IRJMSH Vol 11 Issue 1 [Year 2020] ISSN 2277 – 9809 (0nline) 2348–9359 (Print)

A STUDY ON CURRENT TRENDS IN FMCG SECTOR IN INDIAN MARKET

CONTEXT
Prof. MUDASIR AHAMED KHAN N
Department of MBA, Dr Sri Sri Sri Shivakumara Mahaswamy College of Engineering,
Bangalore, Karnataka
Prof. KAVYA C
Department of MBA, Dr Sri Sri Sri Shivakumara Mahaswamy College of Engineering,
Bangalore, Karnataka
Prof. ABRAR HUSSAIN
Department of MBA, R.R Institute of Advanced Studies Bangalore, Karnataka

ABSTRACT
The fast- Moving consumer goods (FMCG) sector is an important contributor to India’s GDP
and it is the 4th largest sector of the Indian economy has market size ~ Rs.460 billion. Items in
this category are meant for the frequent consumption and they usually yield a high return. This
research emphasizes the various trends and current condition present in this industry. Study is
carried out through secondary data. India is becoming one of the most attractive markets for
foreign FMCG players due to easy availability of imported raw material, cheap labor cost,
enhanced economy, and vast market opportunities. Due to intense competition present in
industry market players adopting various modern practices including use of E-Marketing &
Social media. Rural area has become a crucial market place in recent days which includes
627,000 villages. Indian market is divided into organized retail and unorganized retail stores,
roughly half market being dominated by unbranded, unpacked,
and local products. This presents tremendous opportunity for marketers of branded product to
convert consumer to buy branded products.
Key Words: - FMCG, Indian Market, Rural Market, Trends.

BUSINESS ENVIRONMENT
FMCG refers to consumer non-durable goods required for daily or frequent use. Typically, a
consumer buys these goods at least once a month. The sector covers a wide range of products
such as detergents, toilet soaps, toothpaste, shampoos, creams, powders, food products,
confectioneries, beverages, and cigarettes.

LEADING PLAYERS IN THE FMCG SECTOR

 Hindustan Unilever Ltd
Hindustan Unilever Limited is the Indian subsidiary of Unilever—one of the world’s
largest FMCG multinationals. This came into existence in1933 as Lever Brothers India
Limited. It has been found that two out of every three Indians uses a HUL food,
beverage, home or personal care product. The company has been identified as a Golden
Super Star Trading Company by the Government of India.

 ITC
ITC came into existence in1910 as Imperial Tobacco Company of India. The company
deals with different FMCG products apart from cigarettes, such as soaps and shampoos,
packaged food like chips and pasta, and cooking oil.
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 Nestle India
The journey of Nestle India began in 1912 as Nestle Anglo-Swiss Condensed Milk
Export Company Limited. Its main products include milk powder, baby food and
chocolates.
 GCMMF (Amul)
GCMMFstands for Gujarat Cooperative Milk Marketing Federation and the company’s
products includeAmulya(milk powder), Amul Milk,Nutramul, Amul Ice Cream,
AmulShirkhand, Amul Chocolates, AmulCheese,
Amul Spray, Amul Ghee,and Amul Butter.
 Dabur India.
Dabur India dealswith personal and health care products. Its brands are Dabur Lal
DantManjan, Daburchyawanprash,Dabur Amla, Hajmola, Anmol, Vatikaoils and
shampoos and Daburred toothpaste.
 Cadbury India
Cadbury cameinto India in the year 1948 by importing chocolates. The firm now has
manufacturing units cross India. Its popular brands include Dairy Milk, Celebrations,
Eclairs, Perk and5-Star, apart from the popular milk drink Bournvita.
 Britannia Industries
Britanniais well known for its cheese, cakes, rusks, bread and the popular Britannia
biscuits. Some of its popularbranded biscuits are Milk Bikis, Good Day, Pure Magic,
Maska Chaska, Treat and Marie Gold.
 Procter & Gamble Hygiene and Health Care
Procter & Gamble (P&G) markets household cleaners, pet food and personal care
products. It is also the parent company of some popular brands like Global Gillette and
Clairol. Some of its popular health care products are Vicks inhaler, Vicks Formula 44
cough syrup, Vicks cough drops, Vicks VapoRuband Vicks Action 500+.

