GROWTH TRENDS IN THE INDIAN FMCG SECTOR

 

In a recent report, the Indian FMCG sector is currently estimated to be the 4th largest sector in the country, with household and personal care products accounting for about 50% of the total FMCG sales. In fact, several industry reports state that the FMCG sector will thrive at a CAGR of 27.86%, and the overall segment is estimated to reach a higher price proposition, with the premium segment marking a growth of 6.3% as compared to that the 1.1 % of the mass market.

As of FY 2020, the FMCG sector in India has witnessed significant growth in both rural and urban consumption. The urban segment accounted for about 55% of the total revenue generated by the FMCG sector, whereas with a steady increase in demand for quality goods and services, India’s rural segment has contributed about 45% of the total annual revenue of the sector.

Indian FMCG sector has, therefore, emerged as a fertile hotspot for foreign investments, which promises to offer sustainable growth and derive a steady profit. In addition to growing consumer demands, several government policies and current trends in FMCG industry in India are also making it a boon for foreign organizations willing to expand here in near future.

 

Important Government Initiatives, Investments, and Developments

In order to promote the current trends in FMCG industry in India in the country, Indian Government has undertaken some major initiatives that open up avenues for foreign organizations and facilitates lucrative investment options. Such companies should, however, take the help of professional business consulting firms in India to enjoy solid growth in the Indian FMCG sector.

Indian Government has approved 100% foreign direct investments in the cash and carry and single-brand retail segment and about 51% in the multi-brand retail segment. In fact, India has witnessed a steady and healthy FDI flow of 16.8 billion USD as of March 2020.

Indian Government has also implemented the Goods and Service Tax (GST) which proved immensely beneficial for the FMCG sector as many personal care products, like soap, toothpaste etc. and come under the tax bracket of 18% against the previous rate of 23%. Furthermore, GST on food products and hygiene products is also substantially reduced to 0-5% and 12-18%, respectively.

Also, the Production Linked Incentive scheme (PLI) proposed by Union Cabinet in November 2020 proved extremely beneficial to boost exports and India’s manufacturing capacity.

 

3 Essential FMCG trends 2021 India

Coupled with lucrative government policies, over the years, India’s FMCG sector has witnessed developments on a number of fronts which has shaped its growth. Here are some current trends in FMCG industry in India, which act as a stimulus for foreign organizations willing to set foot in the Indian market. Business consulting companies in India will take one’s market entry plan in the FMCS sector further up a notch.

FMCG trend in 2021 India #1:  Urban and Rural Trends

Currently, India’s FMCG sector is categorized into the demographics of urban and rural segments. The urban areas have always led the growth of FMCG revenues in India. However, semi-urban and rural consumption has recently witnessed a significant rise such that the rural FMCG market is estimated to grow up to 220 billion USD by 2025. Furthermore, with 12.2% of the total population living in villages, rural demands for consumer goods cannot be neglected. In fact, some of the top FMCG companies, like Dabur, Hindustan Unilever, etc., generate about 35 to 45% of their domestic revenue from Indian rural markets.

Foreign firms looking for business expansion in India in the FMCG sector, therefore, need to adequately capture the rural consumer needs with a thorough market analysis and research. One must also be aware of all the current trends in the FMCG industry in India. To this end, comprehensive support from business consulting companies in India becomes imperative to achieve a customized market study and understand the precise addressable markets.

 

FMCG trend in 2021 India #2: Increased Digitization

Post the COVID-19 crisis, digitization has been an emerging FMCG trend in 2021 India which has shaped the future of retailing consumer goods. Almost all FMCG brands partnered with major e-commerce websites, like Flipkart, Groffers, Bigbasket, etc., to deliver products to consumers. Here too, India’s rural market outperformed the urban consumer demand and witnessed a 10.6% growth in Q3 2020. In fact, according to a senior executive at Jyothy Labs, the sales share of e-commerce in the FMCG sector is expected to increase from 2-3% before COVID to 4.5% post-COVID.

Post the COVID-19 crisis, digitization has been an emerging FMCG trend in 2021 India which has shaped the future of retailing consumer goods. Almost all FMCG brands partnered with major e-commerce websites, like Flipkart, Groffers, Bigbasket, etc., to deliver products to consumers. Here too, India’s rural market outperformed the urban consumer demand and witnessed a 10.6% growth in Q3 2020. In fact, according to a senior executive at Jyothy Labs, the sales share of e-commerce in the FMCG sector is expected to increase from 2-3% before COVID to 4.5% post-COVID.

Having learnt the benefits, most FMCG companies are now expected to maintain their digital presence through e-commerce channels. Hence, foreign companies trying to undertake a business expansion in India now also need to invest in tech tools, create new apps that will facilitate online shopping, online product launch, and smooth online payments and transactions, etc. The importance of the current trends in FMCG industry in India and business consulting companies in India has, therefore, become all the more indispensable. It is essential to acquire skilled personnel for marketing and promotional activities and in areas like a product launch and PR management.

 

FMCG trend in 2021 India #3: Growth in Food & Beverage and Health & Wellness Categories

The food and beverage segment is one of the largest contributors to the FMCG sector in India and accounts for almost 30% of the total household spending in the country. A rise in average income level, increase in the disposable income of middle-income groups, increasing urbanization, and change in consumer preferences for hygienic products have driven the growth of this sector. While the per-capita food consumption has been emerging in the rural sector, the urban market has witnessed increased demands for instant meals category; Ready to Cook (RTC), Ready to Eat (RTE) are shaping current consumer preferences as well.

Further, the changed consumer behavior towards hygiene and health post the COVID crisis has also increased the demands for sanitizers, hand wash, disinfectants, wipes, and home cleaning products, thereby setting a new trend in the FMCG sector.

Importance of Business Consulting Firms in India

With an immense opportunity for growth in the FMCG market, what can’t be dismissed is the overwhelming competition that any new organization setting foot in India has to face. This, in turn, is increasingly establishing the importance of business consulting firms in India.

Tecnova’s India-specific consumer and retail consulting approach helps to understand the recent market trends of the FMCG sector and formulate a strategic market entry plan that can achieve long term success. Starting from customized market study, retail roll-out support, consumer insights, dealer and distributor research to assisting companies in forming joint ventures, Tecnova helps leverage the opportunities in the growing market to achieve target business ends seamlessly.

FMCG sector is one of the most rapidly developing domains in India, providing optimistic opportunities for foreign business expansion in India. Supported by the boost from governmental policies and increased demand in the rural sector and professional business consulting companies in India, new firms can certainly enjoy promising and sustained growth. However, it is imperative for all market players to realize the constantly changing consumer behavior in the face of current trends in the FMCG industry in India and revisit the market entry strategies to meet consumer needs and clock higher profit margins adequately. Professional business consulting firms in India will further ease up the process.

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