The drive toward consumer products company differentiation in 2018 The ability of companies in the consumer products industry to quickly adapt, innovate, and differentiate themselves in the marketplace is often essential to success and driving brand growth. According to Deloitte Insights’, the US economy is likely to continue to grow at a moderate 2.0 to 2.5 percent rate in 2018. A key source of strength is consumers, who have benefitted from strong labor, rising incomes, record low unemployment, and low inflation. Households are enjoying growing wealth and consumer confidence remains elevated despite uncertainty in the political and economic policymaking areas. Companies in the consumer products industry are developing newer and bolder strategies to execute traditional levers against a backdrop of a more stable US and worldwide economy. Among the latest trends are:. Globalization.
Companies in the consumer products industry will strive to strategically capitalize on growth in emerging markets, and seek opportunities to acquire or partner with companies to enable access to consumers, leverage market solutions, and in some cases, access sources of raw material. Innovation. Companies in the consumer products industry have traditionally looked to innovate as a source of growth and will try newer and bolder strategies in 2018.
Expect many to take an agile approach to developing, testing, and iterating innovative ideas compared to traditional, highly structured, more time-consuming testing methods. M&A activity. Companies in the consumer products industry are often increasingly looking to expand across geographies and reach out to markets that can drive both sales and profitability. Digitization. Companies in the consumer products industry are aligning technology in creative and efficient ways to optimize customer engagement and influence the consumers’ path to purchase. Read the to learn more.
Achieving globalization to drive differentiation and growth Expanding into global markets is one avenue US-based consumer products companies can pursue to drive growth and brand differentiation. Companies in the consumer products industry could benefit from considering ways in which they can strategically capitalize on the growth in emerging markets and identify opportunities to partner or acquire successful businesses in these markets, thereby having access to their consumers. Emerging markets represent an opportunity for growth. Facing issues of weak demand and increased competition in North America across consumer products company categories, many US companies anticipate growth opportunities from outside the United States. Achieving globalization through partnerships. One approach is through partnerships between US companies and local brands. Such partnerships potentially help US-based companies adapt their products to the needs of a specific market.
Realizing the potential of global markets by tapping into consumer insights. Companies in the consumer products industry could gain a foothold in the marketplace by developing deep insights about consumers in the emerging markets they wish to enter. Newer, bolder paths to innovation While many consumer products companies have looked to innovation as a source of growth, what’s changing is how companies are pursuing innovation. In addition to following traditional new product development cycles, many companies in the consumer products industry are experimenting with new approaches, such as innovation through:. Venture capital-styled incubators. Crowdsourcing and partnering with consumers. Renovation of previously successful products.
Continued focus on health and wellness/good-for-you products Learn how. Digitization continues to drive differentiation through efficiency and creativity Digital technologies and applications have a wide influence on many consumer products companies, from interacting with consumers to operations and procurement. In some organizations, the company’s digital strategy is increasingly becoming part of its overall business strategy. Many could benefit from continually investing in digital technologies to deepen customer engagement and.
Investing in digital technologies could also benefit companies in the consumer products industry by driving efficiency in supply chain. Trends in digitization—and their potential benefits include:. Promoting real-time customer engagement. Promoting e-commerce. Blockchain applications Learn how. See for more information.
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Fast moving consumer goods (FMCG) is the 4th largest sector in the Indian economy. There are three main segments in the sector – food and beverages which accounts for 19 per cent of the sector, healthcare which accounts for 31 per cent and household and personal care which accounts for the remaining 50 per cent. The FMCG sector has grown from US$ 31.6 billion in 2011 to US$ 49 billion in 2016.
