Understanding FMCG Sector

The Fast Moving Consumer Goods (FMCG) industry primarily deals with the production, distribution and
marketing of consumer packaged goods, i.e. those categories of products that are consumed at regular intervals.
Examples include food & beverage, personal care, pharmaceuticals, plastic goods, paper & stationery and
household products etc. The industry is vast and offers a wide range of job opportunities in functions such as
sales, supply chain, finance, marketing, operations, purchasing, human resources, product development and
general management. Global leaders in the FMCG segment are Sara Lee, Nestlé, Reckitt Benckiser, Unilever,
Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi and Mars etc.

What are Fast Moving Consumer Goods (FMCG)?

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.

A subset of FMCGs is Fast Moving Consumer Electronics which include innovative electronic products such as
mobile phones, MP3 players, digital cameras, GPS Systems and Laptops. These are replaced more frequently
than other electronic products.

White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, Music Systems, etc. In
2005, the Rs. 48,000-crore FMCG segment was one of the fast growing industries in India. According to the AC
Nielsen India study, the industry grew 5.3% in value between 2004 and 2005.

Performance

In India, the FMCG industry is the fourth largest sector with a total (organized) market size of over US$15 billion
in 2007, as per ASSOCHAM, and can be classified under the premium and popular segments. The premium
segment (~25%) caters mostly to the higher/upper middle income consumers while the price sensitive popular or
mass segment (~75%) consists of consumers belonging mainly to the semi-urban or rural areas who are not, and
cannot afford to be, brand conscious.
The market growth over the past 5 years has been phenomenal, primarily due to consumers’ growing disposable
income which is directly linked to an increased demand for FMCG goods and services. Indeed, it is widely
acknowledged that the large young population in the rural and semi-urban regions is driving demand growth, with
the continuous rise in their disposable income, life style, food habits etc. On the supply side, the wide availability
of raw materials, vast agricultural produce, low cost of labor and increased organized retail have helped the
competitiveness of players.
At a time when the economy and other large industrial sectors such as automobiles, aviation and financial
services are reeling from the global slowdown, the consumer goods sector in India has managed to defy the
trend. According to the recent reports by Zeus Consulting, India's FMCG industry has so far been resilient to the
slowdown in the economy and a dip in consumer sentiment, with most companies posting double-digit growth in
net profits in the first half of fiscal 2009, backed by healthy sales. As very categorically said by the Amway India
Enterprises managing director and chief executive, Mr. William Pinckney, “I am not saying that our company
[sector] is recession-proof but it is recession-resilient.” This statement on the whole stands strong for most the
leading players in the FMCG sector.
While a price hike and cost-cutting were the first lines of defense in a bid to protect margins, Indian
manufacturers were able to let logic rather than bottom lines dictate measures, with increased marketing efforts,
a well-thought product mix and new launches helping them emerge unscathed from the turmoil. The prospects
going forward also remain promising. Adi Godrej, Chairman and MD of Godrej Consumer Products Limited
(GCPL) and Chairman of Godrej Industries feels that the best policy would be to provide tremendous fiscal and
monetary stimuli to the economy, “…[stimuli is needed] especially in industries connected with consumer finance.
Once that is done, the economic growth will come through and that will generally create multiplier factors. FMCG
already seems to be doing quite well and FMCG sector will have its best year ever in 2009-10,” he said.

Indian FMCG sector

The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13.1 billion. Well-
established distribution networks, as well as intense competition between the organised and unorganised
segments are the characteristics of this sector. FMCG in India has a strong and competitive MNC presence
across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015
from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most
promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most
of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita
consumption as well as low penetration level, but the potential for growth is huge.

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased
literacy levels, and rising per capita income.

The big firms are growing bigger and small-time companies are catching up as well. According to the study
conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies.
Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number
three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8)
and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing.
Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account
for 35 of the top 100 brands.

Future Prospects
The only threats to this strong growth trajectory remain the high portion of unorganized trade, the limited
distribution network of new entrants and the pressure on profit margins due to increasing competition. But these
are likely to be of diminished importance as proportion of organized trade increases and players invest in
improving distribution. Going forward, the industry prospects remain attractive, and new graduates can hope to
leverage the training and on-the-job learning at the leading players in various functional roles, across the Metros
as well as the interior heartlands on India.
Top FMCG Companies

1. Hindustan Unilever Ltd.

2. ITC (Indian Tobacco Company)

3. Nestlé India

4. GCMMF (AMUL)

5. Dabur India

6. Asian Paints (India)

7. Cadbury India

8. Britannia Industries

9. Procter & Gamble Hygiene and Health Care

10. Marico Industries

A
ADF Foods Ltd Agro Dutch Inds. LtdAgro Tech Foods LtdAjanta Soya LtdAmar Remedies LtdAmrit Corp. LtdAnik
Industries LtdANS LtdApeejay Tea LtdArcuttipore Tea Company LtdAssam Company India Ltd.AVT Natural
Products Ltd

B
B&A LtdBajaj Hindusthan Ltd.Bajaj Hindusthan Sugar & Inds. LtdBalrampur Chini Mills Ltd.Bambino Agro Inds.
LtdBCL Industries & Infrastructures LtDBeeyu Overseas LtdBelapur Industries LtdBio Whitegold Farms
LtdBritanniaBritannia Industries Ltd

C
Camson Bio Technologies LtdCCL Products (India) Ltd.Chaman Lal Setia Exports LtdChordia Food Products
LtdColgate-Palmolive (India) Ltd

D
Dabur India LtdDarshan Oils LtdDCM Shriram Inds. LtdDFM Foods LtdDhampur Sugar Mills Ltd.Dhampure
Specialty Sugars LtdDharani Sugars & Chemicals LtdDHP India Ltd.Dhunseri Tea & Inds. LtdDiana Tea
Company LtdDollex Industries Ltd.

