Indian FMCG sector report – Relevant and specific statistics
- Between 2016 – 2020, the Indian FMCG market is expected to grow at a CAGR of nearly 21%
- A rise in rural consumption is all set to drive the FMCG market. It is estimated to grow at a CAGR of 14.6% during the period 2016-2025. A major reason behind the spurt is explained by an increased disposable income that has grown at a CAGR of 4.1%.
- The penetration of modern retail is expected to see a substantial rise at a CAGR of 24.6% by 2020.
- The middle-income class population to grow at a CAGR of 10.8% and estimated to nearly double by 2020
In terms of growth and opportunities, what do the above pointers interpret for the Indian economy?
- Increased disposable income in the rural market implies higher spending power followed by creating an increased demand for premium products.
- Mobile and smartphone usage in rural and urban India – The number of mobile internet users in India is reached around 420mn by June 2017 from 389mn in December 2016. The growth in the rural market is much higher than the urban market in this context. Subsequently, E-com companies are strengthening their FMCG business by positioning their platform as a front line offering to drive daily product sales.
- Tier 2 and 3 cities are witnessing faster growth in Modern Trade. In fact, modern trade consumer spend has nearly tripled from 2011 to 2015.
- Finally, in order to tap the potential, FMCG giants such as Patanjali, Wipro, and Nestle are slowly diversifying and expanding its product range through massive investments across the country.
- Key drivers that have been identified through historic trends primarily are increased awareness, easier access, and changing lifestyles
- Modern trade is a big-ticket item that is expected to grow at 20% year on year, likely to boost revenues for FMCG players.
- Household and Personal Care is one of the leading segments accounting for 50% of the overall market while Haircare at 23% and F&B at 19% market share.
- With the rising adoption of sales technologies and increased mobility usage, the FMCG distribution system has become more transparent, structured, and easily compliable.
- Rural market consumption and spending patterns.
Understanding the Indian Rural Market consumer behavior
- While the urban market accounts for nearly 60% revenue share, semi-urban and rural segments are the high potential markets that are growing faster and currently account for a 40% revenue share. It is interesting to note that FMCG products account for 50% of the total rural spending in India.
- As income levels are rising, there is a clear uptrend in the share of non-food expenditure in rural India.
- Mobile internet users in rural India is recording a growth of nearly 26%. In fact, mobile handset penetration in rural India is much higher than TV. This statistic makes it interesting for FMCG brands to use the mobile medium creatively to expand its reach. A case in example is Colgate Palmolive (I) Ltd. which has low unit packs across its mass sub-brands such as Cibaca that caters to the “Pocket Dentist Initiative”(Jul16 – Dec17). It’s missed call phenomenon or mobile ring-back service provides access to dental care information in rural India
Notable trends in FMCG
- Brand consciousness – Consumers are increasingly becoming aware and prefer lifestyle and premium range products owing to higher disposable income.
- FMCG companies’ buildings focus on innovating their existing product portfolio and developing new ones.
- The trend towards mass customization of products is expected to intensify further owing to increased preferences in consumer demand.
- Companies are aggressively introducing smaller SKUs at reduced prices to sustain margins and maintain volumes to expand the consumer base.
- More and more products are focusing on reducing the carbon footprint by creating eco-friendly products.
Strategies adopted by FMCG brands
- Offer customized products owing to distinct customer preferences. Eg: Women’s Horlicks for women and Junior Horlicks for kids.
- Since varied choices are available for a singular product, customers are less likely to stay brand loyal. Hence, FMCG players massively spend on product innovation and promotion to stay ahead in the competition.
- The online research enables customers to make informed purchasing decisions. Hence, FMCG companies are focusing on building their online presence.