FMCG. Industry. Outsourcing in Indian

Transcription

1 Outsourcing in Indian This white paper offers an insight into the Fast Moving Consumer Goods [FMCG] industry in India and how it is resorting to outsourcing specific tasks from their overall operational procedures. It also highlights why India is being considered as a favoured outsourcing destination and how Guires as an outsourcing partner can aid FMCG organizations to enhance their overall productivity. FMCG Industry R Your Outsourcing Partner

2 CONTENT FMCG Industry in India 01 Characteristics of the Indian FMCG Industry FMCG Sector Trends Top Reasons to choose Guires Outsourcing

3 Fast Moving Consumer Goods FMCG Industry in India: In the present day, the FMCG industry forms a keystone of Indian economy. Basically FMCG products are those that are consumed by consumers at a rapid rate than all other goods combined. The FMCG sector can largely be split up into three vital categories such as; food and beverages, household goods and personal care products. Leading players in this industry are PepsiCo, Coca-Cola, ITC, Nestle, Hindustan Unilever and Procter & Gamble. In 2014, the FMCG industry in India emerged as the fourth largest sector boasting of a market size of $13 billion and it is expected to reach a total market size of $33 billion in The FMCG industry in India also generates employment opportunities and presently employs more than three million people. A factor that supports robust growth of this sector is the high consumption of FMCG products by consumers from both urban and rural areas. 700 million people in India come from rural areas and contribute to 40 percent of the total FMCG market in India. This sector is projected to grow in the coming years owing to several factor such as; education and urbanization, rising population and incomes and a marked expansion of the retail sector. Growth of FMCG Industry in India: FMCG industry expects a CAGR of percent per annum. Annual profits recorded in this sector amounted to $14.74 billion. 01 In the financial year the FMCG sector in India recorded a compound annual growth rate [CAGR] of 11.2 percent based on a potent yearly growth volume of 8.5 percent. As specified above, this growth is being fuelled by increasing incomes, favourable demographics and lifestyle changes. In India, FMCG consumption in urban and rural areas constitute 25 percent and 40 percent respectively. Average spending on groceries in India is 40 percent whereas average spending on personal care products constitutes 8 percent. As per a recent report, once goods and service tax [GST] is introduced combined with the onset of foreign direct investment [FDI], the size of the industry is expected to rise to $47 billion. Based on the above said trends the FMCG industry in India revealed a surge in overall sales thereby generating sizable income over the years. Profit margins even after tax deduction revealed an ascending incline which brings us to the conclusion that the industry has done exceptionally well and the future looks bright too. FMCG growth rate in India is outlined in the figure below

4 02 Year Income 2,669, ,196, ,837, Expenditure 2,597, ,117,734 3,715,446 Sales 2,598, ,115, ,743, CAGR % 4,264, ,904, ,840, ,160,620 4,801, ,711, ,179, ,813, ,737, Characteristics of the Indian FMCG Industry: Products offered by FMCG industry continue to be consumed irrespective of an economic deceleration as these are products that are consumed daily. Two-third of FMCG income is generated largely from products that fall under the category of food and beverages and personal care. Around 40 percent of the FMCG market is driven by demand from rural India. Critical aspects to consider while reaching both urban and rural markets in an effective manner is by maintaining fully functional distribution channels and possessing elaborate logistics management skills. Existence of intense competition. Requires huge capital when it comes to launch new commodities or establish distribution networks pan-india. The FMCG sector has witnessed a boost owing to the elimination of licensing fee for most food and agro-processing industries sparing some like cane sugar, hydrogenated animal oils & fats and alcohol. A factor that defines the characteristic of the Indian FMCG industry is the existence of a healthy distribution network that encompasses around six million retail outlets. Other factors comprise of:-

