Wednesday March 14, 09:00 AM
FMCG: The Indian opportunity...
By Equitymaster.com
India is an important market for FMCG players. The Indian FMCG sector is the fourth largest sector in the economy with a total market size of around US$ 13.1 bn. During 1950's to 1980's, there was low investment in the sector as the purchasing power was low. Also, the government had put a lot of emphasis on the development of the small-scale sector. The existing companies like HLL were purely focused on the urban areas. However, post liberalisation the scenario changed marking the entry of the MNCs into the country. Also, the focus shifted from the urban to the rural areas. In this article, we shall take a look at the importance of India for FMCG players.
Large base: With a population of 1 bn people, India is a big market for FMCG companies. Around 70% of the total households in India reside in the rural areas. The total number of rural households is expected to rise from 135 m in 2002 to 153 m in 2010, which represents the largest potential market in the world.
Rural and urban potential
Urban Rural
Population 2001-02 (m household) 53 135
Population 2009-10 (m household) 69 153
% Distribution (2001-02) 28 72
Market (Towns/Villages) 3,768 627,000
Source: Statistical Outline of India (2001-02), NCAER
India - a large consumer goods spender: An average Indian spends around 40% of his income on groceries and 8% on personal care products. A larger part of the total spending pie along with a large base (in terms of population) makes India one of the largest FMCG markets.
Changing lifestyles: Rising per capita income, increased literacy and rapid urbanisation have caused rapid growth and change in demand patterns. The rising aspiration levels, increase in spending power has led to a change in the consumption pattern. Apart from the demand for basic goods, convenience and luxury goods are growing at a fast pace too. The urban population between the ages of 15 to 34...