Meaning Of Fmcg Industry
The sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 20.6 per cent to reach US$ 103.7 billion by 2020. Accounting for a revenue share of around 60 per cent, rural segment is the largest contributor to the overall revenue generated by the FMCG sector in India and recorded a market size of around US$ 29.4 billion in 2016 and is expected to grow to US$ 220 billion in 2025. Demand for quality goods and services have been going up in rural areas of India, on the back of improved distribution channels of manufacturing and FMCG companies. Semi-urban and urban segments accounted for a revenue share of 40 per cent in the overall revenues recorded by FMCG sector in India. FMCG Companies are looking to invest in energy efficient plants to benefit the society and lower costs in the long term. Growing awareness, easier access, and changing lifestyles are the key growth drivers for the consumer market. The focus on agriculture, MSMEs, education, healthcare, infrastructure and employment under the Union Budget 2018-19 is expected to directly impact the FMCG sector.
These initiatives are expected to increase the disposable income in the hands of the common people, especially in the rural area, which will be beneficial for the sector. Copyright © 2010-2018 India Brand Equity Foundation All material, information, data, images or content on this website is subject to copyright or other applicable intellectual property laws and no part of it can be reproduced in any form (including paper or electronic form) without prior written consent and approval from IBEF. Infringements are subject to prosecution under the applicable laws. For consent related queries and conditions, please write to An initiative of the.
The FMCG sector seems to have finally joined India Inc’s growth party by posting surprising double-digit growth in sales in the past couple of years. With annual revenues of Rs 72,000 crore, it is the one of the largest sectors in the Indian economy. The industry’s future prospects look bright, considering rising household incomes and the spread of modern retail. However, the per capita income level in India is still very low compared to the developed world. Besides, the penetration level of many products is also relatively low and several categories remain fairly unbranded.
All these factors provide a huge untapped potential for the industry. In contrast to other manufacturing sectors, FMCG is relatively less capital-intensive, but demands immense skills and expenditure on branding and distribution. Most companies in the sector create value through product differentiation, package innovation, and differential pricing and highlighting the functional aspect of foods. While inflation restricts the industry’s growth, many companies in the sector thrive under inflationary pressures. Most companies pass on the cost inflation to consumers, via a judicious blend of price hikes, packaged size reduction and change in product mix. Few consumers react by down-trading to lower priced products, but most hang on to their preferred brands if price hikes are moderate.
The top five FMCG companies constitute nearly 70% of the total revenues generated by this sector. Multinational FMCG companies like Hindustan Unilever, ITC, Nestle, Procter & Gamble and GlaxoSmithKline Consumer Healthcare traditionally comprise the first category of FMCG companies. They tend to spend nearly 10% of their revenues on an average on advertising and promoting their products, which is the highest ad spend figure in the industry. Justifying their high product pricing, these companies largely tend to capture value by addressing a felt need. C programming and data structures by balaguruswamy pdf free download. Another category is non-traditional FMCG companies, which is dominated by homegrown companies like Asian Paints, Dabur, Tata Tea, Marico and United Spirits. These companies have grown to become market leaders in their respective segments, giving strong competition to MNC brands. Their average ad expenditure is much lower than that of the MNC biggies.
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The third tier includes small, but strong regional players operating on a smaller scale. They are mostly price warriors, who expand by eating into the market share of national players. But the biggest worry for national players is the emergence of private labels, i.e. The in-house brands of retail companies. As retailers don’t have to incur marketing costs on these in-house brands, they are cheaper than their branded counterparts.
FMCG companies can also be segregated according to the product categories in which they exist. Various products have different demand drivers; hence, the growth of companies tends to be different.
For instance, paints makers witness growth during a housing boom. But the same may not be the case with soap manufacturers, which may witness some down-trading by consumers. With the market in a bearish phase, the FMCG sector has found flavor among investors. The sector’s defensiveness is demonstrated by the stability in returns generated even during times of slow economic growth.
While the Sensex is down by 29% since the beginning of this year, the ET FMCG index comprising the top 20 stocks in the sector has fallen only by 12.5%. For investors eyeing the FMCG space, large domestic companies offer attractive growth prospects.
These companies are out performing their MNC peers and small Indian companies in the sector. But the MNC pack specifically GlaxoSmithKline Consumer Healthcare, Nestle and HUL has fared better in terms of profit margins.
