What are FMCGs?

WE regularly talk about things like butter, potato chips, toothpastes, razors, household
care products, packaged food and beverages, etc. But do we know under which category
these things come? They are called FMCGs. FMCG is an acronym for Fast Moving
Consumer Goods, which refer to things that we buy from local supermarkets on daily
basis, the things that have high turnover and are relatively cheaper.
FMCG Products and Categories
- Personal Care, Oral Care, Hair Care, Skin Care, Personal Wash (soaps);
- Cosmetics and toiletries, deodorants, perfumes, feminine hygiene, paper
products;
- Household care fabric wash including laundry soaps and synthetic
detergents; household cleaners, such as dish/utensil cleaners, floor cleaners,
toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish
and furniture polish;

Personal Care
Personal Care
Personal care category in India is valued at Rs 54.6 billion. An average Indian spends 8%
of his income on personal care products. Personal care mainly consists of Hair Care, Skin
Care, Oral Care, Personal Wash (Soaps), Cosmetic and Toiletries, Feminine Hygiene. Till
2002-2003, Personal care products, except those in oral care category, were regarded as
luxury items, and attracted a high excise duty of 120%. But the taxation reforms in India
after 1991 have lowered the excise duty rates that make these products more affordable.
It is divided into two segments:

The premium segment

The popular segment

The premium segment caters mainly to urban high class and upper middle class, and is
more brand conscious and less price sensitive. The popular segment caters to mass
segments in urban and rural markets; prices here are around 40% of the premium
segment prices.
Growth
With the increase in rural income and improvement in distribution network (i.e. road
development projects), the penetration levels are set to increase. Since the consumption
level in urban areas is already high in most of the categories, the growth can come only
from deeper penetration and higher consumption in rural areas. In the year 2005-06, the
sector witnessed growth because of the increase in consumer demand from urban and
rural areas. In addition to demand, prices also went up. Also, with the increase in
disposable income, some consumers have moved up in the value chain. The growth for
FMCG products in February 2006 was the highest in 5 years, on YoY (year over year)
basis.

Prospects
The proportion of the consuming class to total households will touch 46% by FY07 from
17.4% in FY95, estimated by National Council for Applied Economic Research (NCAER). As
the native companies are expanding in international market, the MNC subsidiaries are
looking for greater leverage of the parent strengths. Also, big MNCs cannot afford to avoid
India because of its potential market. The market size and the major players are:
Source:CII
Category

Market share (In

billions)

Major Players

Skin Care

13

HLL

Personal Wash

46

HLL

Hair care

28

Marico

Oral care

23

Colgate

In India, the per capita consumption of almost all the products is amongst the lowest in
the world. For example, the average consumption of toothpastes is around 320 gms in the
world but in India it is 107 gms. In Thailand, Mexico, and USA it is 262 gms, 376 gms, and
518 gms respectively.

Oral Care
Oral care
The oral care market can be segmented into:

Toothpaste - 60%

Toothpowder - 23%

Toothbrushes - 17%

This Segment is characterized by high entry barriers, a few major players, high
advertisement spending, and frequent product variant launches. The major players in

this segment are:

Colgate-Palmolive

Hindustan Lever Ltd.

SmithKline
Toothpaste Sales
Family Platforms

60%

Cosmetic Propositions

35%

Toothpowder market
White Toothpowder

52%

Red Toothpowder

40%

Black Toothpowder

8%

The penetration level of toothpowder/toothpaste in urban areas is three times that of rural
areas. Neem tree, salt, ash, and tobacco are some traditional materials that are still
popular for cleaning teeth in rural areas. According to a survey, only 15% of toothpaste
users brush their teeth twice a day in India. The per-capita consumption is very low in
India.
Per capita consumption

in gms

India

70

Europe

300

Thailand

150

About 50 % of India's population uses toothpastes, 27 % uses toothpowder while 23% in

the rural areas are yet to adopt oral care. Mouth freshening washes, dental floss and teeth
whitening products are at a primary stage in India. The use of these products is limited to
urban areas. To increase the penetration level of oral care products, HLL and Colgate in
tandem with Dental Associations have launched nationwide informative commercials on
oral health and community dental health programs to inculcate hygienic practices in rural
areas. Industry sources expect an increase in penetration level of oral care products to
70% from current level of around 49% because of increase in advertising campaigns and
awareness.
Some of the small Indian companies in this segment are:
Anchor
Babool
Colgate-Palmolive is the market leader in oral care segment. Colgate and HLL together
account for 85% of organized toothpaste market. In toothpowders market, Colgate and
Dabur are the major players.

Hair Care
The hair care market in India is valued at $200 million. It has registered a growth of
3.8% over the previous year. The hair care market can be segmented into hair oils,
shampoos, hair colorants & conditioners, and hair gels.
Hair colorants & conditioners
According to A C Nielsen (the world's leading marketing information company), hair
colorants, feminine hygiene, and baby care have accelerated growth in personal care
market.
Hair colorants are substitutes for hair dye to counter graying hair. Hair colorants indicate
strong growth trends with a YoY (year over year) growth of 8 per cent.
Gone are the days when hair conditioners and hair colorants were used occasionally to
look beautiful. Today, they have become the way of life. However, hair conditioners in India
still face a difficult market due to long established habit of using hair oil and ayurvedic
treatments, as they are cheaper for consumers and lack the chemicals of conditioners.
The major players in hair colorants category are Godrej, Garnier, L'Oreal, and Lakme.
Hair oils
The hair oil market is valued at Rs. 6 billions. Hair oiling is a major niche in the hair care
segment. Unlike market abroad, India has a large quantity of consumers whose hair care
expenditure also includes hair oils. The penetration level of hair oil is around 87%. Around

50% of the population uses hair oil everyday. The growth rate of hair oils in rural India is
faster than the growth rate in urban India.
The major players in hair shampoo category are HLL, Marico, and Dabur India.
Shampoos
The shampoo market is valued at Rs 4.5 billions and has the penetration level of only 13%
in India. The market is expected to increase due to increased marketing by players, lower
duties, and availability of shampoos in affordable sachets. Sachet makes up to 40% of the
total shampoo sale. The Indian shampoo market is divided in two parts
Cosmetic
Anti-dandruff
This is primarily a middle class product because more than 50% of the population use
toilet soaps to wash hair. The penetration level is only 30% in metros. The major players
are HLL, and Procter & Gamble.
Hair gels
Hair gel market segment is at a primary stage and not many local brands are available in
India. Hair gels/creams are mainly used for hair grooming by men and is used as a fashion
accessory. The market penetration of hair gels/creams is very low, and is limited to a small
section of the urban market.

