Fast-moving consumer goods, or FMCG for short, are also referred to as consumer packaged goods (CPD).
These goods are items that are frequently purchased and are typically not long-lasting. Other names for it include consumer packaged goods (CPG). Soft drinks, processed foods, cosmetics like lip balm, eyeliner, deodorants, soaps, and everyday items like toilet paper, face towels, shower caps, toilet soaps, and over-the-counter medications are a few examples of FMCG products.
Products made by FMGC typically have a short lifespan and are replaced or sold within a few days, weeks, or months.
Although FMGC products have a relatively low-profit margin, they are typically sold in large quantities.
so the overall profit is good. FMCG products’ success is greatly influenced by their brand equity, marketing, distribution system, and knowledge of consumer behaviour.
The Indian economy’s fourth-largest sector is the fast-moving consumer goods (FMCG) sector.
which is expected to rise from US$ 30 billion in 2011 to US$ 75 billion in 2018. It contributes 5% of all factory employment in India.
The main drivers of this sector’s growth are thought to be the increase in awareness, ease of access to goods, and changing lifestyles.
- FMCG Industry History
- Current State of FMCF Industry
- Characteristics of FMCG products
- What does the Indian FMCG market look like?
- Scope of the FMCG Sector in the future
- FMCG Distribution
- Investment in FMCG Sector
FMCG Industry History
There was little investment in the FMCG sector between 1950 and 1980. Due to the lower purchasing power of the local populace, people chose basic goods over expensive ones. The Indian government tended to favor neighbourhood stores and merchants.
Due to the less purchasing power of Indians and the government’s preference for small-scale industries, this sector did not experience much growth from the 1950s to the 1980s. One of the few businesses that persisted and developed into market players was HUL and Amul.
People’s desire for greater product variety between 1980 and 1990 prompted FMCG companies to expand their product offerings. As the FMCG industry gained momentum, more businesses began to enter it. At the same time, the media sector in India experienced a boom, which increased the pressure on new businesses to turn a profit.
Prior to 1991, when globalization and liberalization took place in India, local consumers could not purchase western clothing or imported foods. The general public had little awareness of brand recognition. Following 1991, the FMCG sector was influenced by multinational corporations, which also permitted government intervention to entice foreign FMCG firms to operate in India.
The 1991 economic reforms increased the number of domestic options as well as those available abroad. Trade barriers were lowered to encourage MNCs to invest in India. Companies began introducing goods aimed at both the rural and urban markets as a result of rising living standards and the expanding purchasing power of rural India. Companies began making investments in new product lines, distribution networks, and upgraded products. Many of the wealthy consumers who had always had money but few options started splurging as a result of the increased choices available to consumers and the positive euphoria following liberalization.
FMCG Industry – Current
India should, without a doubt, be among the nations with a leading and expanding FMCG market, as it is the second-most populous nation in the world. Evidently, that is what is taking place at the moment, and the products with the largest market shares are the most intriguing.
Recent times have seen an increase in programs like farm loan forgiveness, Direct Benefit Transfer (DBT), and rural infrastructure development. The Union Budget 2019-2020 has shifted the emphasis to infrastructure, tax breaks, micro, small, and medium-sized businesses, agriculture, and healthcare (Ministry of Micro, Small and Medium Enterprises). It is anticipated that these initiatives will have an impact by raising the minimum wages for regular people, particularly in rural areas. Therefore, any increase in income will directly correlate with the demand for FMCG goods.
The FMCG industry is benefiting from changes in traditional culture and lifestyle. Because of the increase in middle-class income, urban populations are shifting away from necessities and toward high-end goods. Consumer willingness to pay high prices for premium goods has also forced FMCG companies to reconsider their business models.
The demographic makeup of India significantly contributes to the expansion of this industry. India’s demographic is not only young, but this group is also more urbanized and has higher spending levels. Government-sponsored urban development initiatives and India’s expanding middle class have increased the number of lucrative markets there. According to Ernst & Young’s study of Indian cities, 30 “new wave” cities, including Jaipur and Surat, have recently emerged. Consumption in these cities is increasing more quickly than in many of India’s metropolises. The young people of India exhibit a high level of technological awareness.
The booming E-Commerce industry in India, as a result of increasing smartphone adoption and improved internet connectivity, has assisted in the formalization of sizable portions of the unorganized retail sector.
Characteristics of FMCG products
- Mandatory use
- Frequent purchase
- Low cost
- No effort to choose
- Comes in a wide range
Consumer goods are items that the typical person purchases for daily use. Fast-moving consumer goods are examples of non-durable goods with a very short shelf life. Fast-moving consumer goods are the most common commodities (FMCG).
Fast-moving consumer goods (FMCG) are used daily by almost everyone. These include a few of the standard purchases we make at a supermarket or grocery store.
These are the things that we use frequently and satisfy our needs. Despite making up more than half of all consumer spending, FMCG purchases are frequently low-involvement.
What does the Indian FMCG market look like?
FMCG goods are widely accessible across the nation. The FMCG sector is in charge of producing, distributing, and marketing goods so that the general public can consume them continuously.
Over the past ten years, FMCG revenue in India has increased at an astounding rate of 21.4%. India’s FMCG market expanded at the fastest rate in the Asia Pacific in 2018—14.8 percent.
FMCG is distributed outside of cities. Even though the urban market contributes about 55% of the consumption revenue to the Indian FMCG sector, the rural market is not far behind.
Scope of the FMCG Sector
The FMCG market grew by 7.3% in the final quarter of the 2020 fiscal year. The FMCG market had a growth momentum of 9.4 percent by 2021 and was conducted both online and offline.
Consumption habits significantly affect the FMCG sector of the economy, especially among young urban residents.
