RESEARCH REPORT ON FMCG INDUSTRY

Transcription

1 RESEARCH REPORT ON FMCG INDUSTRY By-Swati Bandil 1

2 Content :- Page no. 1. Overview of FMCG Industry 3 2. Contribution of FMCG Industry in India s 3-4 growth 3. Classification of FMCG Industry 4 4. Global Scenario 5 5. Porter s 5 forces model 6 6. Challenges and future trends of FMCG Industry Conclusion 7 2

3 FMCG Industry:- Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. FMCG have a short shelf life, either as a result of high consumer demand or because the product deteriorates rapidly. FMCG goods are all consumable items (other than groceries/pulses) that one needs to buy at regular intervals. These are items which are used daily, and so have a quick rate of consumption, and a high return. FMCG can broadly be categorized into three segments which are: 1. Household items as soaps, detergents, household accessories, etc, 2. Personal care items as shampoos, toothpaste, shaving products, etc and finally 3. Food and Beverages as snacks, processed foods, tea, coffee, edible oils, soft drinks etc. Global leaders in the FMCG segment are Nestlé, ITC, Hindustan Unilever Limited, Reckitt Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi, Gillette etc. The FMCG sector in India is at present, the fourth largest sector with a total market size in excess of USD 13 billion as of This sector is expected to grow to a USD 33 billion industry by 2015 and to a whooping USD 100 billion by the year This sector is characterized by strong MNC presence and a well-established distribution network. In India the easy availability of raw materials as well as cheap labour makes it an ideal destination for this sector. There is also intense competition between the organized and unorganized segments and the fight to keep operational costs low. Contribution of FMCG Industry in India:- 1. The contribution of FMCG sector in India s total GDP is 2.5% and it is the fourth largest sector of the Indian economy, and it has a market size of `2 trillion with rural India contributing to one third of the sector s revenues. It is one of the largest sectors in India. 2. FMCG have major role in employment also, it is the larger employers sector in country, and the sector provides direct and indirect employment opportunities over the 30 lakh people. 3

4 3. Packaging industry, media industries are the two industries which contributed in a major part of FMCG Industry. The packaging industry for the FMCG sector alone is worth US$ 3.5 billion, and is expected to grow faster due to the growth of private label FMCG products. The media industry has a lot to gain from the FMCG sector, Around 40% of media industry earnings from advertising (US$ 5.5 billion) are estimated to come from the FMCG sector, a contribution of US$ 2 billion 4. Create employment for people with lower educational qualifications. FMCG firms have also undertaken some specific projects to integrate with upcountry and rural areas for both inputs and for distribution as well as to fulfill CSR 5. In the last decade, the FMCG sector has grown at an average of 11% a year; in the last five years, annual growth accelerated at compounded rate of ~17.3%.The overall FMCG market is expected to increase at (CAGR) of 14.7 per cent to touch US$ billion during , with the rural FMCG market anticipated to increase at a CAGR of 17.7 per cent to reach US$ 100 billion during Classification of FMCG Industry:- FMCG INDUSTRY Food and Beverages (43%) Household Care (12%) Personal Care (22%) Health beverages, bakery, snacks, chocolates, ice cream, tea/coffee/soft drinks, processed fruits & vegetables, dairy products & branded flour. Febric wash, Household Care Oral care,hair care,skin care,cosmetic,hygene and paper products 4

5 Global Scenario: - Over the years, demand for consumer durables has increased with rising income levels, double-income families, changing lifestyles, availability of credit, increasing consumer awareness and introduction of new models. Products like air conditioners are no longer perceived as luxury products. The biggest attraction for MNCs is the growing Indian middle class. This market is characterized with low penetration levels. MNCs hold an edge over their Indian counterparts in terms of superior technology combined with a steady flow of capital, while domestic companies compete on the basis of their wellacknowledged brands, an extensive distribution network and an insight in local market conditions. Growth driver of FMCG Industry in India:- Robust growth in India s GDP Growing urbanization & Rise in per capita category consumption Evolving consumer life style increased income in rural areas & Increased in rural consumption Change Spending Pattern Changing Profile and Mind Set of Consumer Growth of modern retail Shift from unorganized to organized Contribution ofglobal FMCG Market In their total GDP USA UK China UAE Africa India 5

6 Porter s 5 Forces model on FMCG industry: - Threat of substitute ( high) :- Low government restriction, low customer switching cost and moderate entery and exist Bargaining power of suppliers (Moderate) : - Low brand loyalty, low costomer switchig cost and availibility of high substitute product Rivalry among competitors( highly attractive):- Stronge MNC Presence, low product differentiation, low consumer switching cost Berriers to entry (Moderate): - Avalibility of cheif labour and COD, Low brand identity, high economic scale, cascading effect in taxation Bargaining power of customers (low) : - Avalibility of high competition and substitute product, Low switching cost Challenges and future Trend:- In union budget 2015 hike on exercise duty On Cigarettes and tobacco products is the biggest Challenges for these manufacturing Companies There are very slow growth in FMCG Sector From the two Successive year because shortfall in rains has very badly affected rural consumption,which Impacted on incomes and adversely affected sales across product category Cascading Multiple Tax structure in the FMCG sector is also one of the biggest challenge for FMCG companies that s by this sector have more hope for upcoming GST (Good & Service tax) bill. In FMCG Sector there are few products in every sector which perform badly compared to the others in terms of sales and movement For e.g. the sales of the Fiama Di Wills shampoo is not comparable with the sales of competing brands 6

7 like Dove or Pantene. Similarly in the house hold and food & beverages category as well as facing these problems Fast moving consumer goods will become a Rs 400,000-crore industry by the FMCG sector witnessed robust year-on-year growth of approx. 11 per cent in the last decade, almost tripling in size from Rs 47,000 crore in to Rs 130,000 crore now (it accounts for 2.2 per cent of the country s GDP). Growth was even faster in the past five years almost 17 per cent annually since It identifies robust GDP growth, opening up of rural markets, increased income in rural areas, growing urbanization along with evolving consumer lifestyles and buying behaviors as the key drivers of this growth The decision to allow 51% FDI in multi brand retail and 100% FDI in single brand retail augers well for the outlook for the FMCG sector. The move is expected to bolster employment, and supply chains, apart from providing high visibility for FMCG brands in organized retail markets, bolstering consumer spending, and encouraging more product launches. FDI of 100% under the automatic route is allowed in the food processing sector, which is considered as a priority sector Conclusion:- The Indian FMCG sector is highly fragmented, volume driven and characterized by low margins. The sector has a strong MNC presence, well established distribution network and high competition between organized and unorganized players. FMCG products are branded while players incur heavy advertising, marketing, packaging and distribution costs. The pricing of the final product also depends on the costs of raw material used. The growth of the sector has been driven by both the rural and urban segments. India is becoming one of the most attractive markets for foreign FMCG players due to easy availability of imported raw materials and cheaper labour costs. This sector will continue to see growth as it depends on an ever-increasing internal market for consumption, and demand for these goods remains more or less constant, irrespective of recession or inflation. Hence this sector will grow, though it may not be a smooth growth path, due to the present world-wide economic slowdown, rising inflation and fall of the rupee. This sector will see good growth in the long run and hiring will continue to remain robust. 7