Skin Care
The skin care market is valued at $180 million in India. With safe and effective
procedures, advancement in medical technology, increase in awareness, the Indian Skin
care solutions business is growing very fast.
The skin care market can be segregated into toners, cleansers, sunscreens, anti-wrinkle
creams, dark circle removing creams, astringents, facial creams, moisturizers, fairness
creams, day and night creams, etc. Out of these, facial creams, moisturizers, fairness
creams, day and night creams, etc. are the most popular products and account for
approximately 60% of the skin care segment.
The skin care market is at a primary stage in India. The penetration level for both the
urban and rural market is low. Many people still prefer to use home made and traditional
products to cure the skin problems. However, within a period of five-six years, the use of
skin care products has increased significantly in India. With changing life styles, increase in
disposable incomes, greater product choice and availability, and influence of satellite
television, more people are taking interest in personal grooming. The facial skin care
market is booming. Products are competing with one another to take shelf space in the
retail stores. Facial skin care products have become an essential part of the beauty
market. Like western countries, creams and potions are applied in India also, in an effort
to remove the pimples and the acne, fight stress and worry lines, and to remain young.
Since the penetration level is still relatively low, growth is expected to be around 25% over
the next five years.
Some of the major players in this segment are Hindustan Lever (Fair & Lovely, Lakme,
Ponds) with a market share of 53%, followed by CavinKare- Fairever with a market share

of over12 % and Godrej-Fair Glow with a market share of 3.4 %. The other players that
have a presence in the market are Emami (Gold Turmeric and Naturally Fair), Revlon (Fair
& Glow).

Personal Wash (Soaps)

Personal Wash (Soaps)
The personal wash can be segregated into:

Premium- Lux, Dove

Economy- Nirma Bath, Lifebuoy

Popular- Nirma, Cinthol

The price of the premium segment products is twice that of economy segment products.
The economy and popular segments are 4/5ths of the entire soaps market. The
penetration level of toilet soaps is 88.6%. However, the per capita consumption of soap
in India is at 460 gms per annum, while in Brazil it is at 1,100 gms per annum.
In India, soaps are available in five million retail stores, out of which, 3.75 million retail
stores are in the rural areas. Therefore, availability of these products is not an issue. 70%
of India's population resides in the rural areas; hence around 50% of the soaps are sold in
the rural markets.
Growth
With increase in disposable incomes, growth in rural demand is expected to increase
because consumers are moving up towards premium products. However, in the recent past
there has not been much change in the volume of premium soaps in proportion to
economy soaps, because increase in prices has led some consumers to look for cheaper
substitutes.
The major players in personal wash (Soap) market are HLL, Nirma and P&G.

Cosmetics and Toiletries

Indian cosmetics and toiletries market is valued at $950 million. The key growth drivers
for the cosmetics and toiletries market in India are rapid urbanization, increase in
disposable incomes, and changes in people's tastes.
Cosmetics
The cosmetics market can be segregated into talcum powder, colour cosmetics (lip, eye,
face, and nail care products), deodorants, and perfumes. The cosmetics market has been
growing at the rate of 15-20% for the last few years. The sector has witnessed growth
mainly from medium and low priced category that accounts for 90% of the cosmetic

market.
Talcum powder is one of the most popular cosmetic products in India. Its market is
valued at Rs 3.5 billions and is growing at the rate of 12% per annum. Its penetration
level is 45.4% and 25.2% in urban and rural areas respectively. Ponds dominates talcum
powder market with a market share of 70%, followed by Johnson & Johnson with a market
share of 15%.
Colour cosmetics are the fastest growing segment, valued at $60 million. The major
products in colour cosmetics market are foundation, compacts, eye make-up, lipsticks, nail
enamels, blush-on, etc. Lipsticks and Nail Enamel account for 65% of the Color cosmetic
segment. The nail polish segment is valued at Rs. 1.25 billions followed by the lipstick
market at Rs 7 millions. All the categories in this segment are growing at around 25-30%.
Gone are the days when cosmetics were viewed as expensive and self-indulgent items.
Greater access to television, increased advertisement, growing awareness of western
world, and greater product choice and availability have resulted in growing demand for
cosmetic products in India.
However, the penetration level of cosmetics and toiletries product is still very low in India.
The per capita expenditure on cosmetic products in India is approximately $0.68 cents
compared to $36.65 in other Asian countries. The penetration level of international
cosmetics brand in India is also low. International brands account for only 20% of the
cosmetics market. This low level of market penetration can be perceived as an opportunity
for major players in FMCG sector.
Toiletries
The toiletries market is quiet developed and it is dominated by large Indian companies and
MNCs. High advertising expenditures, high entry barriers, and a high rate of new product
launches characterize this segment. Shower and Bath products have the major share in
the toiletries market. The toiletries market can be segregated into:
. The premium niche- i.e. High brand conscious. It caters to the urban higher class.
. The less price sensitive niche it caters to the middle and lower middle class.
These products are not limited to women as their usage is now extended to men also. Men
also use body sprays, colognes and other toiletries products. The men's personal care
market is valued at $165 millions. Gillette is the largest player in this segment. Other
major players in this segment are HLL, Godrej, and J.L. Morison and HLL.

