 on others. Non-food expenditure included US$ 1.11 for fuel and light, and another US$1.00 for clothing, footwear and US$3.45 on other non-food expenditure. For the urban sector, average Monthly Per Capita Consumer Expenditure (MPCE) of US$ 23.53 was split up into US$ 10.00 for food and US$ 13.53 for non-food. Of food expenditure, US$ 2.37 went towards cereals and cereal substitutes while US$ 3.67 was spent on milk, milk products, vegetables and edible oil and US$3.96 on other food items. US$ 2.11 was spent per person per month on fuel and light, and US$ 1.65 on clothing and footwear and US$9.77 on other non-food items. Urban expenditure levels per capita exceeded rural levels for all the product groups, except on cereals and cereal substitutes. The average monthly per capita expenditures on cereals and cereal substitutes for rural and urban areas are very close to each other. The gap between rural and urban averages of MPCE was of the order of US$ 11.16. The itemgroups viz. milk and milk products, beverages etc, fuel and light, education, miscellaneous consumer goods & services, conveyance and rent contributed to the gap significantly. Non-food expenditure per person in the urban sector was more than double of that for the rural sector, where it was about US$ 5.55. In India, the higher income group (>US$2,465) spends more amount of their income on luxury goods and trendy products than fact moving consumer products. The middle income group (US$1,162 US$1,190) spends more on consumer expendables than the rich. Combined the middle and the lower income group provide 60 per cent of the value of the Indian market.

Conclusion Top class, middle class and lower class are income related classifications of the population and each of this class has its own consumption pattern. For the Indian market, Malaysian exporters/manufacturers should see the substantial middle class and base the market demand/projections on this roughly estimated at 250 million people with substantial disposable income.

MAJOR RETAIL PLAYERS IN INDIA

FMCG Food bazaar Hyper market Reliance fresh MORE Spinach Spencers Star Bazaar

FASHION Shoppers Stop Westside Lifestyle Pyramid Globus Ebony Pantaloon

OTHERS E-Zone (Electronics) Planet M (Music) Music World (Music) Crossword (Book) Gautier (Furniture) Durian (Furniture Style Spa (Furniture)

The Future of FMCG Fast moving consumer goods will become an Rs 400,000-crore industry by 2020. A Booz & Company study finds out the trends that will shape its future Consider this. The anti-ageing skincare category grew five times between 2007 and 2008. Its today the fastest-growing segment in the skincare market. Olay, Procter & Gambles premium anti-ageing skincare brand, captured 20 per cent of the market within a year of its launch in 2007 and today dominates it with 37 per cent share. Mouth-rinsing seems to be picking up as a habit mouthwash penetration is growing at 35 per cent a year. Rural penetration of shampoos increased to 46 per cent last year, way up from 16 per cent in 2001. Consumption patterns have evolved rapidly in the last five to ten years. The consumer is trading up to experience the new or what he hasnt. Hes looking for products with better functionality, quality, value, and so on. A new report by Booz & Company for the Confederation of Indian Industry (CII), called FMCG Roadmap to 2020. The Game Changers spells out the key growth drivers for the Indian fast moving consumer goods (FMCG) industry in the past ten years and identifies the big trends and factors that will impact its future. The report estimates the FMCG sector witnessed robust year-on-year growth of approximately 11 per cent in the last decade, almost tripling in size from Rs 47,000 Cr in 2000-01 to Rs 130,000 Cr now (it accounts for 2.2 per cent of the countrys GDP). Growth was even faster in the past five years almost 17 per cent annually since 2005. It identifies robust GDP growth, opening up of rural markets, increased income in rural areas, growing urbanisation along with evolving consumer lifestyles and buying behaviours as the key drivers of this growth.

