Sector analysis

Shreya Jain
PGDM0025
1. Identify sector of your choice.
Answer. FMCG (Fast Moving Consumer Goods).
Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are
products that are sold quickly and at relatively low cost. Examples include non-
durable goods such as packaged foods, beverages, toiletries, over-the-counter
drugs and other consumables.

2. What proportion of contribution in the GDP this sector has in India?

Answer. Fast moving consumer goods (FMCG) is the 4th largest sector in
the Indian economy. ... Accounting for a revenue share of around 45 per cent, rural
segment is a large contributor to the overall revenue generated by the FMCG sector
in India.
(Source: - https://www.ibef.org/industry/fmcg-presentation)

3.Is the sector regulated? If yes! Name the regulators and its function.
Answer. yes, sector is regulated by Federation of Indian Chambers of Commerce and
Industry (FICCI).
The main functions of FICCI are given below:

(i) Undertakes economic research and encourages scientific research useful for the
development of industry and commerce.
(ii) Arranges business education and technical education.
(iii) Publishes periodicals for dissemination of information useful to business
community.
(iv) Provides library facilities to members.
(v) Offers advice and suggestion on management, quality improvement so as to
improve competitive strength of Indian industry.
(vi) Arranges seminars, conferences and workshops on subjects of importance to
business community.
(vii) Sends trade delegations abroad to explore foreign investment and assists in
negotiating bilateral trade agreements.

(vii) Resolves differences and disputes among members through arbitration.

Thus, FICCI is making outstanding contribution in the fields of export promotion,

commercial arbitration, business legislation, research, infrastructural development,
etc., for the protection and promotion of business interests.
4. Identify the emerging players of sector both at National & International
level.

Answer. Emerging players of sector at national level: -

 ITC
 Dabur
 HUL
 Godrej
 Britannia
 Emami

Emerging players of sector at international level: -

 Nestle
 Cadbury
 PetSmart
 Sun basket
 Whole foods

5.What are the trends in Sale and growth rate Compounded Annual
Growth Rate (CAGR) over past 5 years?
Answer. The FMCG sector has grown from US$ 31.6 billion in 2011 to US$ 52.75
billion in 2017-18. The sector is further expected to grow at a Compound Annual
Growth Rate (CAGR) of 27.86 per cent to reach US$ 103.7 billion by 2020. The
sector witnessed growth of 11 per cent in value terms between April – June 2018,
supported by rate cuts due to Goods and Services Tax along with better consumer
off-take. It is forecasted to grow 12-13 per cent between July – December 2018. ^
FMCG’s urban segment is expected to have a steady revenue growth at 8 per cent
in FY19 and the rural segment is forecasted to contribute 15-16 per cent of total
income in FY19. *
Accounting for a revenue share of around 45 per cent, rural segment is a large
contributor to the overall revenue generated by the FMCG sector in India. 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.
Urban segment accounted for a revenue share of 55 per cent in the overall revenues
recorded by FMCG sector in India.
(Source: - https://www.ibef.org/industry/fmcg-presentation)
6.Compute market share, sales turnover and net profit of ten companies in
the sector at national level.

Answer.

7.What are the challenges and opportunities for the sector?

Answer. As every sector has some challenges and opportunities so FMCG also has
some which are given below: -

Challenges

Issues in supply chain: -Due to the higher demand or nature of FMCG products,
setting up and maintaining supply chain especially in developing countries is biggest
challenge.

Growth: -As there are so many companies in this industry so it is difficult to grow in
market rapidly in front of big giants of this sector.

Innovation: -As competition is very hard in this sector so product should be

innovative but most of the companies are introducing and accounting similar
products.
General business environment: -This is mainly from an Indian market context.
Different states have different regulations relating to FMCG products. Also,
regulatory hurdles need to be cleared to do business.

Lack of healthy products: -Another big challenge for the sector, lack of healthy
products like packed products we consider as health affective, this market is still
struggling with this issue.

Opportunities
Large domestic: - market with more population of median age 25 years: India has
large young population, 54 % of Indians are under 25 years of age. A rising
productive population fuels growth and drives personal consumption

High consumer goods spending: - The rising income is resulting into high
spending into consumer goods. Per a Nielsen report, the spending on consumer
goods set to triple to $ 5 billion by 2015.

Export potential: - to neighbouring countries like Bangladesh, Pakistan, Nepal.

Government Initiatives: - The Government of India has approved 100 per cent
Foreign Direct Investment (FDI) in the cash and carry segment and in single-brand
retail along with 51 per cent FDI in multi-brand retail. The Government of India has
also drafted a new Consumer Protection Bill with special emphasis on setting up an
extensive mechanism to ensure simple, speedy, accessible, affordable and timely
delivery of justice to consumers. 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 per cent tax bracket against the previous 23-24 per cent.
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.

