The document provides an overview of the FMCG sector in India. It discusses key topics like demand drivers, strategies being adopted by companies, and the growth opportunities in the industry. Some of the major companies in the FMCG sector are Hindustan Unilever Ltd., ITC, Dabur, Nestle, and Godrej Group. The FMCG market in India is expected to reach $103.7 billion by 2020, growing at a CAGR of 23.15%. New product launches, capacity expansions, and joint ventures are some strategies being used by companies to boost growth. Higher incomes in urban and rural India are also aiding the growth of the FMCG sector. The implementation of GST
The document provides an overview of the FMCG sector in India. It discusses key topics like demand drivers, strategies being adopted by companies, and the growth opportunities in the industry. Some of the major companies in the FMCG sector are Hindustan Unilever Ltd., ITC, Dabur, Nestle, and Godrej Group. The FMCG market in India is expected to reach $103.7 billion by 2020, growing at a CAGR of 23.15%. New product launches, capacity expansions, and joint ventures are some strategies being used by companies to boost growth. Higher incomes in urban and rural India are also aiding the growth of the FMCG sector. The implementation of GST
The document provides an overview of the FMCG sector in India. It discusses key topics like demand drivers, strategies being adopted by companies, and the growth opportunities in the industry. Some of the major companies in the FMCG sector are Hindustan Unilever Ltd., ITC, Dabur, Nestle, and Godrej Group. The FMCG market in India is expected to reach $103.7 billion by 2020, growing at a CAGR of 23.15%. New product launches, capacity expansions, and joint ventures are some strategies being used by companies to boost growth. Higher incomes in urban and rural India are also aiding the growth of the FMCG sector. The implementation of GST
The document provides an overview of the FMCG sector in India. It discusses key topics like demand drivers, strategies being adopted by companies, and the growth opportunities in the industry. Some of the major companies in the FMCG sector are Hindustan Unilever Ltd., ITC, Dabur, Nestle, and Godrej Group. The FMCG market in India is expected to reach $103.7 billion by 2020, growing at a CAGR of 23.15%. New product launches, capacity expansions, and joint ventures are some strategies being used by companies to boost growth. Higher incomes in urban and rural India are also aiding the growth of the FMCG sector. The implementation of GST
Sector Report Table of Contents Overview 2 Demand 3 Higher Investment 3 Policy Support 3 Evolution of FMCG in India 3 Urban Rural Industry breakup 4 Strategies 5 New Product Launches 5 Expansions 5 Green Initiatives to lower costs 5 Joint Ventures 5 Analytics 6 Higher incomes aid growth in urban and rural markets 6 Policy and Regulatory Framework 7 Key M&A deals in the FMCG Industry 8 Growth Opportunities In The Indian FMCG Industry 9 A Few Important Events 9
Page | 1 Overview FMCG sector is the 4th largest sector in the Indian economy.
FMCG market in India is expected to grow at a CAGR of 23.15 per cent and is expected to reach US$ 103.70 billion by 2020 from US$ 68.38 billion in FY18.
The dominating companies in the sphere of FMCG manufacturing consists of:
1. Nestle 2. Hindustan Unilever Ltd. 3. ITC 4. Dabur 5. Colgate-Palmolive 6. Parle Agro 7. Brittania Industries 8. Marico 9. Procter and Gamble 10. Godrej Group 11. Amul 12. Patanjali Ayurved 13. Emami 14. Nirma 15. Johnson & Johnson
Nielson revised its growth forecast for the FMCG sector to 9-10% from its previous outlook of 11- 12%, citing a sharp rural slowdown.
Final consumption expenditure is set to increase at a CAGR of 25.44 per cent from 2017-2021.
Final consumption expenditure is expected to reach nearly US$ 3.6 trillion by 2020 from US$ 1.82 trillion in 2017.
Rural India comprises 36% of overall fast moving consumer goods (FMCG) sector
Rural growth down to 5% in September quarter 2019 compared to 20% reported in September 2018
The rural FMCG market in India is expected to grow to US$ 220.00 billion by 2025 from US$ 23.63 billion in FY18.
Page | 2 Demand India’s contribution to global consumption is expected to more than double to 5.8 per cent by 2020.
