FAST MOVING CONSUMER

GOODS
Characteristics of FMCG industrya) The industry
is characterised by a strong focus on the four P's
of marketing. Ib) It is a high volume,low value
driven industry in most categories.c) It is brand
driven,rather than product drivend) The capital
investment required in plant & machinery is not
high & any reasonably sized industrial house can
enter the industry in manufacturing. e) Distribution
network is extremely vital for the success of the
organisation.

Characteristics of Indian FMCG Sector:

Launch costs are as high as 50-100% of the revenue in the
first year which would reduce as the brand matures.ii)
Presence of a large unorganised market : Factors like low
entry barriers in terms of low capital investment,fiscal
incentives from the government,low brand awareness led to
the mushrooming of the unorganised sector.Local players
understand the local demand & local players have more than
50% share of the market.iii) Pace of competition :
Increasing competition is the main reason for loss of pricing
power in most brands.FMCGs brands are unable to deliver
the experiential difference beyond a point & hence,find it
difficult to hold on to

a premium pricing for long.

iv) Distribution network: The vast & diverse rural d requires
a multi-tiered distribution networks,efficient logistics &
infrastructure to reduce the high distribution costs.
Companies need to review distribution strategies,to leverage
the best possible distribution at the least possible cost,as this
is a crucial factor in deciding the profitability of an
organisation.v) Capacity to Consume: Rural income levels
are determined by the vagaries of monsoon and rural
demand is not as steady as urban demand.Organisations
have to create a capacity for consumption for the rural
consumers so that a consumer market is created.If,the rich
use cash to build inventory as per their convenience,then the
poor who have unpredictable income streams & subsist on
daily wages have to use cash conservatively which forces the
poor to make purchases only when they have cash & buy
only what they need immediately.

vi) Brand BuildingMajor Indian consumer product

companies like Britannia,P&G,HLL,Colgate etc have a very
sound presence througout the Indian market with strong
brands.
Although brand loyalty is comparatively low for FMCGs but
there are a few exceptions to this rule.Products like
cigarettes,personal hygeine products are found to command
a high level of brand loyalty.vii) Rise of Regional Brands:
Regional brands are taking on well known established brands
by pursuing geographical or need based flanking
strategy.Flanking attacks make excellent marketing sense for
smaller and regional players with limited resource.This is how
Nirma detergent powder became a national brand & a
household name also.The smaller players have also started
delivering on the quality front.National players have started
reducing prices employing

innovative packaging & developing price points, which are

comfortable.
Large number of SKUs : Rationale behind having
increasing SKUs from the smallest to the largest is to capture
all possible preferences for consumption patterns of FMCGs
vary with price,necessity and pack size.With lower disposable
income as well as lower exposure to products,smaller pack
sizes to be more acceptable than larger ones in rural markets
of India.

CHALLENGES IN FMCG INDUSTRY

The viable strategy for FMCG organisations is to encourage
consumers to increase penetration of these categories in
semi urban/rural areas through product trials & increased
penetration.2) Increasing Penetration for Emerging
Categories:Some emerging categories like processed
products,value added skin products etc have to be
penetrated in semi urban/urban areas with product trials.3)
Innovation: One of the biggest challenges facing the

FMCG industry is to innovate at the next level.

4) More Spending Options with Consumers : Consumers
now have more spending options than a few years ago but
the lure of new avenues of expenditure in products &
services lead to consumers restricting their spends on
FMCGs.eg-Rural consumers have adopted mobile telephony
on a large scale.
5) Price Wars & Commoditisation of brands : In the last
few years, there has been intensification of price wars.
FMCGs manufacturers have been slashing the prices of
detergents & shampoos.6) Counterfeits: The illict trade of
counterfreits,refilled & grey products causes an annual loss
of over Rs.2,500 crores to the FMCG industry.According to a
Nielsen study,Delhi acts as a distribution centre for about
70% of counterfreits annually.

HLL incurred a loss of upto Rs.1,500 crores on account of

counterfeit production of its brands,out of the total estimated
loss of upto Rs.2,500 crores for the FMCG industry.
7) Low Order Value Per Rural Retailer per visit : Not only
the rural retail outlets are highly scattered but also their
orders interms of value per visit per organisation makes the
operation of distribution of products in rural areas financially
unviable.

PENETRATION OF DIFFERENT
FMCG PRODUCTS IN RURAL
MARKET

CATEGORYPENETRATIONBRAND Toilet
Soap91% Lifebuoy Washing Cake88%Wheel
Tea77%Lipton Taaza Washing Powder70%Nirma
Salt64%Tata Salt Biscuits61%Parle G