India’s FMCG sector is the fourth largest sector in the economy. Foods, fabric care, personal care and household products are the principal constituents of FMCG. The total FMCG market is in excess of US$16.4 billion and is set to treble from US$11.6 billion in 2003 to US$33.4 billion in 2015. It is currently growing at 14%. The industry is characterised by a large unorganised sector, low penetration levels, well established distribution network, low operating cost and lower per capita consumption. It requires simple manufacturing processes for most products resulting fairly low capital investments. This has made the proliferation of localised brands and products being offered in loose form possible in small towns and rural India where brand awareness is low. With 12.2% of the world population living in the villages of India, the Indian rural FMCG market is something no one can overlook. Urban India accounts for 66% of total FMCG consumption, while rural India accounts for the remaining 34%. However, rural India accounts for more than 40% of the consumption in major FMCG categories such as personal care, fabric care and hot beverages. FMCG per capita consumption is estimated to be around US$14.5 billion. It is a key component of India’s GDP as FMCG accounts for 5% of the total factory employment in the country and also creates employment for 3m people in downstream activity. Advertising and promotional expenses are rising for all players in the FMCG industry due to intense competition and brand awareness. The investments in the FMCG industry are growing to tap the opportunity in the sector. Foreign direct investment in the FMCG industry is about to reach US$3 billion. Many MNCs have made their presence felt in India and more companies want to enter the Indian market because of the broad consumer base. The long-term potential of FMCG sector appears to be good, as the per capita consumption in most of the FMCG products in India is low estimated to be around US$14.5 billion, indicating the untapped market potential. Burgeoning Indian population, particularly the middle class and the rural segments, with the rise in the disposable income and consumer spending, presents an opportunity to manufactures of branded products to convert ‘consumers’ to branded products. For FMCG companies, the growth can come only from deeper penetration and higher consumption in rural areas. The major challenge for the companies is to change the consumer mindset and offer new generation products. The Indian FMCG sector is the fourth largest in the economy and has a market size in excess of US$16.1 billion. At present, urban India accounts for 66% of total FMCG consumption, and rural India accounts for the remaining 34%. However, rural India accounts for more than 40% of the consumption in personal care, fabric care and hot beverages. Around 70% of the total households in India (188m) reside in the rural areas. The total numbers of rural households are expected to rise from 135m in 2001- 02 to 153m in 2009- 10, making a huge potential market in the world. FDI flow in the FMCG sector can create more revenue for the sector. It has been predicted that the FMCG market will reach to US$33.4 billion in 2015. The most promising market for FMCG are the middle class and the rural segments of the Indian population which gives companies the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skincare and shampoos, in India, have low per capita consumption as well.
India is a growing economy and multiple growths are expected because of the increase in the demand for FMCG products. New product developments, better health and happier taste buds are expected in the FMCG sector. As per ASSOCHAM, FMCG will be witnessing more than 50% of its growth in the rural and semi-urban segments by 2010. Currently, nearly 34% of the off take of FMCG companies come from rural areas. Companies like HUL, ITC and Colgate have already established good distribution networks in rural regions. Processed foods and personal care segment would be the fastest growing segments with the growth of other categories and the sector. Along with volume growth it is expected that value growth will also be strong. The rise in the inflationary pressures would force companies to take selective hikes in price.