INTRODUCTION

• Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with Household
and Personal Care accounting for 50 % of FMCG sales in India.
• Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector.
The urban segment (accounts for a revenue share of around 40 per cent) is the largest contributor to the
overall revenue generated by the FMCG sector in India .
• A record of having a market size of around US$ 52.75 billion in 2017-18. However, in the last few years,
the FMCG market has grown at a faster pace in rural India compared with urban India.
• Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50 per cent
of total rural spending.
MARKET SIZE
• The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion in 2017,
with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is likely to boost
revenues of FMCG companies.
• In 2016-17, revenue for FMCG sector have reached US$ 49 billion and is expected to grow at 9-9.5 per
cent in FY18 supported by expectations of the total consumption expenditure reaching nearly US$ 3,600
billion by 2020 from US$ 1,595 billion in 2016.
• Direct selling sector in India is expected to reach Rs 159.3 billion (US$ 2.5 billion) by 2021, if provided
with a conducive environment through reforms and regulation.
 EXECUTIVE SUMMARY

• 2nd largest arable land in the world: India has the tenth-largest arable land resources in the world
with 161 million tonnes. With 20 agri-climatic regions, all 15 major climates in the world exist in India.
The country also possesses 46 of the 60 soil types in the world.

• Largest producer of milk India: is the largest producer of milk and second – largest producer of fruits
and vegetables

• Largest livestock population: India has the largest livestock population across the globe which is
equal to 512 million, including 119 million milch (in-milk and dry) animals, 80.06 million goats and
44.56 million sheep in FY15. The segment contributes about 25 per cent to the country’s farm GDP.

• Rising consumption expenditure: Consumer spending in 2015 was USD 1 trillion; it is likely to reach
USD3.6 trillion by 2020.

• Favourable location for export: Strategic geographic location and proximity to food importing
nations favour India in terms of exporting processed foods.
 WHY ENTER THE INDIAN FOOD PROCESSING SECTOR?

 Seventh largest country, with extensive administrative structure and independent judiciary, a sound
financial network and above all a stable and thriving democracy.

 It is one of the biggest emerging markets, with over 900 million population and a 250 million strong
middle class.

 Rapid urbanisation, increased literacy and rising per capita income , have all caused rapid growth
and changes in demand patterns, leading to tremendous new opportunities for exploiting the large
latent market. An average Indian spends about 50% of household expenditure on food items.

 Liberalised overall policy regime, with specific incentives for high priority food processing sector,
provides a very conducive environment for investments and exports in the sector.

 Very good investment opportunities exist in many areas of food processing industries, the important
ones being : fruit & vegetable processing, meat, fish & poultry processing, packaged, convenience
food and drinks, milk products etc.
FMCG Industry in India

• FMCG is the 4th largest sector in the Indian economy

• Household and Personal Care is the leading segment, accounting for 50 per cent of the overall
market. Hair care (23 %) and Food and Beverages (19 %) comes next in terms of market share
• Growing awareness, easier access and changing lifestyles have been the key growth drivers for the
sector
• The number of online users in India is likely to cross 850 million by 2025.
• Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 672 billion in 2016,
with modern trade expected to grow at 20 %- 25 % per annum, which is likely to boost revenues of
FMCG companies
• People are gracefully embracing Ayurveda products, which has resulted in growth of FMCG major,
Patanjali Ayurveda, with a revenue of US$ 1.57 billion in FY17. The company aims to expand
globally in the next 5 to 10 years.

Source: Dabur Annual Report, Economic Times, Emami

Annual Report, McKinsey Global Instotute, CII, Boston
Consulting Group Report.
• By 2020, the revenues of the sector are forecasted to reach US$ 104 billion
• In the long run, with the system becoming more transparent and easily compliable, is expected to
benefit organized players in the FMCG industry.
• Direct selling sector in India is expected to reach Rs 159.3 billion (US$ 2.5 billion) by 2021, if
provided with a conducive environment through reforms and regulation
• The focus on agriculture, MSMEs, education, healthcare, infrastructure and employment under the Union
Budget 2018-19 is expected to directly impact the FMCG sector. These initiatives are expected to
increase the disposable income in the hands of the common people, especially in the rural area, which
will be beneficial for the sector.