Deodorants and Perfumes

Cosmetics and Toiletries market also include deodorant and antiperspirant category. The
fragrance market in India is growing at an annual average rate of 12.17%.
Deodorants market in India is valued at Rs 3 million only HLL has launched various
products in deodorants category. Fragrance market is valued at Rs 3 billions, out of which
50% is accounted by Alcoholic and Attar perfumes (alcohol free perfumes) each. In
Alcoholic perfumes, one-third is represented by unorganized market while rest is mainly

imported.
Deodorants and Perfumes are the major product niches with promising prospects. Increase
in media exposure (fashion magazines and cable television) has also raised awareness of
foreign fragrance brands. With the reduction of tariff on premium fragrances from 30% to
10% in 2005, new brands are encouraged to enter the market. However, black market,
fake goods, and the enduring popularity of traditional Indian perfumes, such as attar,
hamper sales in India.
From The Economist Intelligence Unit
Sales Value (US $ m)

Perfumes & Fragrances

2005

2006

2007

2008

2009

2010

2,103

1,291

2,464

2,696

2,941 3,169

Feminine Hygiene Products

With the increase in awareness of hygienic products, the market is growing at the rate of
20-25 percent. This segment is characterized by a high product price that has limited the
use of feminine hygiene products to middle middle-income group, upper middle-income
group, and high-income group.
The penetration rate is 10% only. The major factors of low penetration level are low
awareness and the near absence of the feminine hygiene products in rural areas.
Growth prospects
The factors that are stimulating the growth of feminine hygiene products in urban areas
are:
Increase in the number
Increase in job opportunities for women as new-age businesses such as software,
outsourcing, BPO/KPO, etc. are emerging.
Increase in disposable income
Increase in demand

Given these factors, a good growth is projected over 2006-2010.

Paper Products
Paper Products
Some of the paper products are sheet paper, paper boxes, tissues, paper bags,
stationery, envelopes, and printed-paper products such as books, periodicals, and
newspapers. Specialty papers like sandpaper, blueprint paper, carbon paper are not a
part of paper products industry.
The stationery category includes greeting cards, printing and writing papers, school and
office papers, etc. Thetoiletry products include paper towels, tissue paper, and bath
tissue.
Threats
Internet threatens the paper products industry, as it has become the new market channel
(such as,) for many companies. Email marketing campaigns and online banner ads have
reduced the demand for traditional print advertising. Print advertising now includes
newspaper and magazine production only. Newsletters, articles, books are now available
online and that that has reduced the use of print services. Apart from Internet, cell phones
can also be used to access news, and other information, which poses another threat to the
paper products industry.
Outlook
The challenges faced by paper products industry are:
. Increase in production and distribution expenses i.e. increase in transportation cost.
. Reduction in demand i.e. competition from other media
These factors are likely to continue in future and will soon draw away investors,
customers, and advertising money from the paper products industry.
Mergers and Acquisitions
Competition from electronic media has affected the share value of many publishing
companies. With their slashed share prices, these publishing companies have now become
the target of private equity buyers.

Household Care
Household Care Overview
Household care segment is characterized by high degree of competition and high level of
penetration. With rapid urbanization, emergence of small pack size and sachets the
demand for the household care products is flourishing. Household care segment is
expected to grow at a CAGR (Compounded Annual Growth Rate) of 2% from 2005 to
2010, out of which air care and toilet products are expected to grow dynamically during
the same period.
Product Coverage
Fabric wash

Laundry soaps
Synthetic detergents
Household cleaners
Dish/utensil cleaners
Floor cleaners
Toilet cleaners
Air fresheners
osquito repellents
Furniture polish
Major Players
Major players in this segment are HLL, Nirma, Dabur India, Godrej Sara Lee, Henkel India,
Jyothi Laboratories, Naulakha Soaps & Detergents, Reckitt Benckiser (India).

Fabric Wash
Fabric Wash Overview
The fabric wash market is valued at Rs 57 billion in India, and is the world's largest
market after China, and USA. With increase in the penetration of washing machines,
increase in disposable income, aggressive advertising, and convenience of usage, people
prefer detergents and powders in place of bars in urban areas. Detergents' demand has
been growing at the rate of about 11% for the last 5 years. However, laundry bar market
has registered a negative growth. The rural fabric wash market is growing at the annual
rate of 13-14%, while urban market is at 8-9%.
Production (market
size)

Unit

Fabric wash market

MN tonnes 50

4%

50.25

0.50%

Laundry soaps/bars

Rs billion

-6.5%

50.64

-5%

Detergent cakes

MN tonnes 15

10%

15.3

2%

Washing powder

MN tonnes 25

10%

25.63

2.5%

Products Covered
Products covered in this category are:

2002-2003 % Growth 2003-2004 % Growth

53.3

Laundry Soaps
Synthetic Detergents
Synthetic Powders
Major Players and their Products
The major players and their products in the fabric wash market are:
HLL (Surf)
Nirma (Nirma Super, Nima)
Henkel (Henko)
Proctor & Gamble (Ariel, Gain, Tide)

Household Cleaners
The household cleaning market is valued at around Rs. 400 crores and is estimated to be
growing at the rate of 20% per annum. According to AC Nielson (world's leading
marketing information provider), the consumer's desire for germ-free, healthy
environment is increasing and is driving good sales for household cleaning products. The
focus of household cleaner products is to keep disease-free environment. Now-a-days
consumers are looking forward not only to improving upon their eating habits but also to
practising healthy living.
Products Covered
Dish/utensil cleaners
Floor cleaners
Toilet cleaners
Toilet cleaners
The toilet cleaning market is valued at around Rs 40 crores only. The penetration level of
toilet cleaners is still very low because it has been estimated that most of the people even
in urban areas are still using cheap products like acids, or phenols to clean their toilets.
The major share in Toilet Cleaning market is of Harpic from Reckitt Benckisser and its
biggest competitor is Sanifresh from Balsara (now Dabur).
Dish/Utensil cleaners
The dish/utensil cleaning market is valued at around 44 crores. In the dish/utensil-cleaning
segment, bars have dominated over 60% of the market, while dish wash powder accounts

for 32% only. Research shows that 50% and 80% of urban and rural population
respectively are still using substitute products like ash, bricks and other detergents for
dish-washing purposes.
Floor cleaners
The floor cleaners are very less popular in India. Only 3% of Indian households use floorcleaning products, whereas 97% use phenyl or a combination of bleaching powders,
detergents, and acids.
The penetration of house cleaning products is still very low. The challenge of players in
Household Cleaners market is to enter into the households that are still using cheap
products. The opportunity is huge enough as there are millions of households.
Major players
The major players in Household Cleaning Segment are:
HLL
Reckitt & Colman India (RCI)
Bayer India
Balsara Hygiene
Henkel Spic