Higher Investments RP-Sanjiv Goenka Group to invest capital fund of US$ 14.74 mn in FMCG startups.
Dabur is planning to invest Rs 250-300 crore (US$ 38.79-46.55 million) in FY19 for capacity expansion and is also planning to make acquisitions in the domestic market.
Policy Support Investment approval of up to 100 per cent foreign equity in single brand retail and 51 per cent in multi-brand retail.
Evolution of FMCG in India
India’s household and personal care is the leading segment, accounting for 50 per cent of the overall market, healthcare (31 per cent) and food and beverages (19 per cent) comes next in terms of market share
Retail market in India is estimated to reach US$ 1.1 trillion by 2020, with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is likely to boost revenues of FMCG companies.
Page | 3 Urban Rural Industry Breakup (FY2017-18)
FMCG products account for 50% of total rural spending
Total rural income, which is currently at around US$ 572 billion, is projected to reach US$ 1.8 trillion by FY21. India’s rural per capita disposable income is estimated to increase at a CAGR of 4.4 per cent to US$ 631 by 2020.
Page | 4 Strategies Bundling – Selling 4 items at the price of 3
Amazon India is planning to invest significantly over the coming months for expanding its grocery and food business, launching more products and categories and forming new partnerships with huge grocery and supermarket chains. In May 2018, Amazon India targets to capture 100 million customers in the next 5 years by providing more features in Prime and Alexa.
New Product Launches
• By end of 2019, Nestle plans to launch up to 36 products. • Marico’s Coco Soul introduces a range of three 100 per cent natural-infused oil variants. • In FY19, ITC made more than 60 launches in the Fast-Moving Consumer Goods (FMCG) segment in India. • In June 2019, ITC launches dairy beverage range “Sunfeast Wonderz Milk” in four variants • In May 2019, Naturell (India) Pvt Ltd, innovator of power snacking launched RiteBite Max protein chips
Expansions • Besides food and beverages now, Tata is planning to enter in home and personal care business. • Nestle plans to invest Rs 700 crore (US$ 100.16 million) to open a new plant in Sanand for Maggi. • In February 2019 India’s leading FMCG Contract Manufacturer Hindustan Foods Limited received an investment of US$ 22 million from Convergent Finance LLP for its expansion. • Dabur to invest Rs 250-300 crore (US$ 37.29-44.75 million) in FY19 for capacity expansion and is also looking for acquisitions in the domestic market.
Green Initiatives to lower costs
HUL fulfils 80 per cent of its power requirement for its Sumerpur plant from solar energy. The company has been able to reduce the carbon footprint of its manufacturing plants by 13 per cent in FY17.
Joint Ventures In August 2018, Fonterra announced a joint venture with Future Consumer Ltd which will produce a range of consumer and food service dairy products.
Page | 5 Analytics Hindustan Unilever Ltd (HUL) implemented a transformational programme called Connected4Growth (C4G) to help drive business growth by increased speed to market, faster decision making, localised and swifter innovation.
Higher incomes aid growth in urban and rural markets
• Incomes have risen at a brisk pace in India and will continue rising given the country’s strong economic growth prospects. According to IMF, nominal per capita income is estimated to grow at a CAGR of 4.94 per cent during 2010-19F. • India’s GDP per capita at current prices is expected to increase from US$ 1,481.56 in 2012 to US$ 3,277.28 in 2024. • An important consequence of rising incomes is growing appetite for premium products, primarily in the urban segment. As the proportion of ‘working age population’ in total population increases, per capita income and GDP are expected to surge.