While the FMCG sector’s revenue growth has been positive since the past three quarters, profits are showing a downward trend. Nevertheless, the FMCG growth story is here to stay.
Although double-digit revenue growth is likely to continue, margins may come under pressure as the industry is finding it difficult to pass on cost inflation without impacting consumer demand. Moreover, the scenario has become more challenging for FMCG companies, given the emergence of modern retail and regional brands. The growth in media industry has also led to innovative advertising, which has changed the rules of the game.
Fmcg sector of india. 1.
FMCG sector of India OVERVIEW The Indian FMCG sector is the fourth largest in the Indian economy and According to‖ india bulls securities publish & Nielsen‘s study ‖ market size of FMCG is $13.1 billion. This industry primarily includes the production, distribution and marketing of consumer packaged goods, that is those categories of products which are consumed at regular intervals. The sector is growing at rapid pace with well-established distribution networks and intense competition between the organized and unorganized segments. It has a strong and competitive MNC presence across the entire value chain. The FMCG‘s promising market includes middle class and the rural segments of the Indian population, and give brand makers the opportunity to convert them to branded products. It includes food and beverage, personal care, pharmaceuticals, plastic goods, paper and stationery and household products etc.
CURRENT SECNARIO FMCG industry facilitates extensive series of consumables and it circulates high amount of money in the economy. The intense competition in the FMCG manufacturers is resulting in increase in investment in FMCG industry. According to‖ india bulls securities‖ publish report & Nielsen's study shows that out of the total $ 28 billion in FMCG sales last year, products worth about $ 6 Billion were consumed in these smaller towns. This number makes up more than 20% of overall FMCG sales, and 30% of the urban FMCG sales. Since 2002, the FMCG sector grew 3.5 times in these smaller towns of 1-10 lakh population, compared to 3.2 times at the all-India level.
At present high burden of local taxes is likely to have an adverse impact on disposable income and purchasing power as a whole. The growth of imports constitutes another problem area and while so far imports in this sector have been confined to the premium segment. FMCG companies estimate they have already cornered a four to six per cent market share.
However, most of the companies are concentrating on cost reduction and supply chain management. This should yield positive results for them.
Current growth rate The FMCG sector of india growth is very faster there is some risen such as the changing the economic standard of people and changing the life style of the people the Fast Moving Consumer Goods sector in India has been growing at a healthy CAGR of 11% over the last decade the market is estimated to grow to US$ 100 billion by 2025, according to market research firm Nielsen. In the last decade the FMCG sector has grown at an average of 11% a year; in the last five years, annual growth accelerated to 17%. FMCGs are slowly and gradually positioning and deeply penetrating in the fast growing rural market. The Rural mindset is open to consumption of newer, more contemporary food categories and as a result, drive consistent growth. FMCG industry to be Rs.4000-6000 billion industry by 2020. According to Nielsen, FMCG growth was 10.7% in the rural market and 10.8% in the urban market during the quarter ended December 2011; for the quarter ended March 2012, while growth in the urban market improved to 16.5%, it rose even higher, to 17.2%, in the rural market.
KEY TRENDS Recent happening Government Policies and Regulatory Framework The govt. Policy and regulation has a bighand to changing the scenario of every sector there are some important regulation and policy According to Business Today, Mercer and Taylor Nelson Sofres (TNS). Which is influence the FMCG sector in india. Investment Approval: Automatic investment approval up to 100 per cent foreign equity for NRI and overseas corporate bodies.
These investments are allowed in food processing segments such as coffee and tea. FDI in organized retail: India currently allows 100 per cent FDI in Cash & Carry segment and 51% in single-brand retail, which is expected to be further increased to 100%. India is also expected to allow 51% FDI in multi-brand retail, which will boost the nascent organized retail market in the country. Priority Sector: The Government of India recognizes food processing and agro industries as priority sectors. Relaxation of license rules: Industrial licenses are not required for almost all food and agro processing industries, barring certain items such as beer, potable alcohol and wines, cane sugar, and hydrogenated animal fats and oils as well as items reserved for exclusive manufacturing in the small-scale sector.
