FMCG sector in India: The rise of Indian companies - Insights by Mr. Divyaroop Bhatnagar, MD of YFactor

At a seminar conducted under the banner of "Achievers in Business Seminar Series" by IME Department, IIT Kanpur, Mr Divyaroop Bhatnagar, Managing Director, Yfactor draws attention towards the role of FMCG companies in India.

Mr. Divyaroop Bhatnagar,  Managing Director of Yfactor, has close to 30 years of General Management, Sales and Marketing experience focused on the FMCG, Telecom and Entertainment areas in India, Sri Lanka and the UK followed by 5 years as an entrepreneur running his own consulting business. He was at IIT Kanpur, IME Department on August 23, to address the students on the role of FMCG companies in India.

Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. Indian FMCG includes non-durable goods such as food (43%), personal care(22%), fabric care(12%), hair care(8%), household cleaning(4%), OTC(4%), baby care(2%) and others(5%). Though the profit margin made on FMCG products is relatively small (more so for retailers than the producers/suppliers), they are generally sold in large quantities; thus, the cumulative profit on such products can be substantial. Indian FMCG market is valued at $30 billion growing at 12% CAGR.

FMCG growth drivers can be evaluated on the basis of extrinsic and intrinsic factors. The extrinsic factors includes growth in GDP and disposable income, increasing urbanisation, media explosion, rural prosperity, government policy (NREGA, Tax Reform), growth of modern trade, mega trends in health/wellness and environment protection. The intrinsic factors includes competition leading to cost effectiveness, keeping prices in check and intense market activity (new launches, advertising and sales promotion), innovation in product development, marketing and distribution strategies, increasing usage of IT in FMCG companies, integration of the product and service experience.

The top 20 markets account for 60%-70% of the premium products. The top FMCG players are MNC’s which includes HUL, Reckitt Benckiser, ITC, Pepsico and Nestle with the principle of ‘think global act local’. Relatively new MNC’s such as L’oreal, Amway, P&G, Kellogg’s in general tends to be more global in outlook and treat the Indian market as an integral part of their Regional/Global Strategy. Large Indian companies such as Dabur, Godrej, Marico, Emami and CavinKare, have grown rapidly in scale and sophistication over the years, the quality of their management is rapidly levelling the playing field. Single category large Indian companies include Nirma, Ghari, Power Detergents and Ruchi Soya. Other companies in the FMCG sector are the Emerging Indian companies, better known for their brands such as Vasmol, Himgange, Lotus Herbals, Crax, Forest Essentials and others who are currently regional or limited players but are keen to scale up rapidly. 

Indian market is becoming the ‘mother of all markets’ which is rapidly increasing demand for all classes of product. It is due to the increasing numbers entering the consumption economy, constant growth in economic power at all levels, retail and media revolution which drives consumer choice, information and increasing urbanization. The exploitable categories are ‘unique to India’ propositions and ‘below the radar’ brands. The ‘unique to India’ includes legacy products like Amrutanjan, Boroline; Indian categories such as fairness cream, hair oil; Herbal/Ayurvedic/Unani products such as Shahnaz Hussein, Rooh afza, safi; Indian Habits and Preferences such as Oil Based Hair Dye ‘Super Vasmol’, ‘Cooling’ Hair Oil, Kali Mehndi, Kajal, Bindi, Sindhoor, Chywanprash, Hajmola, Kesh Nikhar etc., Indian Taste products such as Indian namkeens, masalas , Idli Dosa Batter. The ‘below the radar’ brands exploit interstitial spaces that the vast Indian market offers and have region based focus.

Thus the final thoughts are that India is the sea of opportunity, the Indian entrepreneurs have shown that it is possible to beat MNCs at their own game. The FMCG space is only one example.

Richa Singh

MBA 1st Year

Corporate Relations and Seminars Team