Page | 6 Policy and Regulatory Framework Union Budget 2019-20 The Government of India has provided a full tax rebate for an income up to Rs 5 lakh (US$6,930), which is expected to boost disposable income in the hands of the common people. Goods and Service Tax (GST) • The rate of GST on services lies between 0-18 percent and on goods lies between 0-28 percent. • Prices of commodities in the FMCG sector, like soaps, shampoo, detergents, biscuits, savory snacks etc. decreased after the implementation of GST, leading to a 3-8 percent decrease in prices of goods at modern retail stores. The GST is expected to transform logistics in the FMCG sector into a modern and efficient model as all major corporations are remodelling their operations into larger logistics and warehousing. • Warehousing cost for FMCG companies is estimated to fall by 25-30 percent backed by the implementation of the GST. The number of warehouses will decrease from 45-50 to 25-30 and the size of warehouses will become larger. • The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the FMCG products such as Soap, Toothpaste and Hair oil now come under 18 percent tax bracket against the previous 23-24 percent rate. Also rates on food products and hygiene products have been reduced to 0-5 percent and 12-18 percent, respectively. FDI in organised sector • The government approved 51 percent FDI in multi-brand retail in 2006, which will boost the nascent organised retail market in the country. • It also allowed 100 percent FDI in the cash and carry segment and in single-brand retail. • The sector witnessed healthy FDI inflows of US$14.67 billion during April 2000 to March 2019. • Within FMCG, food processing was the largest recipient; its share was 62.03 percent. • Investment intentions, related to FMCG sector, arising from paper pulp, sugar, fermentation, food processing, vegetable oils and vanaspati, soaps, cosmetics and toiletries industries, worth Rs 916.13 billion (US$15.55billion) were implemented between April 2000 - December 2018.
Page | 7 Key M&A deals in the FMCG Industry Target Name Acquirer Name Merger/ Acquisition Year Splash Corporation, Wipro Consumer Care Acquisition 2019 Philippines & Lighting GlaxoSmithKline Hindustan Unilever Acquisition 2018 Consumer Healthcare Limited (HUL) (GSKCH India) Bombay Shaving Colgate Palmolive Acquisition (14 per 2018 Company cent stake) BrillareScience Emami Acquisition (26 per 2018 cent stake) Beardo Marico Acquisition (45 per 2018 cent) Future Consumer Future Capital Acquisition 2017 Limited Investment Private Limited D&A Cosmetics Dabur India Acquisition 2017 Proprietary Ltd and Atlanta Body & Health Products Proprietary Ltd Helios Lifestyle PvtLtd EmamiLtd Acquisition 2017 (30 per cent stake) Godfrey Phillips India Goodricke Group Ltd Acquisition 2017 (GPI) (packed tea brands) HyperCity Future Retail (Future Acquisition 2017 Group) Godrej Industries Godrej Agrovet Ltd. Increase in stake 2017 Argencos, Argentina Godrej Consumer Acquisition 2016 (Hair care products) Products Ltd (Home and personal care) Issue Group, GCPL (Home and Acquisition 2016 Argentina (Hair personal care) products) Tura, Nigeria (Soap GCPL (Home and Acquisition 2015 and cleaning personal care) products)
Page | 8 Frika Hair (Pty) Ltd, Godrej Consumer Acquisition 2015 Africa Products Ltd (Home and personal care)
Growth Opportunities In The Indian FMCG Industry
• Leading players of consumer products have a strong distribution network in rural India; they also stand to gain from the contribution of technological advances like internet and e-commerce to better logistics. It is estimated that 40 percent of all FMCG purchases in India will be online by 2020, thereby making it a US$5-6 billion business opportunity. • In May 2018, RP-Sanjiv Goenka Group created a Rs 1 billion (US$ 14.92 million) venture capital fund to invest in FMCG start-ups.
A Few Important Events
• HUL GSK merger: On 3rd December 2018, HUL’s board of directors approved the amalgamation between the company and GlaxoSmithKline Consumer Healthcare Limited (GSK CH India) subject to obtaining requisite approvals from statutory authorities and shareholders. HUL has reached a definite agreement with GSK CH India in this regard. The transaction is an all equity merger with 4.39 shares of HUL being allotted for every share in GSK CH India. This transaction values the total business at INR 317 billion. • P&G India sets up ₹200 crore fund to invest in startups focused on sustainability: The sustainability fund is an extension of the company’s multi-million dollar Innovation Sourcing Fund. P&G will invest in startups or companies whose sustainable business solutions, spanning logistics, packaging, supply chain, etc., can benefit its consumer goods business. • Patanjali Ayurved posts highest ever revenue for April-September: It achieved a revenue of Rs. 3,562 crores in April-September 2020.
