How To Start FMCG & Consumer Goods Industry

Commonly known as the consumer packed goods, FMCG is a huge entity in itself. These are the good which people buy at short and regular intervals of time. These are your everyday goods, without which you routine needs will go unfulfilled. Think about having to go through the day with bad breathe because you ran out of toothpaste in the morning. The most common items in this long and lengthy list are toilet or beauty soaps, washing detergents, shampoos and other grooming essentials. These also include edibles such as eggs, bread etc that you need every day.  These goods aren’t meant for once in a while use, but for daily or frequent consumption. They have a high return.

The Fast Moving Consumer Goods industry is a huge one and covers the various household items that you purchase when shopping in the local supermarket, a mom and pop shop or even a pharmacy.  The meaning of fast moving is that as soon as these goods are placed on the shelf, they are sold up. It doesn’t take long for these items to be taken home by the consumer. They are produced/ bought/ stored in high volume but their cost is usually low. Various things used around your house such as cleaning stuff, basic medicines, and essential food items and personal hygiene goods all constitute the FMCG industry.

What does the FMCG market look like?

• FMCG is the 4th largest sector in the Indian economy
  
• Household and Personal Care is the leading segment, accounting for 50 per cent of the overall market. Hair care (23 per cent) and Food and Beverages (19 per cent) comes next in terms of market share
• Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector
• The number of online users in India is likely to cross 850 million by 2025.
• Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 672 billion in 2016, with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is likely to boost revenues of FMCG companies
• People are gracefully embracing Ayurveda products, which has resulted in growth of FMCG major, Patanjali Ayurveda, with a revenue of US$ 1.57 billion in FY17. The company aims to expand globally in the next 5 to 10 years.

This is the 4th largest sector of our economy.

The three main segments in this sector are:

• The food and beverages segment
• The healthcare segment
• The household and personal care segment

The FMCG sector has made huge leaps in the last few decades, in terms of sales and revenue. By the time 2020 roles by, the numbers are expected to be quadrupled.  These industry has next to no chances of slowing down, owing to our population that doesn’t seem to be slowing down either.

Of course, as the standard of living and the annual incomes are accounted for, the urban segment contributes the most to the FMCG sector in India. The market share during the year 2016-17 was a whopping 29.4 billion dollars. The rural and semi-urban segments are also not too far behind. The sales in these areas are growing steadily, owing to the standard of living that is on an all-time rise. With people growing accustomed to having simple conveniences such as liquid soaps or hair conditioners, it is only going to increase further.  Also, as people have become more aware and can now afford to buy the basics, FMCG shows no signs of slowing down.

Putting sales, revenue and FMCGs contribution to the GDP aside, these fast moving goods, during their production and other related activities are huge generators of jobs. Right from procuring raw material, processing, packaging, sales and delivery, there are lakhs of people making a living in this industry. Even the foreign FMCG companies aren’t immune to our charm. Many western firms are making efforts to set up industries in India, owing to the cheap labor and lots of natural resources.

Market Outlook

• Fast moving consumer goods (FMCG) is the 4th largest sector in the Indian economy. There are three main segments in the sector – food and beverages which accounts for 19 per cent of the sector, healthcare which accounts for 31 per cent and household and personal care which accounts for the remaining 50 per cent.
• The FMCG sector has grown from US$31.6 billion in 2011 to US$ 49 billion in 2016. The sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 20.6 per cent to reach US$ 103.7 billion by 2020.
• Accounting for a revenue share of around 60 per cent, urban segment is the largest contributor to the overall revenue generated by the FMCG sector in India and recorded a market size of around US$ 29.4 billion in 2016-17. Semi-urban and rural segments are growing at a rapid pace and accounted for a revenue share of 40 per cent in the overall revenues recorded by FMCG sector in India. The rural FMCG market in India is expected to grow at a CAGR of 14.6 per cent from US$ 29 billion in 2016 to US$ 100 billion by 2020.
• Growing awareness, easier access, and changing lifestyles are the key growth drivers for the consumer market.
• The fast-moving consumer goods (FMCG) sector is an important contributor to India’s GDP. Fast moving consumer goods (FMCGs) constitute a large part of consumers’ budget in all countries. India’s FMCG sector creates employment for more than three million people in downstream activities. It is currently growing at double-digit rate and is expected to maintain a high growth rate.
• Globally, India is becoming one of the most attractive markets for foreign FMCG players due to easy availability of imported raw materials and cheap labor costs. The urban segment is the biggest contributor to the growth of India FMCG sector, accounting for around two-thirds of the total revenues. However, the share of semi-urban and rural segments in the country’s FMCG sector is anticipated to increase by the end of 2020.