Job opportunities: - As this sector has so many companies and involvement of

other industries are creating jobs for young generation.

Q8: List out the range of products offered by companies of this sector.
Answer.
 Prepared Meals
 Dry Goods
 Beverages
 Processed Foods
  Baked Goods
 Frozen Food
 Fresh Food
 Candy
 Over-the-counter Medications
 Toiletries
 Cosmetics

Q9: Classify customers of the segment in various categories.

Answer.
There are three major various categories in FMCG:
1.Household care: Which holds 11% of the market share
2.Personal care: Which holds the 23% of the market share
3.Food and Beverages: Which has major stake in the market i.e. 46%

FMCG Market Segment

11%
20%
Household care

23% Personal care

Food and Beverages
Others

46%

Q10: Identify future trend and major strategic changes in the sector.
o Answer. The Indian FMCG industry generates approximately 70 billion USD in sales,
of which foods and beverages constitute more than half the share. Over the last few
years sector has become increasingly exciting. With the implementation of Good And
Services Tax alongside Demonetisation brought unpredicted and unprecedented
events. While consistency has not been found in the FMCG sector in past few years,
the projections remains positive. The Central Bank (RBI) has predicted an optimistic
7.4% growth for FY18-19. The introduction of E-way Bill that is poised to ease the
trade barriers and make the supply chain more effective has been rolled out by a few
states after several delays.

Between 2016 – 2020, the Indian FMCG market is expected to grow at a CAGR of
nearly 21%. Rise in rural consumption is all set to drive the FMCG market. It is
estimated to grow at a CAGR of 14.6% during the period 2016-2025. A major reason
behind the spurt is explained by an increased disposable income that has grown at a
CAGR of 4.1%. Penetration of modern retail is expected to see a substantial rise at a
CAGR of 24.6% by 2020.The middle-income class population to grow at a CAGR of
10.8% and estimated to nearly double by 2020

Major Strategic changes in the sector:

Tackling taboos. Personal issues like sexual health, menopause, pregnancy, and
gender related hygiene issues that used to be whispered about are now going public,
fuelling new product innovation. Social media has played a part in making personal
issues public. This is paving the way for products that address formerly taboo
subjects.

Make it regional. FMCG companies are increasingly appealing to consumers by

launching products with regional provenance thorough flavours, ingredients, recipes,
and more. Though consumers may express a preference for local ingredients and
flavours, local is difficult for big brands to achieve. As an alternative, big brands are
connecting with consumers by using regional flavours and ingredients that tap into
regional and home country pride.

Healthy junk food. Snacks considered to be junk food are getting a healthy
makeover with “better for you” ingredients. Snack makers are using ingredients
perceived as being “better for you” as a virtue-signalling mechanism to induce
health-conscious consumers to try snacks that may have previously been off limits
for health and nutrition reasons. Healthful ingredients like avocado and coconut oil
along with plant-based proteins are changing the face of so-called ‘junk food’. Novel
ingredients like jackfruit and moringa are also finding their way into junk food, which
are challenging consumer perceptions.

Gender-bending beauty. Changing views toward gender identity are impacting the
beauty market by blurring the lines between female and male beauty. The blurring of
these traditional binary gender identities is opening the door for concepts like
genderless beauty and another crossover innovation.

Magic bubbles. Healthful drink makers are adding carbonation to their products in
order to steal sales from traditional carbonated soft drinks (CSDs) that are often
perceived by consumers to be unhealthy. Coconut water, ready-to-drink tea, cold-
brew coffee, and fruit juice are among several packaged beverage variants that are
adding carbonation to offer consumers a choice to traditional carbonated soft drinks.

Plant-power beyond food/drink. Plant-based ingredients are changing food and

beverage markets, but the plant revolution is spreading beyond food and drink.
Plant-based ingredients and formulations are beginning to change personal care and
household product markets. FMCG non-food makers are turning to plant-based
ingredients to create products seen as more sustainable and less likely to cause
harm from harsh chemicals.

Declaring war on plastic. Solid waste and pollution issues are catching up with
plastic, so much so that 2018 could mark the beginning of a “war on plastic.”
Packaged goods makers are beginning to move away from traditional plastic
packaging, and toward sustainable options like sugarcane “plastic” tubes as well as
bowls made from plant fibbers. But the “war on plastic” is about more than just
packaging; growing concern over the presence of micro plastics in the oceans land
water eco systems is casting the long-term viability of personal care ingredients like
microbeads and glitter into question.

Overall the future trends reflects that there is a high scope of booming up of sales in
FMCG sector with the implementations of new Strategies that the sector is adapting
to as well as government support in doing business.