Report On FMCG Sector

Report On FMCG Sector Overview of FMCG sector:Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly a...
Author: Milo Anderson
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Report On FMCG Sector

Overview of FMCG sector:Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. FMCG have a short shelf life, either as a result of high consumer demand or because the product deteriorates rapidly. Indian FMCG Sector: With a population over a 1 million, India is one of the largest economy in the world in term of purchasing power and increasing consumer spending, next to china. The fast-moving consumer goods (FMCG) sector is an important contributor to India’s GDP and it is the fourth largest sector of the Indian economy ,and it has a market size of `2 trillion with rural India contributing to one third of the sector’s revenues. It is one of the largest sectors in India and is a largely a Make-in-India industry. The scopes for the growth of the FMCG industry are high as the per capita consumption of the FMCG products in India is low in comparison to the other developed countries. In the last decade, the FMCG sector has grown at an average of 11% a year; in the last five years, annual growth accelerated at compounded rate of ~17.3%.The overall FMCG market is expected to increase at (CAGR) of 14.7 per cent to touch US$ 110.4 billion during 2015-2020, with the rural FMCG market anticipated to increase at a CAGR of 17.7 per cent to reach US$ 100 billion during 2015-2025. Last five Year S&P BSE FMCG Performance

Classification Of FMCG Sector:Major Segments in FMCG Sector:-

HOUSEHOLD CARE

FMCG INDUSTRY

Febric wash, Household Care

PERSNAL CARE

Oral care,Hair care,Skin care,Cosmetic ,Hygene and paper products

Food & Beverages

Health beverages, staples/cereals, bakery, snacks, chocolates, ice cream, tea/coffee/soft drinks, processed fruits & vegetables, dairy products & branded flour.

Household Care:The fabric wash market size is estimated to be ~USD 1 billion, household cleaners to be USD 239 million, with the production of synthetic detergents at 2.6 million tonnes. The demand for detergents has been growing at an annual growth rate of 10 to 11% during the past five years Personal Care:The personal care products market in India is estimated to be worth ~USD 4 billion p.a. Personal hygiene products (including bath and shower products, deodorants etc.), hair care (The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels), 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. Food & Beverages 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 250 billion by 2020.

Top market leader of FMCG Sector in India:       

ITC Ltd Hindustan Unilever Ltd Nestle India Ltd P&G Dabur India Marico Ltd Pepsico Pvt. Ltd Britannia Ltd

 

Cadbury India Ltd Emami Ltd

Performance of market leader from the last three year :-

Graph 1Gross sale (Cr.) 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Figure 1 BSE FMCG (ITC INDIA)

Graph 2 Net Profit (Cr.) 12000 10000 8000 6000

FY15

4000

FY14

2000

FY13

0

Figure 2 BSE FMCG (HUL)

Figure 3 Dabur India

Figure 4 Nestle India

Top Global Market Player in Indian FMCG sector:     

Procter & Gamble(USA) Reckitt Benckiser(UK) Coca-cola & Kellogg’s (USA) Colgate-Palmolive(USA) Unilever PLC(UK) Jhonson & Jhonson (USA)

Contribution of global FMCG market in their total GDP:-

Contribution ofGlobal FMCG Market In their total GDP

USA UK China UAE Africa India

Contribution of FMCG Sector in India :-



The Indian FMCG sector is the fourth largest in the Indian economy and has a market size of $13.1 billion and represents nearly 2.5% of the country’s GDP but in comparison to India USA FMCG Sector represent in the Global FMCG market size to be more than $10 trillion which is about one-seventh of the global economy

FMCG Sector Growth in FY15 25.00% 20.00% 10.30%

15.00% 8.00%

10.00%

Price Growth

6.10%

5.30% 5.00%

0.60% 4.70%

1.50%

3.50%

7.00%

4.60%

4.50%

3.30%

Q1FY15

Q2FY15

Q3FY15

Q4FY15

0.00%

Total Growth

Volume Growth



FMCG has been a safe sector for investors looking for predictable margins and stable returns during the economic crisis. This has made the sector highly attractive to investors during the economic downturn, But despite significant productivity programs and cost saving efforts, margin growth has been slow – only 0.6% during the period as a whole and 0.8% since 2009 – the turn of the economic crisis.



Contribution In Employment: The FMCG sector is one of the larger employers sector in country. This sector provides significant direct and indirect employment opportunities. With a market size of more than Rs. 60,000 Crore, the FMCG sector provides employment for over 30 Lakh people in the country. The total salary outlay of the sector on direct employment is estimated at approximate 6% of turnover. Approximately 12-13 million retail stores in India, out of which 9 million are FMCG kirana stores. Thus the sector is responsible for the livelihood of almost 13 million people.



Fiscal Contribution:- Cascading Multiple Taxes by the FMCG sector (Import duty, service tax, CST, income tax). 30% revenue of the sector goes into both direct and indirect taxes.



Social Contribution: - Create employment for people with lower educational qualifications. FMCG firms have also undertaken some specific projects to integrate with upcountry and rural areas for both inputs and for distribution as well as to fulfill CSR. some e.g.

ITC Echoupal And Choupal Sagar:- sells both agricultural inputs and daily needs products. ITC’s rural e-network enables farmer connectivity and provides an easy way for farmers to get better profitability and control through access to timely information. HUL’s Shakti Amma Network: - HUL pioneered a rural entrepreneurship model amongst women who became HUL distributors. Dabur India: - regularly conducts rural and adult education programs and provides training in rural areas to facilitate employability. 

Contribution in growth for other industry: Packaging Industry - The packaging industry for the FMCG sector alone is worth US$ 3.5 billion, and is expected to grow faster due to the growth of private label FMCG products. Media Industry - The media industry has a lot to gain from the FMCG sector. Around 40% of media industry earnings from advertising (US$ 5.5 billion) are estimated to come from the FMCG sector, a contribution of US$ 2 billion

Major challenges facing by FMCG sector:

Hike on exercise duty On Cigarettes and tobacco products is the biggest Challenges for these manufacturing Companies



There are very slow growth in FMCG Sector From the two Successive year because shortfall in rains has very badly affected rural consumption ,Which Impacted on incomes and adversely affected sales across product category



Cascading Multiple Tax structure in the FMCG sector is also one of the biggest challenge for FMCG companies that’s by this sector have more hopes for upcoming GST (Good & Service tax )bill.



In FMCG Sector there are few products in every sector which perform badly compared to the others in terms of sales and movement For e.g. the sales of the Fiama Di Wills shampoo is not comparable with the sales of competing brands like Dove or Pantene. Similarly in the house hold and food & beverages category as well as facing these problems.

Conclusion:The Indian FMCG sector is highly fragmented, volume driven and characterized by low margins. The sector has a strong MNC presence, well established distribution network and high competition between organized and unorganized players. FMCG products are branded while players incur heavy advertising, marketing, packaging and distribution costs. The pricing of the final product also depends on the costs of raw material used. The growth of the sector has been driven by both the rural and urban segments. India is becoming one of the most attractive markets for foreign FMCG players due to easy availability of imported raw materials and cheaper labour costs.