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Alea Consulting: Industry Risk Review on FMCG Sector | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Delhi, Delhi, India
Introduction Fast Moving Consumer Goods (FMCG) is the 4th largest and one of the fastest growing sectors in the Indian economy. In 2016-17 FMCG revenues reached US$49 billion.
Growth Drivers
Key Statistics
Government Initiatives / Action
Foreign Direct Investment (FDI) 100% FDI is allowed in food processing and single-brand retail and 51% in multi-brand retail. The minimum capitalization for foreign companies to invest in India is US$100 million. Between April 2000 and March 2017 FMCG sector witnessed FDI inflow of US$11.84 billion.
Within FMCG, food processing was the largest recipient with a share of 63.73%. Some recent deals are:
Impact of GST on FMCG Sector Introduced on July 1, 2017 GST is expected to infuse greater overall efficiency and create a level-playing field for the larger, established players. For most FMCG majors, the GST rate structure is likely to be neutral or marginally positive, as their broad portfolios will witness a mixed impact. The firms which were aiming at introducing premium products to drive profitability, may experience a negative impact because of the higher taxes. Several may consider new strategies and realignment of portfolios.
GST rate reductions are being progressively implemented and many important raw materials required in the food processing industry are exempted. The highest tax rate of 28% is restricted to fewer items, including luxury, cement, paints, white goods and demerit goods like pan masala, cigars and cigarettes, aerated water and beverages.
Key Companies In 2016, some of the leading Indian FMCG companies, by revenue, were
Industry Opportunity In 2015 the market size of the organised FMCG sector was 9% of the overall organised retail market. It is expected to reach 30% by 2020. A CII-BCG report suggests fundamental shifts towards premium products, e-commerce, Tier II/III area driven growth etc. Health and wellness is a prominent influencer in shaping consumer preferences and shopping habits; demand for Organic, Ayurveda and other specialty products is on the rise. There is also a focus on improving packaging and designing of products to enhance experiences and shelf life, and reduce costs.
With the emergence of e-commerce and digital connectivity, rural distribution is expanding. Partnerships with e-commerce players stand to gain. In order to maintain competitive advantage, there is emphasis on achieving high supply chain effectiveness through upstream/downstream partnership, revenue sharing etc. |
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