FMCG N INDIA BAZAAR

The Indian FMCG sector is the fourth largest sector in the
economy with a total market size in excess of $13.1 billion.
It has a strong MNC presence and is characterised
by a well established distribution network, intense competition
between the organised and unorganised segments and low
operational cost. Availability of key raw materials, cheaper labour
costs and presence across the entire value chain gives India a competitive
advantage. The FMCG market is set to treble from $11.6
billion in 2003 to $33.4 billion in 2015. Penetration level as well
as per capita consumption in most product categories like jams,
toothpaste, skin care, hair wash etc in India is low indicating the
untapped market potential. Burgeoning Indian population, particularly
the middle class and the rural segments, presents an opportunity
to makers of branded products to convert consumers to branded
products. Growth is also likely to come from consumer 'upgrading'
in the matured product categories. With 200 million people
expected to shift to processed and packaged food by 2010, India
needs around $28 billion of investment in the food-processing
industry.

POLICY
India has enacted policies aimed at attaining international competitiveness
through lifting of the quantitative restrictions, reduced
excise duties, automatic foreign investment and food laws resulting
in an environment that fosters growth. Cent per cent export
oriented units can be set up by government approval and use of
foreign brand names is now freely permitted.


CENTRAL AND STATE INITIATIVES
Various states governments like Himachal Pradesh, Uttaranchal
and Jammu & Kashmir have encouraged companies to set up manufacturing
facilities in their regions through a package of fiscal
incentives. Jammu and Kashmir offers incentives such as allotment
of land at concessional rates, 100 per cent subsidy on project
reports and 30 per cent capital investment subsidy on fixed
capital investment upto $63,000. The Himachal Pradesh government
offers sales tax and power concessions, capital subsidies and
other incentives for setting up a plant in its tax free zone.

TRENDS

Demand for FMCG products is set to boom by almost 60 per
cent by 2007 and more than 100 per cent by 2015. This will be
driven by the rise in share of middle class from 67 per cent in
2003 to 88 per cent in 2015.
The boom in various consumer categories, further, indicates a
latent demand for various product segments. For example, the
upper end of very rich and a part of the consuming class indicate
a small but rapidly growing segment for branded products.
The middle segment, on the other hand, indicates a large market
for the mass end products.The BRICs report indicates that
India's per capita disposable income, currently at $556 per annum,
will rise to $1150 by 2015 - another FMCG demand driver. Spurt
in the industrial and services sector growth is also likely to boost
the urban consumption demand.

HOUSEHOLD CARE
The size of the fabric wash market is estimated to be $1 billion,
household cleaners to be $239 million and the production of synthetic
detergents at 2.6 million tonnes. The demand for detergents
has been growing at an annual growth rate of 10 to 11 per cent during the past five years. The urban market prefers washing powder
and detergents to bars. The regional and small un-organised
players account for a major share of the total volume of the detergent
market.

PERSONAL CARE
The size of the personal wash products is estimated at $989
million; hair care products at $831 million and oral care products
at $537 million. While the overall personal wash market is growing
at one per cent, the premium and middle-end soaps are growing
at 10 per cent. The leading players in this market are HLL,
Nirma, Godrej Soaps and Reckitt & Colman. The oral care market,
especially toothpastes, remains under penetrated in India (with
penetration level below 45 per cent). The industry is very competitive
both for organised and smaller regional players.
The Indian skin care and cosmetics market is valued at $274 million and dominated by HLL, Colgate Palmolive, Gillette India and
Godrej Soaps. The coconut oil market accounts for 72 per cent
share in the hair oil market. In the branded coconut hair oil market,
Marico (with Parachute) and Dabur are the leading players. The
market for branded coconut oil is valued at approximately $174
million.


FOOD AND BEVERAGES
The size of the Indian food processing industry is around
$ 65.6 billion, including $20.6 billion of value added products. Of
this, the health beverage industry is valued at $230 million; bread
and biscuits at $1.7 billion; chocolates at $73 million and ice
creams at $188 million.
The size of the semi-processed/ready-to-eat food segment is
over $1.1 billion. Large biscuits & confectionery units, soya processing
units and starch/glucose/sorbitol producing units have also
come up, catering to domestic and international markets.
The three largest consumed categories of packaged foods are
packed tea, biscuits and soft drinks.
The Indian beverage industry faces over supply in segments like
coffee and tea. However, more than half of this is available in
unpacked or loose form. Indian hot beverage market is a tea dominant
market. Consumers in different parts of the country have heterogeneous
tastes. Dust tea is popular in southern India, while
loose tea in preferred in western India. The urban-rural split of the
tea market was 51:49 in 2000. Coffee is consumed largely in the
southern states. The size of the total packaged coffee market is
19,600 tonnes or $87 million. The total soft drink (carbonated
beverages and juices) market is estimated at 284 million crates a
year or $1 billion. The market is highly seasonal in nature with consumption
varying from 25 million crates per month during peak
season to 15 million during offseason. The market is predominantly
urban with 25 per cent contribution from rural areas. Coca cola
and Pepsi dominate the Indian soft drinks market.
Mineral water market in India is a 65 million crates ($50 million)
industry. On an average, the monthly consumption is estimated at
4.9 million crates, which increases to 5.2 million during peak
season.