FMCG INDUSTRY OVERVIEW - RURAL MARKETING

 

FMCG INDUSTRY – OVERVIEW-

The fast moving consumer goods (FMCG) industry, alternatively named 

CPG (Consumer Packaged Goods) industry, deals mainly with the production, distribution as well as marketing of packaged goods for all consumers

Categories of products and players

Some of the leading FMCG companies all over the world are Sara Lee, Nestle, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Mars, etc. 

The major players-

Personal care: ln this category we find the largest number of brands, i.e. 21, inclusive of Lux, Lifebuoy, Fair & Lovely, Vicks and Ponds. 

HUL has 11 brands - Rs 37.99 billion or

54 % of total market value.

Foods: 

The foods category in the FMCG market is dominated by Amul, Nestle, HUL, ITC, Godrej,

  Britannia. 

This category has l8 major brands, aggregating  Rs 46.37 billion. 

AMUL, India's largest packaged food company  has a good presence in the foods category with  its ice-creams, curd, milk, butter, cheese, etc. 

Britannia also ranks in the top 100 FMCG  brands dominating the biscuits category   Nestle and Amul dominate it out in the  powders segment. 

The food category has also seen innovations  like softies in ice-creams,  chapatis by

HUL, ready-to-eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury.

Cigarettes: 

Cigarettes account for 17 % of the top 100 FMCG sales, and is ranked just below the

     personal-care category. 

ITC alone accounts for 60 % market share by volume & 70 % by value of all filter cigarettes in India

Household care: In this segment Godrej & Reckitt are the two big players. 

Good-night from Godrej is worth more than Rs 2.17 bn, followed by Reckittt - Mortein at Rs 1.49 bn.

Hair care:

ln the shampoo category, HUL’s Clinic & Sunsilk make it to the top 100, although

P&G's Head & Shoulders & Pantene are also trying hard to reach the top. 

Clinic's market share is nearly double the size of Sunsilk's.

Herbal products-

Dabur is among the top 5 FMCG companies in India and is a herbal specialist.

Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and ReaI.

Confectioneries: 

Cadbury India is the market leader in the chocolate confectionery market with a

70 % market share and is ranked No-2 in the total food and drinks market. 

Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs & Gems

Size and growth

The Rs 850 bn Indian FMCG industry is expected to register a double-digit value growth and is set to grow by 20-30% in 2009-2010, up from 10-20% in 2008-2009.

The FMCG sector generates 5%  of the total factory employment in the country and is creating employment for three million people, especially in small towns and rural India.

The SWOT 

 The major strength of the industry lies in low operational costs and strong distribution networks. The major weakness is

the inability to innovate on a continuous basis. There are more modifications than novel products.

The growth drivers are expanding markets and innovations. 

The limiting factors are competition and government restrictions.

The big firms are growing bigger & small companies are catching up as well. 

According to a study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by

    Indian companies. 

15 companies own these 62 brands, and 27 of these are owned by Hindustan Unilever. 

Pepsi is at number 3 followed by Thums Up. 

Britannia takes the 5 place, followed by

Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). 

Personal care, cigarettes, & soft drinks are the three biggest categories in FMCG. 

Between them, they account for 35 of the top 100 brands

Recession and reactive strategies

FMCG is a recession-proof industry. 

"By definition, FMCG addresses a very core need in the consumer's life & so it is less prone to economic swings than high-ticket items such as TV or even apparel 

The economic recession has NOT impacted the performance of the companies that have manipulated their marketing strategies intelligently.  

There will be strong growth both by value and by volume because of value-for-money products.

The beverage industry in India is estimated to grow at 17 % despite the slowdown in the

   economy. 

On the personal-care front, deodorants, shampoos and talcum powders could see 2 digit growth. 

For instance, Cavin-Kare registered 23 % sales growth in 2008-2009 and anticipates

30% growth this year,  

Different companies have reacted in different ways to sustain and increase sales.

Price increases-

Some companies like HUL resorted to price increases. 

They have also been well-absorbed by the

market. 

There has not been any drop in Demand for consumer products at popular price points. 

However, there may have been some narrowing

in demand at the top end of the market; 

in the mass market, demand continues to be strong, both from rural and urban markets.

Price cuts

Companies like P&G & Godrej resorted to price cuts. "While volume growth is likely to be strong for most categories, it is expected to decelerate for discretionary categories. 

Lower input costs will result in margin expansion, leading to growth in operating profit for the FMCG industry,"  

lnnovations

Some companies resorted to new product launches and brand extensions. 

The extensions of brands such as Navratna cool oil and Boroplus are examples for this.

Focus on rural markets with the urban market reaching near saturation, companies developed strategies for penetrating deeper into rural & semi-urban markets

Rural market-a new opportunity

According to a research study commissioned by the Associated Chambers of Commerce and Industry in India, rural areas are propelling the demand for FMCGs, passenger cars, two-wheelers and organized retail goods at a comparatively faster pace than the urban areas and thus, leading to a healthy

increase in the revenue of companies despite the global recession.

The FMCG sector in rural areas is expected to grow by 40% against 25%  in urban areas 

 With current estimated value of over Rs 5,600 bn, or nearly 40% of the total retail market valued at Rs 14,000 bn, the

rural retail market will remain the potential area for growth.

Several FMCG firms, including ITC  have been registering faster and higher growth in the sales of their goods in the rural markets as compared to the urban markets. 

This has significantly added to their bottom lines.

Significance of the FMCG sector

According to a research analyst at RNCOS, a leading market research and information analysis company,

"Increasing penetration of the FMCG sector in rural areas is leading to the development of

  rural India over the last few years." However, to  grow strongly and rapidly, rural areas should  effectively

address widespread and fundamental problems such as developing infrastructural facilities and improving education levels.

Prospects of FMCGs

The future outlook for FMCGs is very promising.  

The middle class and the rural segments of the Indian population are the most promising market

for FMCGs, and there is an opportunity to convert them as buyers of branded products.

The per capita consumption of almost all products in the country is among the lowest in the world.

Technology is advancing to facilitate innovations that are affordable to the middle and BOP segments

of the Indian market.

Growth is possible if companies focus on innovation of quality products at affordable prices and design

effective marketing strategies.

The marketing mix of FMCGs is a combination of the various elements  

The choice of the elements to design a marketing strategy requires a customer-centric long-term view, aggressiveness & innovative spirit.