OBJECTIVE OF STUDY
The main objective behind this project is to study and understand current scenario present in
FMCG industry. It ensures substantial corporate strategy and also serves as a useful tool for
analysis of sector. This study also aims to opportunities and challenges in FMCG industry.
RESEARCH METHODOLOGY
Research refers to a search for knowledge; it can be defined as a scientific and systematic search
for pertinent information on a specific topic. Research comprises defining and redefining
problems, formulating hypothesis or suggested solutions; collecting, organizing and evaluating
data; making deduction and reaching conclusions; and at last carefully testing the conclusions to
determine whether they fit the formulating hypothesis. In dealing with any real life problem it is
often found that data at hand are inadequate, and hence. It becomes necessary to collect data that
are appropriate. There are several ways of collecting the appropriate data which differ
considerably in context of money costs, time and other resources at the disposal of the
researcher.
The study conducted is a descriptive in nature and involved collection of data through secondary
sources.
Secondary Sources
The secondary data consists of information collected from:
 Websites

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 Annual Report of the Companies

 CMIE Report
 Business magazines
 Trade guides
 Published data on FMCG industry
Data Analysis
Currently different types of categories present in this sector which mainly includes,
 Personal care
 House Hold care
 Food and Beverages
These are the main three categories present in this industry. These main categories contain many
product lines and depths.
PERSONAL CARE
The personal care products (PCP) market in India is estimated to be worth ~USD 4 bn p.a.
Personal hygiene products (including bath and shower products, deodorants etc.), hair care, skin
care, colour cosmetics and fragrances are the key segments of the personal care market. Each of
these segments exhibits its unique trends and growth patterns. For example, the largest segment
of personal hygiene products, largely dominated by bar soaps, has grown at ~5% p.a. over the
last five years. In comparison, the second largest segment, hair care products has seen a much
higher growth of ~9-10% p.a. during the same period. Personal care products include skin care,
hair care and oral care products.
Skin care: The total skin care market is estimated at Rs.34 billion. This market is at a nascent
stage in India. The penetration level of this segment in India is around 20 per cent. With
changing lifestyles, increase in disposable incomes, greater product choice and availability,
people are becoming more aware about personal grooming. Major players in this segment are
HUL with a market share of 54 per cent, followed by CavinKare with a market share of 12per
cent, and Godrej with a market share of 3 per cent.

Hair Care: The hair care marketing India is estimated at Rs 38 billion, including hair oils,
shampoos, hair colourants, conditioners and hairgels. Marico is the leader in hair oil segment
with a market share of 33per cent; Dabur occupies second position at 17 per cent.

Shampoos: The Indian shampoo market is estimated at Rs 27 billion. It has a penetration level
of only 13per cent. Sachets make up 40 percent of the total shampoo sales. It has a low
penetration level even in metros. Again, the market is dominated by HUL with around 47 per
cent of market share; P&G occupies second position with a market share of around 23 per cent.
Oral Care: The oral care market can be segmented into toothpastes (60 per cent), toothpowder
(23 per cent) and toothbrushes (17 per cent). The total toothpaste market is estimated at Rs 35
billion. The penetration level of toothpowder and toothpaste in urban areas is three times that of
rural areas. This segment is dominated by Colgate-Palmolive with a market share of 49 per cent,
while HUL occupies second position with a market share of 30 per cent. In the toothpowder
market, Colgate and Dabur are major players.
HOUSEHOLD CARE
Household care products include bath soaps and detergents.
Bath soaps: The market size for soaps is estimated at Rs 83 billion, comprising the premium,
economy and popular. The penetration level of soaps is 92 per cent. They are available in 5

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million retail stores, of which 75 per cent are in the rural areas. Hindustan Unilever Limited
(HUL) is the leader with a market share of 53 per cent; Godrej occupies second position with a
market share of 10 per cent. With increase in disposable incomes, rural demand is expected to
increase because consumers are moving up towards premium products.