Air Fresheners
Air fresheners market in India is at its nascent stage. It is valued at Rs 50 crores only
and is growing at an average annual rate of 6.2%. Air fresheners are not considered in
the priority list of Indian consumer class. This segment is characterized by low awareness
among users, high cost, little competition, and ease of usage. However, its market holds
a huge potential due to rapid urbanization, increase in disposable income, and growing
lifestyle of Indian consumer class. The most common air-freshener used in Indian homes
is "moth balls". Nowadays, its use is extending to cars also. For example, Ambi Pur (the
no. 1 European brand) was launched as air fresheners for cars. The product has quickly
gained popularity among car owners.
Products Covered
Products covered under air fresheners category are:
Sprays/Aerosols
Electric Air Fresheners
Gels & Candles

Car Air Fresheners

Bathroom Fresheners
Domestic Room Fresheners
Major Players
The major players in this segment are:
Odonil from Balsara (Now Dabur)
Ambi Pur from Godrej Sara Lee

Mosquito Repellents
Overview
The Mosquito Repellents market is valued at Rs 1600 crores and is growing at the
compounded annual growth rate (CAGR) of 15%. This segment is characterized by low
competition and high consumption. As people are aware of the diseases (like yellow
fever, dengue hemorrhagic fever, and many forms of encephalitis) caused by mosquitoes,
the demand will keep on increasing, which is a positive sign for the manufacturers,
entrants as well as the existing players. According to Vikas Hajela, Vice President of
Godrej Sara Lee, Mosquito Repellents segment has 54 manufacturers with 72 brands.
Products Covered
The products covered in this category are
Coils & Mats
Liquidator
Candle
Vaporizer
Hit
Jet
Cream

Spray
Gel
Lotion
Aerosol Cans

Furniture Polish
Overview
Growth in furniture polish market in India has peaked at around 4% and is expected to
remain above 3.6% till 2009. This segment is characterized by low awareness among
users, high cost, little competition. However, its market holds a huge potential due to
rapid urbanization, increase in disposable income, and growing lifestyle of Indian
consumer class.
Products Covered

Spray Polishes or Aerosols

Liquid Polishes

Semi-Solid Polishes

Furniture Polish Wipes

Major Players
Reckitt Benckiser PLC
Samadhan Combine
Tide Industries

FMCG in 2006
After 4 years of dull performance in both revenues and profits, FMCG sector has now, i.e.
since 2005, gained the momentum, principally because of the smaller companies that
have substantially improved their market shares at the cost of larger players and, in
some cases, the regional players.

If we carefully observe the FMCG index and BSE index, we would realize that the returns
on money invested in FMCG index are much lower than the returns in benchmark index.
The FMCG sector has under performed the benchmark BSE Sensex in 2006. Though both
the indices were close to each other till August 2006, in the later half of the year the
Sensex surpassed the FMCG index by a reasonable margin.
Comparison of 2006 and 2005
After two years of sinking performance of FMCG sector, the year 2005 has witnessed the
FMCGs demand growing. Strong growth was seen across various segments in FY06. With
the rise in disposable income and the economy in good health, the urban consumers
continued with their shopping spree. The rural demand grew at around 11%, while both
the urban and rural sector together registered a growth of around 8%. Packets and
sachets contributed to the highest growth in rural areas. Growth in FMCG depends on two
factors:
Increase in penetration and consumption in rural areas
Change in aspirations and tastes of the urban population

Both these factors contributed to growth in 2006. Besides demand, prices also increased,
because of which only the selected consumers moved up in the value chain. The large
format retail stores in metros also stimulated sales, even if on a very small base. Some
companies absorbed higher input prices, while others were able to pass on the cost to the
consumers.

Food and Health Beverages

India's Food and Beverage industry is valued at Rs. 3584 billion. India produces above
600 million tonnes of food products every year and is one of the major producers of food
in the world.
The food and beverage industry registered a growth rate of 8.5% in 2005-06. According
to Mckinsey's report, the total beverage consumption will grow at 9% over the next 20
years. Of which, alcoholic beverage and non-alcoholic beverage will see a spurt of 9.6%
and 8.8% respectively.
Classification of Food and Health Beverages Sector
Food and health beverages sector includes branded flour, branded sugarcane, bakery
products such as bread, biscuits etc., milk and dairy products, beverages such as tea,
coffee, juices, bottled water etc., snack food, chocolates, etc.
Growth Prospects
With increase in disposable income of consumers, growing awareness among consumers
about health products, rapid urbanization, and increasing popularity of convenience foods,
food and beverage sector is expected to grow at a high rate. This sector holds a huge
potential to grow because of the increase in advertisement spending, awareness campaign
about products in urban as well as rural areas, and large scale transformation.

Major Players
The major players in the "Food and Beverage" Industry is: Heinz, Mars, Marico, Conagra,
Pepsi, HLL, Pillsbury, Nestl, Amul, ITC, Dabur, Britannia, Cadbury, Smith Kline Beecham,
The Surya Food and Agro Private Ltd.
Challenges in the Food and Beverage sectorPoor infrastructure
Lack of adequate facilities for storage, transportation, and cold chain facilities
No common food law (13 laws are enforced by 9 ministries)
Food standards are confusing and contradictory
High cost of raw material and packing material and high railway freight put
pressures on margins
Different rules and regulations and licensing are defined for different commodities

Branded Flour
Branded Flour
Branded flour market has an yearly business volume of 42 million tonnes and is growing
at the rate of 13% per annum. This category comprises of wheat flour milling, rice
milling, and pulse milling. Branded flour market holds a huge potential for growth, as the
consumption of branded atta is at present as low as 2-3% in urban areas.
Products Coverage

Ground wheat

Flakes of wheat

Rice

Corn
Major players and their products
Branded flour market is highly unorganized is held by only a few major playersHindustan Lever - Annapurna brand
Godrej Pillsbury - Pillsbury

Agro Tech - Healthy World

Nature Fresh
ITC - Aashirvaad
Shakti Bhog

Branded Sugar Cane

India is presently a dominant player in the global sugar industry. The sugar industry
comprises of organized and unorganized players. The unorganized players usually
produce Gur and Khandsari, the less refined forms of sugar.
Challenges faced by sugarcane industry

Inadequate availability of cane

Devastating droughts
Delayed payments to farmers
Bad condition of plant and machinery
Lack of uniform pricing systems
Uneconomical size

Major Players
The major players in Indian sugar industry are:
Balrampur Chini Mills Ltd.
Bajaj Hindustan Ltd.
Andhra Sugars Ltd.
Thiru Arooran Sugars Ltd.
Dhampur Sugar Ltd.

