Indian FMCG market is 4th largest sector in the Indian economy and FMCG growth has a significant impact on the economic structure of the country. With the implementation of Goods and Services Tax (GST), FMCG brands successfully navigated their way to record a higher demand-led growth.The overall attitude of the FMCG landscape seems positive and the current pace projects a healthier growth in both shorter and longer time-frames.
Growing awareness and easier access have been the key driving force in leading this sector’s growth. The current statistics show that urban areas generate the largest revenues for FMCG businesses in India. However, in recent years with rural segment adopting new technologies, the FMCG industry is witnessing growth at a faster pace in rural and suburban areas.
Key Driving Factors for FMCG Growth in India
There are key factors which have resulted in the huge growth of the FMCG sector despite being disrupted by GST and demonetization. Let’s look at the major driving force behind this progress;
- Increased awareness, changing lifestyle and easy accessibility are the primary drivers to lead this historic growth.
- Organized Retail is the biggest ticket for FMCG players as they are estimated to grow at a rate of 20% year on year.
- The growth of middle-class consumers and the greater disposable income has led FMCG companies to flourish.
- With the emerging rural market, FMCG companies are designing products to meet the specification of rural consumers and this has led the FMCG sector to reach every nook and cranny of our country.
- Corporate players are sensing the growing trends of FMCG in India. They are planning to increase their consumer promotion spends and ad budget. Many FMCG giants are diversifying their product base to reach a wide range of consumers. They are currently in a position to provide quality products at affordable prices.
- With FDI and other foreign investments, Indian FMCG landscape has become an attractive sector for most foreign multinationals.
- Technology adoption has made consumer conscious of quality and price of the product, hence the FMCG giants are facing a healthy competition to attract customer attention.
- Increased literacy in both the rural and urban sector has resulted in the growth of income among the population. Consumers today are open to trying new things, which has resulted in changing spending behavior.
- With the explosion of the internet and social media platforms, consumers today are exposed to different lifestyles and demand more comfortable choices while selecting a product.
Understand the Role of Rural Consumers in the growth of FMCG Sales in India
Changing Consumer Behavior has not only been witnessed by urban areas but rural segments have also undergone a huge behavioral shift.
- Rural Consumption rose by 9.7% in the year 2018, whereas urban consumption led to a steady growth of 8.6%.
- Currently, FMCG market receives around 40-45% of its revenue through Rural segments. Current pace shows a growth rate of 15-20% in the coming fiscal year. While the growth of urban revenue is expected to remain steady at 8%.
- Penetration of e-commerce and digitization has made rural population adapt technological features like credit cards, debit cards and online banking. FMCG brands are leveraging this trend to attract new consumers.
- Implementation of GST has transformed logistic planning. Big FMCG and retail clients are remodeling their transportation and warehouse business models to leverage this change.
- FMCG products note a 50% spend of total expenditure in rural India. With more disposable income in hand, this percentage is more likely to increase.
Latest Trends in FMCG Industry
With the growing demand for FMCG products, there are some trends which FMCG industries follow in order to keep up with their customer’s mindset.
- Consumers are increasingly becoming brand conscious and hence FMCG industries are diversifying their product range to meet specific consumer demands.
- FMCG’s are reinventing their portfolios by developing new and better products.
- FMCG’s are releasing customizable products, owing to provide better customer service.
- Many FMCG companies are branding themselves as an eco-friendly product, as consumers are becoming highly environmentally conscious.
Strategies adopted by the FMCG Industry to meet the rising consumer Demand
With increasing competition, the FMCG sector is implementing new strategies to stay ahead in the competition
- Companies are more aggressively following multi-brand strategies to cater to the needs of a larger market segment. For example – Parakh group has extended their FMCG reach through other popular brands like Samrat India and Vilina capturing flour and cooking oil manufacturing segments respectively.
- Offer Customizable products such as Horlicks introduced Women’s Horlicks targeting Women as their audience; as customers are less likely to stay brand loyal if the same product is available with multiple companies.
- FMCG companies have understood the importance of developing new product lines and hence they are hugely investing in consumer research and product development.
- FMCG players are hugely investing in advertising to capture their audience’s attention. As the FMCG sector is witnessing growth, there is an increased level of competitiveness and brands are trying everything to stay ahead in the game.
- As the audience is becoming more health conscious and keeping itself updated with the quality of a product, FMCG brands are constantly adopting new preservation and food processing technologies.
- The biggest change in consumer behavior is their ability to do research before buying a product. Hence FMCG and retail companies are working hard to build a strong online presence.
Having extensively discussed the current state of FMCG in India, it is evident that the FMCG market is skyrocketing and there is a huge demand for branded products in India.
India has a huge share of market categorized as the ‘unorganized sector’ and as these sectors have started counting themselves in the FMCG and bracket, the growth of modern retail is slowly witnessing an augmented growth.
Increase in online sales, higher consumption, changing buying behaviours, healthy competition, demand for more systematic distribution is prompting FMCG business to innovate new products and technologies. This resulting growth will surely invite interesting opportunities to create a robust and seamless business organization.