Statutory Minimum Price: In October 2009, the government amended the Sugarcane Control Order, 1966, and replaced the Statutory Minimum Price (SMP) of sugarcane with Fair and Remunerative Price (FRP) and the State- Advised Price (SAP). Market size of FMCG sector india 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 2012. This sector is expected to grow to a USD 33 billion industry by 2015 and to a whooping USD 100 billion by the year 2025. Growth drivers Growth drivers is that which drive the growth of industry, growth driver play important role for growth and expansion for various sector there is some growth drivers for FMCG sector as follow according to: Dinodia Capital Advisors report. Let‘s see, some other growth driver factor those are help to expansion ofFMCG sector of india. Increasing rate of urbanization, expected to see major growth in coming years.
Rise in disposable incomes, resulting in premium brands having faster growth and deeper penetration. Innovative and stronger channels of distribution to the rural segment, leading to deeper penetration into this segment. Increase in rural non-agricultural income and benefits from government welfare programmes. Investment in stock markets of FMCG companies, which are expected to grow constantly. Opportunity There are many opportunity in india for the FMCG sector which is help to establish new industry attract the investor to invest in FMCG sector on india let‘s see what are those According to Business Today, Mercer and Taylor Nelson Sofres (TNS). Let‘s see the some other opportunity for the Indian FMCG sector wich makes this sector more effective for enlargement.
Rising income levels Large domestic market. Export potential Lifestyle & Premium products Fast evolving lifestyles, rapid urbanization and increasing disposable incomes there exists an opportunity for high-end products. Rising income levels i.e.
Increase in purchasing power of consumers Large domestic market- a population of over 1 billion Higher consumer goods spending Innovation Indian consumers being highly receptive to new products demonstrates an opportunity to offer new products targeting specific segments. Geographical Expansion Fast growing emerging markets as well as culturally compatible markets offer a dimension to further growth. Challenges. The Indian consumer are very price sensitive and value oriented consumer so for in Indian FMCG market is face many challenges on the way of growth let‘s focus those element which is create risk for indian FMCG sector.
Report FMCG: Rural India the growth driver Equitymaster.com February 21, 2008 16:37 IST Higher penetration, per capita consumption, increasing population base, and rising household income continued to drive the growth in the FMCG sector in FY08. The Rs 700 billion FMCG sector grew by 12% YoY in 2007. Rural regions, where nearly 70% of India's population resides, accounted for 34% of the off take for FMCG products. Since urban regions are already matured, the rural region is expected to be the key growth driver. In urban areas, introduction of newer, convenience and higher end products propelled the growth. However, concerns with respect to the increasing competitive environment, input cost pressures and infrastructure bottlenecks continued to worry.
Industry Wish List FICCI. The VAT on processed foods should be reduced from existing high levels. The perishable foods should attract VAT of 0% whereas non-perishables should attract VAT of 4%. Excise duty should be reduced, while central excise should be exempted. Taxes should be converged instead of charging multiple taxes. Infrastructure status should be accorded to agri-processing industry. Tax breaks and incentives should be given to the food processing industry as it establishes a vital linkage and synergy between the two pillars of the economy-industry and agriculture.
Further, establishment of cold chain and other modernized technology for up gradation of storage handling and transportation should be granted infrastructure status and the tax benefit to spur its growth. Confederation of Indian Industries. The excise duty difference between 'branded' and 'unbranded' food products existing at present should be removed to encourage consumers to move from unhygienic unbranded foods to hygienically packaged processed foods. Thrust on better packaging should be made. Import duty on packaging machinery should be nil. Incentives, wherever necessary, should be given to the input side like capital goods, infrastructure development, new technology, etc for the domestic packaging industry. Also the taxes should be rationalised.