Detergents: The size of the detergent market is estimated at Rs 120 billion. Small unorganised
players account for a major share of the detergent market. In washing powders, HUL is the
leading company with 38 per cent of the market share. Other major players are Nirma, Henkel,
and Proctor & Gamble. The demand for detergents has been growing at an annual growth rate of
10 to 11% during the past five years. On account of convenience of usage, increased purchasing
power, aggressive advertising and increased penetration of washing machines, the urban market
prefers washing powder and detergents to bars. The regional and small unorganized players
account for a major share of the total detergent market in volumes. Household Care category
recorded robust volume and value growth during the year through focused innovation in the
portfolio to provide greater consumer value. Vim bar continues to delight consumers by
delivering superior performance and new offerings like the Anti-Germ Bar and the Monthly Tub
Pack. Vim liquid continues to develop the liquid dish wash category driven by superior product
quality and strong advertising. It has effectively accomplished the dual job of growing the liquids
market by reaching out to more households, while increasing consumption in existing
households. Domex continued to provide clean and germ free toilets to the consumers.
FOOD & BEVERAGES
The food category in FMCG is gaining popularity with a string of launches by HUL, ITC, Godrej
and others. Nestle and Amul slug it out in the milk powder segment. The food category has also
seen innovations like softies in ice creams, ready to-eat rice by HUL, and pizzas by Godrej
Pillsbury.
Tea: The tea market is dominated by unorganised players, who control over 50 per cent of the
market. The leading branded tea players are HUL and Tata Tea.
Coffee: More than 50 per cent of the market is dominated by loose, unbranded coffee. Major
players in this segment are Nestlé, HUL and Tata Coffee.
Food processing industry is one of the largest industries in India, ranking fifth in terms of
production, growth, consumption, and export. The total value of Indian food processing industry
is expected to touch USD 194 billion by 2017 from a value of USD 121 billion in 2012,
according to Indian Council of Agricultural Research (ICAR). The packaged food segment is
expected to grow 9% annually to become a `6 lakh crore industry by 2030, dominated by milk,
sweet and savoury snacks and processed poultry, among other products, according to the report
by CII-McKinsey. The ready-to-drink tea and coffee market in India is expected to touch 2,200
crore in next four years, according to estimates arrived at the World Tea and Coffee Expo 2013.
Branding could drive the next growth wave in the country’s food processing sector. The total soft
drink (carbonated beverages and juices) market is estimated at ~USD 1 billion. The market is
highly seasonal in nature with consumption varying from 25 million crates per month during
peak season to 15 million during offseason. The market is predominantly urban with more than
25% contribution from rural areas. Coca cola and Pepsi dominate the Indian soft drinks market.
SWOT Analysis of India’s FMCG Sector
Strengths
1. Low operational costs
2. Presence of established distribution networks in both urban and rural areas

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3. Presence of well-known brands in the FMCG sector Marketing and distribution

Weaknesses
1. Lower scope for investing in technology and achieving economies of scale, especially in small
sectors
2. Low exports levels
3. Me-too products, which illegally mimic labels of established brands. These products narrow
the scope for FMCG products in rural and semi-urban markets
Opportunities
1. Untapped rural markets
2. Rising income levels, leading to higher purchasing power of consumers
3. Large domestic market with a population of over one billion
4. Export potential
5. High consumer goods spending
Threats
1. Removal of import restrictions resulting in cheap alternatives to domestic brands
2. Slowdown in rural demand
3. Tax and regulatory structure
PORTER’S FIVE FORCE MODEL:

1. Barriers to Entry and exit

The Indian FMCG Industry is characterized with modest entry and exit barriers. Integrated
business model and increasing capital requirement in the industry restrict new entrants. Huge
investments in setting up distribution networks and promoting brands and competition from
established companies.
2. Threat of Substitutes
Being an essential commodity the demand for consumer products is elastic. Multiple brands
positioned with narrow product differentiation. Companies entering a category /trying to gain
market share compete on pricing which increases products substitution. Hence, threat of
substitute is high in the industry.

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3. Buyer Bargaining Power

High brand loyalty for some products, thereby discouraging customers’ product shift. But low
switching cost and aggressive marketing strategies under intense competition within the FMCG
companies, induce Customers to switch between products, thereby driving value for money deals
for consumers.
4. Supplier Bargaining Power
Prices are generally governed by international commodity markets, making most FMCG
companies price takers. Due to the long term relationships with suppliers etc., FMCG companies
negotiate better rates during times of high input cost inflation .