It is anticipated that new product categories will emerge, even within the sector of FMCG, to meet the consumer demands of the new consumer living in the new world as a result of changing habits and lifestyles.
That’s why, if you have to grow your company in the FMCG industry, you can apply for an MSME loan, which will make the process easier for you.
FMCG products travel through distribution channels to reach consumers from producers. They serve as the system’s conduits for the movement of goods, data, and money.
While some FMCG businesses prefer to work with consumers directly, the vast majority of businesses rely on a distribution network to get their products to consumers.
It takes a lot of planning, careful consideration, effort, and money to set up a distribution channel. A sizable portion of total marketing expenses is accounted for by the profit margin on distribution channels and the expense of managing them.
The majority of manufacturing businesses in India struggle to effectively plan, build, and manage their distribution channels.
What should you be aware of before pursuing a career in the FMCG/Consumer Goods sector?
An amazing place to start if you’re seeing a new challenge is the consumer goods sector. Although a degree is necessary, you should be aware that it is not the only qualification that will give you a job in this industry.
Other skills include the ability to manage others, being a good listener, and being open to learning, among others. For positions in the FMCG sector, graduates are required.
This might result in employment in the product processing, retail, or marketing divisions. If you are an engineer with experience in product design, merchandising, management, or related fields, that will be advantageous.
Additionally, leading FMCG companies like Britannia Industries, Hindustan Unilever Limited, Cadbury India, and others are constantly looking for business graduates.
However, you can apply for a business loan for expansion if you have decided to start a business in the FMCG sector rather than looking for employment.
Should you make an investment in FMCG?
Research indicates that investments in this sector are particularly profitable because the demand for FMCG goods is steady all year long.
While multi-brand retail is permitted at a rate of 51%, food processing, and single-brand retail are both permitted at 100% FDI.
This will boost consumer spending and stimulate the launch of new products by increasing the employment of FMCG brands, their visibility in the supply chain, and their high visibility in organized retail markets. The sector received a sizable amount of FDI, amounting to US$18.19 billion, between April 2000 and March 2021.
You can either invest money directly in a business or own the business setup that allows you to maximize your returns on investment.
Therefore, you will need the investment if you want to make investments in the FMCG industry. It is advantageous for this industry that investments are low, but returns are high. Therefore, even if you lack the funds to invest, you can still apply for CGTMSE, which supports the expansion of your business.
Rural and urban are the two sides of the FMCG coin!
- A combination of rising income and higher aspirations has led to an increase in rural consumption. In rural India, there is a rising demand for branded goods.
- In FY18, the rural FMCG market had a value of US$23.63 billion. By 2025, the rural FMCG market is anticipated to reach US$ 220 billion.
- The urban market contributes the most to the total revenue made by the FMCG industry in India, with a revenue share of about 55%.
- The rural market is expanding quickly and contributes 45 percent of the total revenues generated by the FMCG industry in India. Fifty percent of all spending in rural areas goes toward FMCG products.
- Rural India is experiencing an increase in demand for high-quality goods and services as a result of FMCG companies’ upgraded distribution systems. Rural markets with low penetration levels have room to grow
Why do FMCG firms have such slim profit margins on their goods?
Consumer goods that move quickly typically have very low-profit margins. Products are therefore widely distributed.
Let’s say you own an IT business that completes Rs 10,000 crore worth of transactions annually and has a 35 percent operating profit margin. In the FMCG industry, the company creates and sells 500 crore rupees worth of goods with an operating profit margin of 5 to 10 per cent, but it does this 40 times. Churn is the key to FMCG’s success!
What are some tactics that FMCG companies use to persuade you to purchase their goods?
- The price of 4 soap cases is reduced to that of 3.
- Free gifts are provided. With a large pack of FMCG items, some plastic-free utensils are provided.
- Continuous marketing The constant barrage of advertisements for products on TV, in print, and on social media automatically imprints the product in your mind, and when you see it in person, you are more likely to purchase it. The best examples of this are online retailers like Amazon. The same product advertisement will be displayed for you on all of the web pages when you conduct a product search, close the tab, and visit other websites.
- Lower prices for larger products encourage consumers to spend more by driving up their purchases. Imagine that a 1.5 kg packet of Quaker Oats costs Rs 200 on Amazon, while a 1 kg packet costs Rs 170.
What phases make up an FMCG product?
There are typically four stages to a fast-moving consumer good.
When a product first enters the market, it is said to have been introduced. It is necessary to raise consumer demand for the product, which is typically accomplished by providing samples for consumers to try before making a purchase. From the perspective of the customer, this stage aids the business in identifying potential problems the product might have.
2. Growth Stage
Following the product’s introduction to the market, sales increase, and customers begin purchasing the product as needed. At this point, the general public is aware of the features and advantages of the product.
3. Maturation stage
Production costs typically decrease at this stage because the product has already sold several times during the growth stage. At this time, sales usually peak, and the price of the product decreases. Competitors introduce their own products at this point, each with a similar set of features.
4. Stage of decline
Sales would have significantly decreased, the product’s price would have increased, and customers would have a propensity to purchase other goods. At this point, making a profit becomes very challenging. When the product reaches this point, it is then stopped.
The FMCG sector is where the demand never slows down. Because its products are non-durable and quickly consumed, FMCG is the most stable sector of the economy. As a result, unlike, say, purchasing a car, you cannot put off eating, taking a shower, or cleaning your bathroom for too long. Due to everyone’s individual impact, FMCG is now individually relevant.
Hindustan Unilever Limited. With a presence spanning more than 70–75 years, Hindustan Unilever Limited is India’s largest and most important FMCG manufacturing company. Among the top five fast-moving consumer goods companies in India, it is the biggest. We hope that we have provided you with the right kind of information regarding the FMCG sector.