Bakery Products
Bakery Products
The market for bakery industry is valued at Rs. 69 billion. The two major bakery
products, i.e. breads and biscuits hold for about 82 % of the market share.
Product coverage

Bread

Biscuits

Pastries

Cakes

Buns

Rusk
Bread
The bread market has a business volume of 1.5 million tonnes. The bread industry has a
production of approximately 27 lakh tonnes. This segment is characterized by high level of
fragmentation, and high margin. The major factors for growth in this segment are:
Brand loyalty
Volumes
Strong distribution networks
The major challenge faced by the organized bread sector at present is low margins of
profit. Hike in the prices of major raw materials like sugar, vegetable oil, milk, and wheat
flour has been accounted for the industry's low margins of profit.
Major Players
The major players in the bread industry that holds about 90% of the market share are:
Britannia
Modern Industries Ltd.
Biscuits
The biscuit market has a total production volume of 1.1 million tonnes. The growth drivers
for the biscuit industry are focused advertising, urban market, and new launches.
Major Players
The major players in the biscuit segment are:
Britannia
Parle

Bakeman
ITC Foods Ltd.
Surya Food and Agro Pvt. Ltd.
HLL
Major Brands
The major brands of biscuit are:
Britannia
Parle
Bakeman
Priya Gold
Elite
Cremica
Dukes
Anupam
Horlicks

Tea
The Indian tea market is valued at Rs. 86 billion. The total production of tea was
estimated to be around 878 million kg in 2005 with a growth rate of about 7%.
Major Players
The major players in the tea industry are:

Hindustan Lever

Tata Tea

Williamson Magors

George Williamson

Harrisons Malayalam

Mcleod Russel

Bishnauth Tea

Dhunseri Tea

Warren tea

AFT Industries
The other players in this segment are
Duncans
Goodricks
Jay Shree
The major share of tea market is dominated by unorganized players. There are about 1000
of tea brands in India, of which 90% of the brands are represented by regional players.
Challenges
The major challenges faced by the producers are:
Changing consumer profiles
Lower price realizations
Low productivity
Threat of imports

Coffee
Coffee is the second most popular beverage drink in India. Its consumption in India was
around 80200 MT in 2005.
India produces only 4% of world coffee output, but exports more than 75% of its
production of beans.
The rise in prices of coffee is likely to continue in 2007 thanks to improving trends in
bean prices.
Major Players
The major players in this segment are:

Nestl

Brooke Bond (Lever)

Tata Tea

Fruit Juices
Household Care Overview
India is the second largest market for foods and vegetables in the world. The total
production of foods and vegetables is estimated to be around 148.5 million tonnes, out of
which fruits account for only 48.5 million tonnes and the rest 100 million tonnes is
accounted for by vegetables. However, the fruit juice market has not been fully tapped
because of poor infrastructure, poor storage facilities, and highly unorganized market,
chiefly constituted by road side vendors. Consumers still prefer to buy juices from road
side vendors even if the juices are unhygienic.
The major growth drivers in fruit juice market are, increase in health consciousness among
consumers, increase in disposable incomes, and more sophisticated cocktail culture.
Major players and their brands
The major players in the fruit juices market are:
Pepsi with its brand Tropicana
Dabur Foods with its brand Real
Coca Cola India with its brand Maaza

Bottled Water
The bottled water market is growing at the rate of 55% per annum and is expected to
cross Rs 1000 crores within a few years. This segment is one of the most developed ones
in India. Bottled water market has low entry barriers when compared to other
businesses.
It has been estimated that there are around 200 brands of bottled water in India, of
which 80% are local brands.
The major players in bottled water segment with their brands are:
Parle's Bisleri
Nestle with its brands Perrier and Pure life

Coca Cola with its brand Kinley

PepsiCo with its brand Aqua Fina
Manikchand

Snack Food
The snack food market in India is valued at Rs. 1530 crore and is one of the largest
markets in the world, out of which potato chips holds the major market share of around
85%. Big players like McChain Smiles and NP Foods have also entered into Indian potato
snack industry in 2005.
Products covered

Potato chips

Savory snacks

Snack nuts

Popcorn

French fries

Sector's Outlook
FMCG is the fourth largest sector of the Indian Economy. FMCG sector generates 5% of
total factory employment in the country and is creating employment for three million
people, especially in small towns and rural India.
According to a CII-A T Kearney report, the FMCG sector in India is expected to grow at a
compounded annual growth rate (CAGR) of 9% to a size of Rs 1,43,000 crores by 2010
from Rs 93,000 crores at present.
With a growth of 52.5%, the BSE FMCG Index has, during the last one year,
outperformed the Sensex, which could manage a growth of 41% only. A well-established
distribution network, intense competition between the organized and unorganized
segments, low operating cost, strong branding characterize the sector.

The large consumer base, particularly in rural sector, and the growing middle class open
up huge opportunities to FMCG companies to take the consumers to branded products and
offer new generation products.
The sector's lack-luster performance in the last few years was due to price competition and
increase in raw materials cost. However, in the FY06, the sector has witnessed a doubledigit growth in profits and revenues. The sector has registered an up trend in growth
across categories, such as health supplement, shampoo, toothpaste, hair oils, and
mosquito repellant, as shown in table below:
Sales Value Growth %

Categories

2004-2005

2005-2006

Apr.2006-Sept.
2006

Health Supplement
(Chyawanprash)

-5%

0%

23%

Shampoo

10%

23%

19%

Toothpaste

5%

6%

16%

Hair Oils

9%

18%

23%

Mosquito Repellant

13%

10%

29%

Sector Financials

Net Sales

In millions

31-03-2006

31-03-2005

31-03-2004

164,196

148,241

145,380

Sales Growth

10.8%

2.0%

Profit after Tax

19,595

17,001

21,008

PAT Growth

16.6%

-24.2%

Market
Capitalization

74,746

65,810

63,072

Enterprise Value

662,540

645,477

551,971

Return on Capital
Employed (ROCE)