E
Eastern Sugar & Inds. LtdEID-Parry (India) Ltd.Emami LtdEmpee Distilleries LtdEmpee Sugars & Chemicals
Ltd.Energy Products (India) Ltd.

F
Flex Foods LtdFoods & Inns LtdFreshtrop Fruits Ltd
G
Gayatri Sugars LtdGlaxoSmithKline Consumer Healthcare LtdGMR Industries LtdGodfrey Phillips India
LimitedGodrej Consumer Products LimitedGokul Refoils and Solvent LtdGoodricke Group LtdGRM Overseas
LtdGujarat Ambuja Exports LtdGujarat Aqua Inds. Ltd

H
Harrisons Malayalam LtdHatsun Agro Products LtdHenkel India LtdHeritage Foods (India) Ltd.Highland
Industries LtdHillock Agro Foods (India) LtdHimalya International LtdHind Industries LtdHindustan Unilever
Limited

I
IB Infotech Enterprises LtdIndage Restaurants and Leisure LtdIndian Extractions LtdIndian Sucrose LtdIndo
Biotech Foods LtdITC LimitedIVP Ltd

J
Jay Shree Tea & Inds. LtdJayant Agro-Organics LtdJeypore Sugar Company Ltd.JK Sugar LtdJoonktollee Tea &
Industries LtdJVL Agro Industries Ltd

K
Kashipur Sugar Mills Ltd.Kesar Enterprises LtdKLRF LtdKohinoor Foods LtdKothari Fermentation & Biochem
LtdKothari Products LtdKRBL LtdKSE LtdKwality Dairy (India) Ltd

L
Ledo Tea Company LtdLongview Tea Company LtdLotte India Corpn. Ltd.Lotus Chocolate Company Ltd

M
Madhur Industries LtdMadhusudan Industries LtdMahaan Foods LtdMarico LtdMawana Sugars Ltd.
[Merged]Mihijam Vanaspati LtdMilkfood LtdModern Dairies LtdMohan Meakin LtdMoneshi Agro Industries
LtdMount Everest Mineral Water LtdMuller & Phipps (India) Ltd.Murli Industries Limited

N
Naraingarh Sugar Mills LtdNatraj Proteins LtdNeelamalai Agro Inds. LtdNEPC Agro Foods LtdNestle India
LtdNijjer Agro Foods LtdNirma Ltd

O
Orient Beverages LtdOudh Sugar Mills Ltd

P
Parry Agro Inds. LtdPiccadily Agro Inds. LtdPiccadily Sugar & Allied Inds. LtdPioneer Agro Extracts LtdPonni
Sugars (Erode) LtdPoona Dal & Oil Inds. LtdPrime Industries LtdProcter & Gamble Hygiene and Health Care
LimitedPrudential Sugar Corpn. Ltd

R
Radico Khaitan LimitedRajshree Sugars & Chemicals LtdRana Sugars LtdRasoi LtdRasoya Proteins Ltd.Rattan
Vanaspati LtdRavalgaon Sugar Farm LtdRei Agro LtdRiga Sugar Company LtdRiverdale Foods LtdRT Exports
LtdRTCL LtdRuchi Infrastructure LtdRuchi Soya Inds. Ltd

S
Saboo Sodium Chloro LtdSakthi Sugars LtdSampre Nutritions LtdSanwaria Agro Oils LtdSBEC Sugar LtdShree
Vaani Sugars & Inds. LtdSimbhaoli Sugars LtdSimran Farms LtdSir Shadi Lal Enterprises LtdSita Shree Food
Products LtdSKM Egg Products Export (India) LtdSpectrum Foods LtdSrinivasa Hatcheries LtdSunil Agro Foods
LtdSuper Bakers (India) Ltd

T
T&I Global LtdTarai Foods LtdTasty Bite Eatables LtdTata Coffee LtdTata Tea LimitedTemptation Foods
LtdTerai Tea Company LtdTezpore Tea Company LtdThiru Arooran Sugars LtdTriveni Engineering & Inds.
LtdTyroon Tea Company Ltd

U
Ugar Sugar Works LtdUmang Dairies LtdUnique Organics LtdUnited Breweries LimitedUnited Spirits
LimitedUpper Ganges Sugar & Inds. Ltd

V
Vadilal Enterprises LtdVenky'S (India) LtdVenus Sugar LtdVijay Solvex LtdVimal Oil & Foods LtdVishnu Sugar
Mills LtdVolga Air Technics Ltd.

W
Warren Tea LtdWeikfield Products Company India Private LimitedWellwin Industry Ltd.

Z
Zicom Electronic Security Systems Ltd.Zydus Wellness Ltd