FMCG industry is witnessing green shoots and the growth has been broad-based with 18 out of 22 categories recording an uptick driven by the rural markets
The fast moving consumer goods industry can potentially grow upwards of 15 per cent over the next two to three years if companies show focused intent and action as per a CII-Bain & Company report: Winning with the Indian Consumer.
As the Indian FMCG industry looks to reignite growth and brands strive to grow categories, the report recommends a blueprint for delivering sustainable growth by focusing on improving brand penetration.
Putting things into perspective, the report says the industry’s growth rate vs. the GDP has fallen to 0.8, from a historical ratio of 1.2.
“This slowdown is perplexing; it cannot be fullyexplained either by changes in consumer spending power—which have only marginallydecelerated in growth—or any significant shifts to non-FMCG categories, including the riseof e-tailing. During this period, FMCG companies scaled back growth-oriented investments,and shifted focus to sustaining profits—all at the cost of the top line,” the report said.
“We see a huge opportunity for FMCG players to reignite growth. Bain & Company’s work with clients in India and globally, has shown that penetration is the key to driving volume growth. Successful companies have done so by focusing on three core brandassets – creating memorable brands, ensuring shopper visibility and range productivity”,
Nikhil Prasad Ojha, partner, Bain and Company and the co-author of the report said. “FMCG companies can learn a lot from Insurgents like Nykaa and Hector Beverageson how to uncover new growth opportunities and disrupt traditional models byleveraging technology,” he added.
Recent data suggests that after a slowdown for three years, the FMCG industry is witnessing green shoots – with the growth rate accelerating in 2016 over the previoustwo years. The growth has been broad-based, with 18 out of 22 categoriesrecording an uptick, and driven by the rural markets.
“Across these 22 categories, volume growth was driven by underlying penetration gains. Significantly, even highly penetrated categories, such as toothpaste and hair oil—both with over 95 percent penetration—recorded material penetration gains,” the report, released at CII’s annualNational FMCG Summit, said.
Food emerged as the fastest growing segment, with larger towns and moreaffluent consumers driving this growth. On the other hand, home care andpersonal care growth was driven by less affluent consumers residing in smalltowns and rural areas, the report noted.