FMCG

Overview

The FMCG industry in India is the fourth-largest economic sector there, with a market worth more than US$110 billion. By 2025, the industry is projected to develop at a CAGR of 14.9% and reach US$220 billion.

Key growth factors:

Rising disposable income: Indian consumers are spending more on FMCG items as their disposable income is rising.

Rising urbanisation: India's rate of urbanisation is increasing, which is driving up demand for FMCG goods in urban areas.

Consumer tastes are evolving: Indian customers are becoming more health-conscious and demanding, which is driving up demand for FMCG items that are healthier and more natural.

Major players: The major players in the FMCG sector in India include:

• Hindustan Unilever: US$7.5 billion
• Procter & Gamble: US$5.5 billion
• Colgate-Palmolive: US$3.5 billion
• Dabur: US$3 billion
• Marico: US$2.5 billion

Key Facts

India's FMCG industry is a vibrant and expanding one. The industry is anticipated to keep expanding in the upcoming years due to changing customer tastes, increasing disposable income, and increased urbanisation.

Market size: The FMCG sector in India is the fourth largest sector in the Indian economy, with a market size of over US$110 billion.

CAGR: The sector is expected to grow at a CAGR of 14.9% to reach US$220 billion by 2025.

Urban vs. rural: The urban segment contributed 65% whereas rural India contributed more than 35% to the overall annual FMCG sales.

Top 5 categories: The top 5 categories in the FMCG sector in India are:

• Personal care: US$36 billion
• Household care: US$26 billion
• Food: US$24 billion
• Beverages: US$13 billion
• Tobacco: US$7 billion

Opportunities

Rising disposable income: Indian consumers are spending more on FMCG items as their disposable income is rising. By 2025, the average family disposable income in India is anticipated to be $2,500 USD. The demand for FMCG items will rise as a result, particularly in the premium and value-added categories.

Rising urbanisation: India's rate of urbanisation is increasing, which is driving up demand for FMCG goods in urban areas.

By 2030, India's urban population is anticipated to total 600 million people.This will result in higher demand for FMCG goods, particularly in the areas of personal care and household care.

Consumer tastes are evolving: Indian customers are becoming more health-conscious and demanding, which is driving up demand for FMCG items that are healthier and more natural.

The demand for organic and natural products is expected to grow at a CAGR of 20% over the next five years. This will lead to increased demand for FMCG products, especially in the personal care and food segments.

Challenges

Competition: A number of significant global corporations and local brands compete for market share in India's FMCG sector, which is extremely competitive.Over 50% of the market share in India is held by the top 10 FMCG businesses.Due to the rivalry, FMCG firms will need to distinguish and reinvent their goods in order to remain competitive.

Regulation: There are several rules that the FMCG industry in India must abide by, which may make it challenging for businesses to conduct business.

The Food Safety and Standards Act, one of several new rules recently passed by the Indian government, has made it more difficult for FMCG firms to comply with the law. Because of this, it will be more challenging for FMCG businesses to operate in India.

Logistics: In India logistic Infrastructure not developed as other countries that makes difficult and expensive for FMCG companies. The average cost of logistic in India is around 15% of the total cost of the product. That will make more difficult for FMCG companies to compete in global market and that leads the price of product in Indian market.

Analysis

Revenue Growth: Over the years, the company's revenue has increased steadily, with a positive growth rate each year. The revenue climbed from $110 billion to $146 billion between 2020 and 2023, or an overall rise of 32.7% throughout this time.

Continuous Revenue Growth: The annual revenue growth rate has been quite consistent, ranging from 8.9% to 11.7%. This suggests that the company's sales are growing steadily and sustainably.

Operating Profit: From $6.9 billion in 2020 to $9.7 billion in 2023, the operating profit has likewise exhibited a strong trend. This shows a progressive increase in the business' operational effectiveness and profitability.

Long Term View:

By 2025, it is anticipated that India's FMCG market would develop at a CAGR of 14.9% and reach US$220 billion. Numerous causes, such as increasing disposable income, increasing urbanisation, and shifting consumer tastes, are fueling this expansion. Long-term growth in the sector is anticipated to be fueled by these and other reasons.The FMCG firm has generally demonstrated robust sales growth, consistent revenue growth rates, and rising profitability. These elements point to a promising future for the business's financial performance.

Analyst  -  Roshan Patel

info@smartinvestment.in
 

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