47.1%

51.0%

45.5%

P/E Ratio

26.7%

27.1%

21.0%

Analysis of FMCG Sector

Strengths:
1. Low operational costs
2. Presence of established distribution networks in both urban and rural areas
3. Presence of well-known brands in FMCG sector
Weaknesses:
1. Lower scope of investing in technology and achieving economies of scale, especially in
small sectors
2. Low exports levels
3. "Me-too" products, which illegally mimic the labels of the established brands. These
products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
1. Untapped rural market
2. Rising income levels, i.e. increase in purchasing power of consumers

3. Large domestic market- a population of over one billion.

4. Export potential
5. High consumer goods spending
Threats:
1. Removal of import restrictions resulting in replacing of domestic brands
2. Slowdown in rural demand
3.Tax and regulatory structure

White Goods
White goods are the goods that are painted white or enameled white. These products
were previously manufactured with a white enamel finish but are now colored. White
goods sector is characterized by emergence of MNCs, exchange offers, discounts, and
intense competition. The market share of MNCs in White goods segment is 65%. MNCs
mainly target the growing middle class of India. MNCs offer superior technology to the
consumers; while the Indian companies compete on the basis of firm grasp in the local
market, their well-acknowledged brands, and their hold over wide distribution network.
However, the penetration level of the consumer durables is still low in the market. The
major factor responsible for low penetration is poor government spending on
infrastructure.
Products Covered
White goods include household appliances, such as, Water Heater, Refrigerator, Clothes
Dryer, Air Conditioner, Dish Washer, Microwave Oven, Washing Machine etc. In the modern
period, these products are available in a variety of decorator colors.
White goods do not include the entertainment appliances, such as, Televisions, Home
cinema, Camcorders, CD, and DVD players. These products are included in the Brown
goods category.
Major Players The major players in the White goods sector are LG Electronics India Ltd.,
Samsung India, Whirlpool, and Videocon.
Practical skills are needed to maintain White goods and heavy tools are required to repair
them, while Brown goods require high technical knowledge, in service area.
White goods appliances account for 70% of the energy consumed in homes and their
greenhouse gas emisison levels are usually high.

Scope Of The Sector

The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector
in the economy. A well-established distribution network, intense competition between the
organized and unorganized segments characterize the sector. FMCG Sector is expected to
grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5year period. It has been estimated that FMCG sector will rise from around Rs 56,500
crores in 2005 to Rs 92,100 crores in 2010. Hair care, household care, male grooming,
female hygiene, and the chocolates and confectionery categories are estimated to be the
fastest growing segments, says an HSBC report. Though the sector witnessed a slower
growth in 2002-2004, it has been able to make a fine recovery since then.
For example, Hindustan Levers Limited (HLL) has shown a healthy growth in the last
quarter. An estimated double-digit growth over the next few years shows that the good
times are likely to continue.
Growth Prospects
With the presence of 12.2% of the world population in the villages of India, the Indian
rural FMCG market is something no one can overlook. Increased focus on farm sector will
boost rural incomes, hence providing better growth prospects to the FMCG companies.
Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to
benefit from growing demand in the market. Because of the low per capita consumption
for almost all the products in the country, FMCG companies have immense possibilities for
growth. And if the companies are able to change the mindset of the consumers, i.e. if they
are able to take the consumers to branded products and offer new generation products,
they would be able to generate higher growth in the near future. It is expected that the
rural income will rise in 2007, boosting purchasing power in the countryside. However, the
demand in urban areas would be the key growth driver over the long term. Also, increase
in the urban population, along with increase in income levels and the availability of new

categories, would help the urban areas maintain their position in terms of consumption. At
present, urban India accounts for 66% of total FMCG consumption, with rural India
accounting for the remaining 34%. However, rural India accounts for more than 40%
consumption in major FMCG categories such as personal care, fabric care, and hot
beverages. In urban areas, home and personal care category, including skin care,
household care and feminine hygiene, will keep growing at relatively attractive rates.
Within the foods segment, it is estimated that processed foods, bakery, and dairy are longterm growth categories in both rural and urban areas.
Indian Competitiveness and Comparison with the World Markets
The following factors make India a competitive player in FMCG sector:
Availability of raw materials
Because of the diverse agro-climatic conditions in India, there is a large raw material base
suitable for food processing industries. India is the largest producer of livestock, milk,
sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat
and fruits &vegetables. India also produces caustic soda and soda ash, which are required
for the production of soaps and detergents. The availability of these raw materials gives
India the location advantage.
Labor cost comparison

Low cost labor gives India a competitive advantage. India's labor cost is amongst the
lowest in the world, after China & Indonesia. Low labor costs give the advantage of low
cost of production. Many MNC's have established their plants in India to outsource for

domestic and export markets.

Presence across value chain
Indian companies have their presence across the value chain of FMCG sector, right from
the supply of raw materials to packaged goods in the food-processing sector. This brings
India a more cost competitive advantage. For example, Amul supplies milk as well as dairy
products like cheese, butter, etc.

Top 10 FMCG Companies

FMCG sector is an ever growing sector and is currently in a boom phase. There are many
jobs in FMCG sector at diiferent levels like sales, supply chain, manager, operations,
purchasing, supervisor, administration, general management, product development, HR,
Finance and marketing. FMCG sector is famous for jobs that are not only well paying but
also gives the best perks and bonuses. Freshers are looking for jobs in FMCGsector as
these jobs will give them the best career in the industry.
S. NO.

Companies

1.

Hindustan Unilever Ltd.

2.

ITC (Indian Tobacco Company)

3.

Nestl India

4.

GCMMF (AMUL)

5.

Dabur India

6.

Asian Paints (India)

7.

Cadbury India

Britannia Industries

9.

Procter & Gamble Hygiene and Health Care

10.