5 FMCG Sector Trends: A factor that defines the characteristic of the Indian FMCG industry is the existence of a healthy distribution network that encompasses around six million retail outlets. Other factors comprise of:- The figure below graphically depicts trends in the Indian FMCG industry: Greater awareness of products / brands Rising Income Desire to experiment with brands / products 03 Average spending on groceries in India is 40 percent whereas average spending on personal care products constitutes 8 percent. This aspect combined with the fact that out of the total spending done by individuals, a huge amount is spent on purchasing FMCG products. Adding to this aspect is the fact that India is largely populated. All these factors together render India as one amongst the biggest FMCG markets on a global level. India spends around $120 billion only on food which is by far the most in emerging markets after China. Factors that drive the rural FMCG market includes; large number of literates, infrastructural development, greater cognizance, outreach of mass media etc., have all worked towards raising the demand for FMCG products. Consumer goods like healthcare products, salty snacks, edible oils etc., have experienced a surge in the rate of consumption. In addition, government intervention to aid the rural public with initiatives that facilitate waiver on loans, payments being made under the national rural employment guarantee act [NREGA] have reinforced the spending capacity of the rural populace. Increasing consumer demands Availability of online shopping channels FMCG Trends Growth of modern trade New product launches Evolving consumer lifestyles The Outsourcing Occurrence: Evolution of information technology over the years has prompted large scale outsourcing. Today, several organizations abroad are outsourcing tasks to India. Every industry, be it manufacturing, automotive, healthcare, oil and gas, FMCG and many others are now outsourcing specific tasks from their overall operational procedures to organizations in India. Popular notion is that outsourcing is eliminating jobs overseas and creating opportunities in India. However, prominent economists believe that outsourcing fosters global business and is profitable to all stakeholders equally

6 04 India: A preferred outsourcing destination On the whole India provides a wide spectrum of reasons that favours outsourcing such as; India boasts of an economy that is driven by a strong market, existence of private conglomerates, has the largest democracy in the world and the largest English speaking population, follows western accounting norms, and has a highly skilled and knowledgeable workforce etc. Market for global business in consumer goods is spurred by the existence of a vastly affluent middle class public. India s competitiveness in the global economy is driven by the existence of a well structured legal system, transparent banking sector etc. All these factors combined together have established India as one of the rapidly developing economies in the global arena. This lends credence to the fact that India will not just be incorporated into the universal economy but also stands to play a major role in it. Dynamics that drive foreign direct investment in India are:- Indian economy is witnessing a volatile and continued growth. Organizations looking forward to invest in India can refer to case studies pertaining to success stories of companies from existing sectors before they make an investment. Foreign institutional investors have been attracted to India considering the performance of Indian public equity market. Availability of easy exit strategy for investors through mergers and acquisitions. An investment idea has been formulated by investment companies which is based on the following factors:- o Highly skilled and knowledgeable Indian workforce displays a proclivity for delivering ground-breaking solutions and top of the notch R&D services. o India s reputation to offer world class products and services combined with an enriched procedural methodology and exceedingly superior quality control. o The time zone advantage facilitates organizations to get their work done when they are closed for business.

7 Top reasons why FMCG industry is opting for outsourcing: 05 Indian FMCG s consider outsourcing as an option when they are faced with cut-throat competition and over demanding customers. This worked in favour of outsourcing companies as it compelled FMCG s to overview their business strategies and operational procedures. Contrary to businesses abroad manpower resources or cost are not what compel Indian FMCG s to outsource. Indian FMCG s consider outsourcing options when confronted with factors such as core competencies, augmenting overall productivity, scalability, downsizing time taken to market and other assorted factors. A study revealed that 84 out of 119 FMCG companies are currently outsourcing tasks from their overall operational procedures. The figure below highlights the top reasons for outsourcing Very significant Significant Moderately significa Low significance Insignificant 5 0 Save cost Free resources & focus on strategies Make growth process run smoothly Maintain core competency Start new projects quickly Gain access to world class capabilities Reduce operational risks Avail resources not available internally

8 06 Top reasons to choose Guires as your outsourcing partner: One point contact Guires connects you with the right personnel who fully understands your requirements and harnesses his expertise and know-how in delivering the project. This ensures that there is no ambiguity or any confusion in executing the project. Complying with international standards Guires makes sure that outsourced tasks adhere to international principles and standards. Reduce client stress Once a project is outsourced to Guires, clients need not worry about any aspect of the task assigned. Clients only have to provide project specifics and they can expect the output within the pre-determined timeline. Management support Every project is individually supervised and micro-managed by Guires management that has extensive expertise and experience thereby providing valuable feedback and insights which is aptly utilized to streamline the project. Timely delivery At Guires, it is ensured that projects are delivered on time in a concise and satisfactory manner.

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