FMCG: the best sector for marketers.
INTRODUCTION
FMCG sector is the 4th largest sector in the Indian economy with Household and Personal Care accounting for 50 per cent of FMCG sales in India. Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector. The urban segment (accounts for a revenue share of around 55 per cent) is the largest contributor to the overall revenue generated by the FMCG sector in India However, in the last few years, the FMCG market has grown at a faster pace in rural India compared with urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50 per cent of total rural spending.
Market size
The retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion in 2017, with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is likely to boost revenues of FMCG companies. Revenues of FMCG sector reached Rs 3.4 lakh crore (US$ 52.75 billion) in FY18 and are estimated to reach US$ 103.7 billion in 2020. The sector witnessed growth of 16.5 per cent in value terms between July-September 2018; supported by moderate inflation, increase in private consumption and rural income.
Some of the recent developments in the FMCG sector are as follows:
- ITC to invest Rs 700 crore (US$ 100 million) in food park in Madhya Pradesh.
- Patanjali will spend US$743.72 million in various food parks in Maharashtra, Madhya Pradesh, Assam, Andhra Pradesh and Uttar Pradesh.
- Dabur is planning to invest Rs 250-300 crore (US$ 38.79-46.55 million) in FY19 for capacity expansion and is also planning to make acquisitions in the domestic market.
- In May 2018, RP-Sanjiv Goenka Group created an Rs 1 billion (US$ 14.92 million) venture capital fund to invest in FMCG start-ups.
- In August 2018, Fonterra announced a joint venture with Future Consumer Ltd which will produce a range of consumer and foodservice dairy products.
Role of Government
- 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 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 rate. Also rates on food products and hygiene products have been reduced to 0-5 per cent and 12-18 per cent respectively.
- The GST is expected to transform logistics in the FMCG sector into a modern and efficient model as all major corporations are remodeling their operations into larger logistics and warehousing.
Conclusion
As we all know that FMCG products are of daily use and consumed by almost of the society, some companies like Vestige and RCM are excelling in this field with the idea of network marketing. This sector is best for marketers as we can see that famous companies like Hindustan Unilever, P&G, ITC and etc are performing too well in this field.
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