Marico Industries

FMCG As A Career
Industry Background
FMCG is one of the most dynamic domains of the business world. A career in this sector
encompasses a large number of job roles like market research, pricing and product
development, purchasing, advertising and brand awareness. FMCG is a sector where
graduates can gain excellent rewards if they work hard. FMCG products are those that
move off the shelves in retail outlets very quickly.
In the Fast Moving Consumer Goods (FMCG) sector, one needs to be fast in translating
the ideas into new products. There is a requirement to create the products that people
trust, enjoy and use in their daily lives. Advertising and marketing have a vital role to
play in this.
Qualifications Required

FMCG career structures are fairly slow to progress. One may not get as high a package
initialy as in some other sectors like IT, Real Estate, etc. Having once entered the secotor,
however, candidates would find any number of opportunities and would see their salary
packages rise fast enough.There are plenty of options in FMCG sector if you entere as a
graduate, but strong educational qualifications are an advantage.
Skills Required
FMCG sector requires huge amount of commercial awareness; one must have the skills of
a team player. Apart from that, good numerical skills, communication and organisational
skills are all essential for a successful career in this industry. Key skills will also depend
upon the type of position you want to pursue, i.e. marketing, human resources, finance,
etc.
Here are seven good reasons why one should pursue one's career in FMCG
sector:
1. Job security
It is a stable industry. Unlike some other industries, such as automobiles, computers, and
airlines, FMCG industry does not suffer from mass layoffs, every time the economy starts
to dip. One may drop the idea of buying a car but not the idea of having dinner. This lends
FMCG a level of job security unknown in other industries.
2. A high profile industry
India has 1.1 billion people and all are consumers. Therefore everyone is affected by FMCG
sector. People now are getting more & more health conscious. They are getting concerned
about what they are eating. All this has become possible because of the frequent display of
various advertisements, such as protests against the genetic modification of foods, the
growing problem of obesity, etc.
3. Quick experience
Consider an example: One person is working in the sales of cars while the other one is
working in the sales of juice. At the end of the month, the person who is working for the
sales of cars makes a maximum of 2 or 3 sales, if he is fortunate. On the other hand, the
other person sells a large number of products every day. Definitely, the juice seller will get
more experienced in less time working in FMCG than any other sector, no matter whether
in sales, marketing, operations, accounting, etc. In the end, one will land up learning more
and gaining a firm grasp of basic business skills.
4. A wide range of experience
One can have a wide range of choices if one desires a career path in FMCG sector. Wide
availability of options for working in a large MNC or a small local company ensures that
people in FMCG sector have a range of job roles available to them. The "fast moving" part
of FMCGs requires people who are flexible. Transfer from sales to marketing or to
operations is very common. In fact all three roles can be played at once in smaller firms.
One will get to learn a lot, even if one enters this sector for a short duration.
5. An industry that thrives on innovation
FMCG sector gives the opportunity to do creative work. There is a constant requirement of
innovation in production, advertising, packaging and branding. FMCG offers an opportunity
to express your creativity through developing new ideas for products, as brands compete
head to head on the shelf.

6. Nationwide opportunities, both urban and rural

FMCG sector offers opportunities through its connection to the primary sector in rural and
urban areas. The sector is particularly attractive for those interested in working in different
parts of the country, as it has a nationwide base, unlike many other sectors confined to
particular locations.
7. Offshore opportunities
The International offices of most FMCG multinationals regularly recruit staff from our
country, either for short projects or for longer stints.

Secondary Players
1. Colgate-Palmolive (India) Ltd.
2. Godrej Consumers Product Ltd.
3. Nirma Ltd.
4. Tata Tea Ltd.
5. Parle Agro
6. H. J. Heinz

Indian Consumer Class

India has a population of over 1 billion and 4 climatic zones . Several religious and
personal beliefs, 15 official languages, different social customs and food habits
characterize Indian consumer class. Besides , India is also different in culture if
compared with other Asian countries. Therefore, India has high distinctiveness in demand
and the companies in India can get lot of market opportunities for various classes of
consumers. Consumer goods marketers experience that dealing with India is like dealing
with many small markets at the same time.
Indian consumer goods market is expected to reach $400 billion by 2010. India has the
youngest population amongst the major countries. There are a lot of young people in
India in different income categories.
Consumer goods marketers are often faced with a dilemma regarding the choice of
appropriate market segment.
In India they do not have to face this dilemma largely because rapid urbanization, increase
in demand, presence of large number of young population, any number of opportunities
are available . The bottom line is that Indian market is changing rapidly and is showing
unprecedented consumer business opportunity .
As the restrictions on foreign investments were relaxed in 1991, Multi-National Companies

have been entering India since then.

Market Size in $
Market Share in %
million
Indian
Companies

MNCs

Indian
Companies

MNCs

1992

2004

1992

2004

Breakfast
cereals

25

100

52

48

Wafers,
potato
chips

35

100

37

63

Washing
Machines

40

570

98

51

49

TV

630

3,030

97

49

51

1992 $=30 rupees

2004 $=45 rupees
Source: Center for Monitoring Indian Economy (CMIE)
Indian consumer class can be classified according to the following criteria:
1.
2.
3.
4.

Income
Socio-Economic status
Age demographics
Geographical dispersion

Income Based Classification

India has a population of 1.095 billion people, comprising of 1/6th of the world
population. India's population can be divided into 5 groups on the basis of annual
household income. These groups are:

1.
2.
3.
4.
5.

Higher income
Upper middle income
Middle middle income
Lower middle income
Lower income

The income classification does not represent a real scenario for an international business
because the purchasing power of currencies differs significantly. The real purchasing
power of Indian rupee is higher than the international exchange value.
In addition to that, income classification is not an effective tool to ascertain consumption
and ownership trends in the economy.
Consumer Classification
According to National Council of Applied Economic Research (NCAER) there are 5 consumer
classes that differ in their ownership patterns and consumption behavior across various
segments of goods.
Consumer Classes

Annual Income in
Rs.

The Rich

Rs. 215,000 and more 1.2

1996 2001

2007

Change

2.0

6.2

416%

The Consuming Class Rs 45- 215,000

32.5

54.6

90.9

179%

The Climbers

Rs. 22-45,000

54.1

71.6

74.1

37%

The Aspirants

Rs. 16-22,000

44

28.1

15.3

-65%

The Destitute

Below Rs. 16,000

33

23.4

12.8

-61%

199.2

21%

Total

164.8 180.7

Source: NCAER
The 5 classes of consumer households (consumer classification) show the economic
development across the country based on consumption trends.