The report further estimates that the FMCG industry will grow at least 12 per cent annually to become Rs 400,000 Cr in size by 2020. Additionally, if some of the factors play out favourably, say, GDP grows a little faster, the government removes bottlenecks such as the goods and services tax (GST), infrastructure investments pick up, there is more efficient spending on government subsidy and so on, growth can be significantly higher. It could be as high as 17 per cent, leading to an overall industry size of Rs 620,000 Cr by 2020. The Indian GDP per capita is low but many Indian consumer segments which constitute rather large absolute numbers are either close to or have already reached the tipping point of rapid growth. The sector is poised for rapid growth over the next 10 years, and by 2020, the industry is expected to be larger, more responsible and more tuned to its customers. Based on research on industry evolutions in other markets and discussions with industry experts and practitioners, Booz & Company has identified some important trends that will change the face of the industry over the next ten years. Some key ones related to evolution of consumer segments are as follows: Accelerating premiumisation The rising income of Indian consumers has accelerated the trend towards premiumisation or up-trading. The trend can be observed prominently in the top two income groups the rich with annual income exceeding Rs 10 lakh, and the upper middle class with annual income ranging between Rs 5 lakh and Rs 10 lakh. The reports says, the rich are willing to spend on premium products for their emotional value and exclusive feel, and their behaviour is close to consumers in developed economies. They are well-informed about various product options, and want to buy products which suit their style. The upper middle class wants to emulate the rich and up-trade towards higher-priced products which offer greater functional benefits and experience compared to products for mass consumption. While these two income groups account for only 3 per cent of the population, the report estimates that by 2020 their numbers will double to 7 per cent of the total population. The rich will grow to approximately 30 million in 2020, which is more than the total population of Sweden, Norway and Finland put together. Similarly, the upper middle segment will be a population of about 70 million in 2020, which is more than the population of the UK. Over the next ten years, these groups will constitute large enough numbers to merit a dedicated strategy by FMCG companies. We have seen companies focused on selling primarily to the mid segments. Often, there is no clear segmentation being offered. Players will do well to clearly separate their offerings for the upper and mid segments, says Malhotra and adds that the two should be treated as separate businesses with a dedicated team and strategy for each. Growing categories Categories are evolving at a brisk pace in the market for the middle and lower-income segments. With their rising economic status, these consumers are shifting from need- to want-based products. For instance, consumers have moved from toothpowders to toothpastes and are now also demanding mouthwash within the same category.

Also, the report notes, consumers have started demanding customised products, specifically tailored to their individual tastes and needs. The complexities within the categories are increasing significantly. Earlier a shampoo used to have two variants normal and antidandruff. Now, you have anti-dandruff shampoos for short hair, oily hair, curly hair, and so on. The trend towards mass-customisation of products will intensify with FMCG players profiling the buyer by age, region, personal attributes, ethnic background and professional choices. Micro-segmentation will amplify the need for highly customised market research so as to capture the specific needs of the consumer segment targeted, before the actual product design phase gets underway. The beauty products market will grow by 20 per cent per annum as result of the changing socio-economic status of consumers, especially women. Middle-class women are now more conscious of their appearance and are willing to spend more on enhancing it. Products such as colour cosmetics (growing by 46 per cent) and sun care products (growing at 13 per cent) have latched on to this trend rapidly. Value at the bottom Booz defines the bottom-of-the-pyramid or Bop consumers as those who earn less than Rs 2 lakh per annum per household. The group constitutes about 900 to 950 million people. While the middle class segment is largely urban, already well-served and competitive, the Bop markets are largely rural, poorly-served and uncompetitive. A lot of the basic needs of Bop consumers are yet unmet: Financial services, mobile phones & communication, housing, water, electricity and basic healthcare. And so there is untapped opportunity. Malhotra says, The aspiration was always there, and increasingly money is coming in. The segment is being targeted primarily with lower-priced products, say, a Rs 2 Parle-G. But increasingly it will need products that deliver more value say, a Rs 5 product that serves as dinner and also delivers nutrition (vitamins, proteins etc). Companies like PepsiCo and Tata are working on such products. The report says the rural Bop population is estimated to be about 78 per cent of the total Bop population. The segment is becoming an important source of consumption by moving beyond the survival mode. As a result of rising incomes, the growth of FMCG market in rural areas at 18 per cent a year has exceeded that of the urban markets at 12 per cent. While the rural market comprises only 34 per cent of the total FMCG market, given the current growth rates, its contribution is expected to increase to 45-50 per cent by 2020. It will require tailored products at highly affordable prices with the potential of large volume supplies. Products such as fruit juices and sanitary pads which had no demand in the rural markets earlier have suddenly started establishing their presence. While most FMCG players have succeeded in establishing sufficient access to their products in rural areas, the next wave of growth is expected to come from increasing category penetration, development of customised products and up-trading rural consumers towards higher-priced and better products.

Another big trend that has been the highlight of the study is the emerging idea of many Indias. The report says that despite the complexities of language, culture and distances, the Indian market has largely been seen as a homogenous market. Theres one product for the entire country the same Maggi noodles for Karnataka and West Bengal, or the same Diet Coke for Punjab and Assam. Besides, these products have the same advertisements that run across the country. Increasingly, FMCG players are realising that India is not a homogenous market and consumer preferences vary significantly. By 2020, Maharashtras GDP will exceed that of Greece, Belgium, and Switzerland, and Uttar Pradesh economic size will exceed that of Singapore and Denmark. So, having a dedicated firm for Maharashtra or Gujarat can prove to be a realistic and profitable proposition. We will see companies coming up with regional products. Hindustan Unilever has teas which are very different in one state versus the other. Pepsi has a different product in Andhra Pradesh which is not sold anywhere else. Differentiation used to happen at the country level; now you will see at the state level, says Malhotra. FMCG players need to grow regional in their thinking and move towards an increasingly decentralised operating model in India. As consumer preferences differ across regions and states, companies may follow a regional strategy in terms of product ingredients, positioning, marketing campaign, and channels. Overall, decentralisation or regionalisation will become an increasingly important theme for FMCG players.