5. Industry Competition
Competitiveness among the Indian FMCG players is high. With more MNCs entering the
country, the industry is highly fragmented. Advertising spends continue to grow and marketing
budgets as well as strategies are becoming more aggressive. Private labels offered by retailers at
a discount to mainframe brands act as competition to undifferentiated and weak brands.

CURRENT PRACTICES BY FMCG PLAYERS

Global Concentration
Major global consumer product companies (such as Unilever, P&G, Colgate, Nestle, Heinz) have
a lion's share of the global market. These companies have been established for a very long time
and possess a clutch of strong brands with proprietary technology. Most of these companies are
cash rich and well managed. Their brands generate strong cash flows and allow them to reinvest
in strengthening their brand equity further, with continued promotions/ advertisements. They
also have the financial clout to acquire small local brands to strengthen their position in the
category. These companies also make considerable investment in R&D to sharpen and maintain
their edge in the business.

Growth is in the Third World

Most of the global majors have their origins in Europe or USA. They find their home markets
saturated and are banking on the third world for future growth. These companies are setting up
shop and are aggressively expanding their base in these countries. They also look out for
opportunities to acquire local brands to push start or consolidate their position in these markets.

Value for Money

During the last 4-5 years, particularly after reduced consumer spending during the global
recession, the new buzz word is value for money. FMCG companies globally have embarked
upon major re-structuring/ cost cutting exercises as the business has become fiercely
competitive. Also, several innovations in packaging media have taken place.

Adapting to Local Conditions

In the last few years, process of adapting to local conditions has accelerated. MNCs are adapting
their products, process and marketing communication to the local conditions. They alter the
manufacturing process to maximize use of local raw materials and suit their products to the taste
and requirements of local consumers. This process has been necessitated by the
Imperative to be cost effective and be competitive vis-a-vis strong local players.

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Packaging
The role of packaging has increased significantly in recent times, partly due to improvement in
packaging technology. Traditionally, packaging was expected to serve the purpose of protection
and economy. Then, packaging was expected to fulfil the objective of convenience. Today,
packaging is used as an effective tool for promotion. Besides, new packaging technology has
enabled most FMCG companies to significantly reduce their packaging costs.
Rural Distribution
Increased focus on rural distribution has increased logistics spend for the leading companies. The
rural market is currently worth approximately USD 9 billion in consumer spending in the FMCG
space annually. Rural India accounts for 700 million consumers or 70% of the country’s
population, accounting for one -third of the total FMCG market.

FUTURE GROWTH FOR FMCG INDUSTRY

Changing consumer profiles
People are becoming conscious about health and hygiene. There is also a willingness to move to
evolved products and brands, because of changing lifestyles, rising disposable incomes, etc.
Consumers are switching from economy to premium products for instance, sharp increase in the
sales of packaged water and water Purifiers’ Findings from a recent survey shows
that about 71 per cent of Indians take note of the labels of packaged goods containing the
nutritional information, compared to two years ago when only 59 per cent of the respondents
read labels.

Government’s Policy.
The Indian government has enacted policies aimed at attaining international competitiveness by
lifting quantitative restrictions, reducing excise duties, and changing food laws, all of which have
resulted in an environment that fosters growth. Hundred per cent export-oriented units can be set
up with government approval, and the use of foreign brand names is now
freely permitted.

Foreign Direct Investment (FDI).

Automatic investment approval (including foreign technology agreements within specified
norms), up to 100 per cent foreign equity or 100 per cent investment for NRI and overseas
corporate bodies (OCBs) is allowed for most of the food processing sector except malted food,
alcoholic beverages and those reserved for small-scale industries (SSIs). There is
continuous growth in net FDI inflows.
A Vast Rural Market.
Rural India accounts for more than 700 million consumers—or 70 per cent of the Indian
population—and 50 percent of the total FMCG market. The working rural population is
approximately 400 million. Average citizens in rural India have less than half the purchasing
power of their urban counterparts. Still, this market has immense potential, enticing FMCG
companies to take different steps to capture it. Hindustan Unilever Ltd is the largest player in the
industry and has the widest market coverage.

Dairy-Based Products.
India is the largest milk producer in the world, yet only around 15 per cent of the milk is
processed in the country. Organised liquid milk business is at a nascent stage, but has vast long-

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