Fmcg Scenario in India

Products which have a quick turnover, and relatively low cost are

known as Fast Moving Consumer Goods (FMCG). FMCG products are those

that get 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.

Indiaʹs 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 Crores. 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. Singleproduct

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.

85,000 Crores Indian

FMCG market is one

of the important

sector and has

registered a robust

growth rate.

Ag-gregate sale

FMCG industry is

expected to increase

by 19.2 per cent

during the December

2008 quarter.

www.ghallabhansali.com Page 2

Jan, 28

2009

FMCG SECTOR

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-tooʺ 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