ROADMAP 2020: FMCG SECTOR by Rahul Bandri MMS 1

Product innovation, focussed initiatives and strategic mergers and acquisitions were the paramaters that defined the FMCG sector in 2010. As the sector prepares itself for the next decade, the question remains – will the past growth be sustained from the current levels of Rs. 1300 billion? 

The willingness of Indian consumers to spend on premium products for the emotional value as well as exclusive feel, a trend which trade pundits term as premiumisation or up-trading, is driving the growth of the FMCG sector. The most recent report , ‘FMCG roadmap to 2020’ states that the sector , which currently accounts for 2.2% of the countrys GDP, has the potential togrow to an annual rate of 12% and reach the size of Rs.4000 billion by 2020. More, too, is possibly apparent.

In the last one decade or so, the consumption pattern of Indian consumers has undergone a rapid revolution. Add to this the mass media advertising adopted companies who are aggressively chasing volumes by spending more on ground level marketing activities. In such a scenario it is expected that a number of categories will witness a robust double digit growth. What can probably be the dampener in the growth saga is the rising inflation that poses a threat to consumer spending; sustaining growth in volumes and value in such a scenario will be a real challenge for the companies.

FROM 8% TO 17% THAT’S THE JUMP

Given the lacklustre growth in developed markets, India has apparently become critical to the growth plans of multinational consumer companies. While foreign players are opting for both organic and inorganic route to generate more revenues from India, the home grown companies too are not lagging behind in their growth aspirations. 13 acquisitions, led by Godrej(which bought Megasari Group, Swatik & Genteel brand), Marico and dabur were the hallmarks of the Indian FMCG players in 2010. 

The rural india growth story is spreading with the government stimulating measures and increasing the reach of marketers to even the once called laggard states. The hinterland is becoming increasingly attractive for manufacturers of consumer products and automobiles as well as organised retail business. Understanding the potential, FMCG companies too have stopped flirting and have realised the need to marry rural markets through long term engagement. With rising rural incomes and consumerism, better penetration of FMCG products in the rural markets will only contribute to its bottom line.

The more realisation that India is not a homogeneous market and preferences vary significantly has led FMCG players to come up with customised products. Players like ghadi detergent, Priyagold biscuits, Cavinkare have been more successful in rural markets. For the uninitiated, Clinic Shampoo is the highest selling shampoo in rural India. As a matter of fact rural areas and small towns account for more than 60% of the FMCG 

market, and in telecommunications 70% of the growth is accounted for by the rural markets.