These initiatives would help to reduce the wastages and raise the quality of exportable food products. Pro-rural policies to promote the growth of rural areas. As per ASSCHOM, FMCG sector will be witnessing more than 50% of its growth in the rural and semi-urban segments by 2010. Budget over the years Budget 2005-06.
Increase in customs duty of refined palm oil to 75%. Excise duty on dairy machinery hived off from 16%. Implementation of VAT across all states.
Concessional rate of 5% custom duty on tae and coffee machinery. Excise duty on preparations of meat, poultry and fish halved to 8%. Excise duty on food grade hexane (used in the edible oil industry) halved to 16% Budget 2006-07.
Excise duty on Condensed milk abolished (16% earlier). Excise duty on Pectines and Pectates, used as a gelling agent in Jams and Jellies abolished (16% earlier). Excise duty on unbranded edible preparations of oil increased from nil to 8%.
Excise on biscuits manufactured without aid of power will now attract a duty of 8% (nil earlier). Excise duty on Pasta reduced from 16% to nil. Excise duty on ice-creams exempted. Excise on ready to eat packaged food reduced from 16% to 8%. Excise on instant food mixes exempted. Excise on soaps manufactured without power will now attract 16% duty. Excise duty on processed meat, fish and poultry products reduced from 8% to nil.
Excise duty on yeast exempted Budget 2007-08. Farm sector has been given the top priority. Agriculture investments to go upto 2% of GDP.
Duty on edible oil has been reduced. Customs duty on food processing machinery and their parts is being reduced from 7.5% to 5%. Excise duty has been fully exempted on biscuits of per kilogram retail sale price equivalent of Rs.50 per kg or less. Excise duty on food mixes, including instant food mixes, has been reduced from 16%/ or 8% to Nil. Free samples and displays are exempt form the purview of FBT. Venture capital investing in dairy industry will get a pass through status. Better rural infrastructure development to be an area of focus.
Key Positives Rural penetration levels are still low: According to estimates, only about 7% to 8% of the total food production is consumed in processed form (US$ 75 bn). This speaks for itself, highlighting the scope for growth. The planned development of roads, ports, railways and airports, will increase FMCG penetration in the long term Newer products: As growth has shown signs of slackening companies are increasingly focusing on key products and brands, cost efficiencies and rural markets. This is a sign of market sophistication, both from the manufacturer's point of view as well as the consumer's point of view. With rising consumerism and changing lifestyle the demand for value added products is increasing. Cost advantage: Owing to India's cost advantage, many MNC companies have started using their Indian operations as their manufacturing base. Alternatively, some Indian companies have tested foreign shores like Bangladesh, Sri Lanka and the Middle East among other.
VAT: The proposed introduction of VAT at the start of FY06 is a long term positive for the FMCG sector. This had been a long pending demand of the FMCG sector. Post this; the tax ambiguity will get reduced, benefiting the sector. Retailing: FMCG companies have partnered with modern retailing stores and as this format is the future. Growth will be faster because modernisation of the retail sector will be reflected in rapid growth in sales of supermarkets, department stores and hypermarkets, because of the growing preference of the affluent and upper middle classes for shopping at these types of retail stores, given the conveniences they offer such as shopping ambience, variety and a single-point source for purchases. Key Negatives Competition: New entrants in the sector have heightened competition in key segments like soaps and detergents, putting pressure on profitability Higher input costs: The companies witnessed rise in the input prices during the year. Higher crude, wheat, palm oil prices amongst others pressurized the margins.
Though the companies took effective price hike of the final products, a further hike would lead to loss of market share. Infrastructure: The infrastructure for free transport of goods is not adequate in the country. Also, the fall in agricultural output continues to cast on FMCG sector's prospects in the short term. Spurious goods: A large part of the branded market continues to be threatened by spurious goods and illegal foreign imports. In times of weakened consumer demand such menaces continue to nightmares to large companies. Powered by, an independent equity research initiative. Equitymaster is currently celebrating its 10th Anniversary.
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