Indian Consumer Products Industry Report - Fast Moving Consumer Goods - Equitymaster
X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Fast Moving Consumer Goods Sector Analysis Report 

[Key Points | Financial Year '18 | Prospects | Sector Do's and dont's]

  • The Fast-Moving Consumer Goods (FMCG) sector is the fourth largest sector in India.
  • The FMCG sector has grown from US$ 31.6 billion in 2011 to US$ 52.8 billion in 2017-18. The sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 27.9% to reach US$ 103.7 billion by 2020. The sector witnessed growth of 16.5% in value terms between June–September 2018; supported by moderate inflation, increase in private consumption and rural income.
  • It is forecasted to grow at 12-13% between September– December 2018. FMCG's urban segment is expected to have a steady revenue growth at 8% in FY19 and the rural segment is forecasted to contribute 15-16% of total income in FY19.
  • Accounting for a revenue share of around 4%, rural segment is a large contributor to the overall revenue generated by the FMCG sector in India. Urban segment accounted for a revenue share of 55% in the overall revenues recorded by FMCG sector in India.
  • Revenues of FMCG sector reached Rs 3.4 trillion (US$ 52.8 billion) in FY18 and are estimated to reach US$ 103.7 billion in 2020.
  • 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.

How to Research the Consumer Products Sector (Key Points)

  • Supply
  • Abundant supply through a distribution network of over 8 m stores across the country. Distribution networks are being strengthened in the rural areas.
  • Demand
  • With food and consumer products being items of frequent consumption, demand is less impacted by slowdown. Processed food and personal products are segments growing at a robust pace. Rising contribution of women to the working force and growing nuclear families led to higher demand for convenience foods, especially in urban areas. Tobacco demand being habit-forming is largely inelastic.
  • Barriers to entry
  • Huge investments in establishing brand identity and setting up distribution networks.
  • Bargaining power of suppliers
  • Suppliers being small and fragmented have limited bargaining power. Most tobacco companies have integrated backwards and have their own supply chains. Therefore, the bargaining power of suppliers is not high.
  • Bargaining power of buyers
  • Rising competition and the onslaught of the e-commerce boom does provide good bargain opportunities for customers. Tobacco consumption is more or less a habit, and thus the bargaining power of consumers is only to the extent of choice of the brand.
  • Competition
  • Domestic unorganized players pose competition. Domestic players also feel the competitive pressures from large well established MNCs. In case of tobacco, branded cigarettes, bidis and contraband compete with each other.

top ↑

Financial Year '18

  • Post GST and demonetization, modern trade share grew to 10% of the overall FMCG revenue, as of August 2018. However, post the GST implementation, things are looking up for the FMCG players as they have passed on the cost benefits from the tax savings to consumers, spurring demand. The big brands have definitely made a comeback post the roll out of GST.
  • The sector witnessed healthy FDI inflows of US$ 13.6 billion during April 2000 to June 2018. 100% FDI is allowed in food processing and single-brand retail and 51% in multi-brand retail.

top ↑

Prospects

  • 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. Godrej is focusing on rural market for household insecticides segment. At present, Godrej accounts for 25% of the household insecticides sales from rural areas. Rural FMCG market size is expected to touch US$ 220 billion by 2025.
  • Low penetration levels in rural market offers room for growth. Disposable income in rural India has increased due to the direct cash transfer scheme.
  • E-commerce segment is forecasted to contribute 11% of the overall FMCG sales by 2030.
  • Rising incomes and growing youth population have been key growth drivers of the sector. Brand consciousness has also aided demand. India's contribution to global consumption is expected to more than double to 5.8% by 2020.
  • The online FMCG market is forecasted to reach US$ 45 billion in 2020 and the number of online users in India is likely to cross 850 million by 2025.

top ↑

Related Links for Consumer Products Sector
Quarterly Results | Sector Quote | Over The Years

Views on News

Marico: Earnings Hit by Lower Volumes and Firming Input Prices (Quarterly Results Update - Detailed)

Aug 9, 2017

While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.

More Views on News

Most Popular

The One Real Estate Stock to Buy Now(The 5 Minute Wrapup)

Feb 13, 2019

The real estate sector is ready to make a comeback. This is the stock to consider buying.

Don't Be Afraid of the Market; Buy Stocks Like This One(The 5 Minute Wrapup)

Feb 14, 2019

During this tough period in the market, a contrarian approach holds huge potential upside for this Smart Money Secrets stock.

Small Caps Under Seige: Could This Be A Once-in-a-Decade Wealth Creating Opportunity?(Profit Hunter)

Feb 14, 2019

Don't let the dark clouds hovering over small caps scare you into hiding; it will rain gold as sentiments recover. Indeed, there is a blood bath. And if you are a first time investor, the correction is deep enough to scare you out of markets.

The 4-Point Plan to Accelerate India to a 10 Trillion Dollar Economy(The 5 Minute Wrapup)

Feb 12, 2019

Two questions I have been eagerly waiting to ask you ever since Budget 2019 was announced.

The Train to 'Small-Cap-Profits Land' is Back on the Station!(Profit Hunter)

Feb 15, 2019

Why its great news that prices for small caps over the last few days have been falling like there's no tomorrow.

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE FMCG


Feb 22, 2019 (Close)

COMPARE COMPANY

MARKET STATS