Socio-Economic Classification
In addition to income classification and consumer classification, Indian households can
also be segmented according to the occupation and education levels of the chief earner
of the household (the person who contributes most to the household expenses). This is
called as Socio-Economic Classification (SEC), which is mainly used by market planners
to target market before launching their new products. SEC is made to understand the
purchase behavior and the consumption pattern of the households.
The urban area is segregated into: A1, A2, B1, B2, C, D, E1, E2.
Socio-Economic Classification

Occupation

Education

Less
5-9
than 4
School
Some
PostIlliterate
yrs of
Graduate
yrs in
certificate college
graduate
school
school

Skilled

E2

E1

B2

B2

Unskilled

E2

E2

E1

Shop owner D

B2

B2

A2

A2

Petty trader E2

B2

B2

Employer of-

Above 10
persons

B1

B1

A2

A2

A1

A1

A1

Below 10
persons

B2

B2

B1

A2

A1

A1

None

B2

B1

A2

A1

A1

Clerk

B2

B1

B1

Supervisor

B2

B1

A2

Professional D

B2

B1

A2

A1

Senior
executive

B1

B1

B1

B1

A2

A1

A1

Junior
executive

B2

B1

A2

A2

Source: Indian readership survey (IRS)

Sections A & B refer to High-class- constitutes over a quarter of urban population
Sec C refers to Middle-class-- constitutes 21% of the urban population
Sections D & E refer to Low-class-- constitutes over half the urban population
To understand the table, consider an example: A trader whose monthly household income
(MHI) is more than that of a person in section A cannot be included in this SEC because
his educational qualification or occupation do not qualify him for inclusion.
Sec C constitutes households whose Chief Wage Earners are employed as :

Skilled workers

33%

Petty traders

12%

Clerk/Supervisor

37%

Shop owners

18%

3/4th of them have studied till 10th or 12th class while the remaining 1/4th have studied
till 9th class.
Less than half of the Chief Wage Earners of households belonging to sections D & E are
unskilled workers. Petty Traders are 18%, while Skilled Workers are about 28%.
More than 80% of the population of upper strata consumers is living in the top 7 cities.
Those top 7 cities are Mumbai, Kolkata, Delhi, Chennai, Ahmedabad, Bangalore, and
Hyderabad. With increase in economic prosperity, this population (upper strata consumers)
is growing at 10 percent annually.
The rural area is segregated in to: R1, R2, R3, R4.

Education of
chief wage
earner

Type of House

Pucca

Semi-pucca

Kuchcha

Professional
degree

R1

R2

R3

Graduation/ PG

R1

R2

R3

College

R1

R2

R3

SSC/HSC

R2

R3

R3

Class 4-Class 9

R3

R3

R4

Up to class 4

R3

R3

R4

Self-learning

R3

R4

R4

Illiterate

R4

R4

R4

Age Demographics
India is a very young nation, if compared with some advanced and developed countries.
Nearly two- thirds of its population is below the age of 35, and nearly 50 % is below 25.
Marketers explain that the boom in the consumption level and leisure related expenditure
is because of this young population. It will have a significant impact over the consumer
goods market. In addition to that, it is expected that this will generate trade
opportunities and continuous investment in the economy. There is huge potential for
further consumption of goods and services due to the increased level of disposable
income. The expenditure on essential goods and services has a higher share in
developing countries as compared with that of developed countries.
Age distribution if Indian population (In Millions)
Year/ Age

2006

2001

1996

Below 4 yrs

113.5

108.5

119.5

5-14 yrs

221.2

239.1

233.2

15-19 yrs

122.4

109.0

90.7

20-34 yrs

279.1

246.8

224

35-54 yrs

239.2

207.3

178.1

55 & above

118.7

101.7

88.7

Total

1094.1

1012.4

934.2

Consumption Trends

Food Essentials

45.68%

Essential Services (water, power,

rent, and fuels)

10.1%

Clothing

4.9%

Footwear

0.63%

Medicare

4.25%

Transport & Communication

14.51%

Recreation, Education, and Culture

Less than 4%

Home Goods

3.25%

Geographical Dispersion of Market Potential

There is large difference in economic prosperity levels among several states in India,
linked to the wealth creation from trade, industrial, and agricultural development. There
are poor districts in many states, classified according to their market potential. India has
500 districts, out of which 150 districts (category A) and next 150 districts (category B)
account for 78% and 15% of the national market potential respectively. Remaining 200
districts (category C) are backward and account for only 7% of national market potential.
Category C districts have 40% of the geographical share.

Recent Developments in Fast Moving Consumer Goods (FMCG) Sector

FMCG sector is no doubt registering an up trend in growth. According to CNBC, FMCG
sector growth story will continue because of the positive budget. Nevertheless, there are
some barriers to the growth of the sector. Indirect taxes constitute no less than 35% of
the total cost of consumer products - the highest in Asia. Last year, Finance Minister
proposed to introduce an integrated Goods and Service Tax by April 2010.This is an
exceptionally good move because the growth of consumption, production, and
employment is directly proportionate to reduction in indirect taxes.
Budget 2007-2008 for FMCG Sector
Reduction of duty on edible oil will have a positive impact on Marico.
Full exemption of excise duty on biscuits priced at 50 rupees or less per kg is
positive for ITC, Britannia, and Parle.
Reduction of custom duty on food processing machinery and their parts from 7.5%
to 5%.
Reduction of excise duty on food mixes from 16% or 8% to nil is positive for ITC.
Development of rural infrastructure is in focus, which is beneficial for FMCG
companies because it is a big market for FMCGs. Better infrastructure will improve the
supply chain.
Exemption of free samples and displays from the purview of FBT will be beneficial
for FMCG companies because they spend huge amount of money on advertising and brand
building. HLL, Dabur, ITC, and Marico will be amongst the most benefited companies.

Reliance Retail to Enter the Packaged Tea Market

Emami Set to Invest Rs 220 Crore for Expansion in FMCG Sector
Godrej Targeting FMCG Acquisitions in China, Indonesia, and Brazil
FMCG Sector on a Buying Spree
Corporate Social Responsibility
FMCG companies have now started taking Corporate Social Responsibility seriously. For
instance, to encounter domestic violence, Ponds has tied up with the United Nations
Development Fund(UNDF) for Women. Surf Excel is funding the education of children. Most
brands link themselves with the social causes, thereby linking consumers with the brands
and gaining goodwill in the market.