Source: Dabur Annual Report, Economic Times, Emami Annual Report, McKinsey Global Instotute, CII, Boston
Consulting Group Report.
 INVESTMENTS/ DEVELOPMENTS

• The government has allowed 100 per cent Foreign Direct Investment (FDI) in food processing and single-
brand retail and 51% per cent in multi-brand retail. This would bolster employment and supply chains,
and also provide high visibility for FMCG brands in organized retail markets, bolstering consumer
spending and encouraging more product launches. The sector witnessed healthy FDI inflows of US$
13.07 billion, during April 2000 to December 2017. Some of the recent developments in the FMCG
sector are as follows:
• The Hershey Co. plans to invest US$ 50 million over the next five years in India, its fastest growing core
market outside of US.
• As a part of its Rs 25,000 crore (US$ 3.88 billion) investment package, ITC will invest Rs 10,000 crore
(US$ 1.55 billion) to expand its food processing segment.
• The bottling arm of Coca-Cola India, Hindustan Coca-Cola Beverages (HCCB) is planning to increase its
retail reach by one million new outlets and is targeting revenue of US$ 2.5 billion by 2020.
• Future Retail will acquire HyperCity, which is owned by Shoppers Stop for Rs 911 crore (US$ 139.7
million) to further consolidate its business and have a better footing in the hypermarket segment.
• Patanjali will spend US$743.72 million in various food parks in Maharashtra, Madhya Pradesh, Assam,
Andhra Pradesh and Uttar Pradesh.
 GOVERNMENT INITIATIVES

• Some of the major initiatives taken by the government to promote the FMCG sector in India are as
follows:
• In the Union Budget 2017-18, the Government of India has proposed to spend more on the rural side
with an aim to double the farmer’s income in five years; as well as the cut in income tax rate targeting
mainly the small tax payers, focus on affordable housing and infrastructure development will provide
multiple growth drivers for the consumer market industry.
• The Government of India’s decision to allow 100 per cent Foreign Direct Investment (FDI) in online
retail of goods and services through the automatic route has provided clarity on the existing businesses
of e-commerce companies operating in India.
• With the demand for skilled labour growing among Indian industries, the government plans to train
500 million people by 2022 and is also encouraging private players and entrepreneurs to invest in the
venture. Many governments, corporate and educational organizations are working towards providing
training and education to create a skilled workforce.
• The Government of India has drafted a new Consumer Protection Bill with special emphasis on setting
up an extensive mechanism to ensure simple, speedy, accessible, affordable and timely delivery of
justice to consumers.
• The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the FMCG products
such as Soap, Toothpaste and Hair oil now come under 18 per cent tax bracket against the previous
23-24 per cent rate.
Source: Ministry of Food Processing Industries (MOFPI),
Annual Report MOFPI (2013 - 14), TechSci Research
Note: *- As per latest data available

By 2024, food processing sector is

expected to employ 9
million people in India
 RISING INCOME AND GROWING MIDDLE CLASS TO DRIVE
DEMAND FOR PROCESSED FOOD

• Strong growth in per-capita income has resulted in greater demand for food items .
• Incomes have increased at a brisk pace in India and would continue rising considering the country’s
strong economic growth prospects. Nominal per capita income is estimated (IMF) to have recorded a
CAGR of 9.2% over 2001–19E .
• There has also been a shift in demand:-
1. From carbohydrates to meat products (in line with the various phases of economic growth); and
2. To convenience foods, and organic and diet foods.
• Strong economic growth since the 1990s has led to:
• Nuclear families and dual income households ; and
• Rapid urbanisation and a growing middle class

Source: IMF, World Bank, TechSci Research

Notes: E - Estimate, F - Forecast

• Coupled with a young population and increasing media penetration, this has led to a surge in demand
for packaged food, alcoholic and non-alcoholic beverages, snacks, savouries, etc.
10000000

1000000

100000

10000

1000 Quantity in MT

100 Value IN Cr.

10
Value in Million
1 USD
Non Basmati Rice

Basmati Rice

Fresh Onions

Fresh Grapes
Other Products

Guargum
Buffalo Meat

Groundnuts

Cereal Preparations
Other Processed Fruits & Vegetables

Miscellaneous Preparations
Value of the commodity
Exported In the FY 2017-
18 is 1,19,724.9Cr.

1 2 3 4 5 6 7 8 9 10 11

SOURCE: http://agriexchange.apeda.gov.in/indexp/Globalexport/India_Export_Statistics.aspx
Other products are the sum of the products which are not listed.
 India is the world’s 2nd producer of fruits and vegetables. India produced 86.283 million tonnes of
Fruits and fruits, 167.058 million tonnes of vegetables during 2014 - 15; The government expects the
vegetables processing in this sector to grow by 25 per cent of the total produce by 2025.

India is the largest producer of milk in the world, with the production estimated at 146.3 MT in FY
Milk 15

India is the largest producer of buffalo meat (1.4 MT in 2015) and the second largest producer of
Meat and goat meat (0.91 MT in 2015). It is world’s second largest egg producer (78.4 billion) and third
poultry largest producer of broiler meat (3.8 million tonnes).
Food
processing
Marine Total fish production in 2014-15 is expected to reach 10.06 MT with Andhra Pradesh being the
products largest producer of fish in the country with estimated fish production of 1.9 MT during 2014-
2015

Grain India produces more than 200 million tonnes of different food grains every year. Total food
processing grains production reached 252.68 MT in FY15 (4 th Advanced Estimates)

Consumer Among the fastest growing segments in India; it includes –

food

Packaged drinking Alcoholic

Packaged foods Aerated Soft drinks
water beverages