World over, FMCG (Fast-moving consumer goods) have certain iconic names, some becoming category synonyms as well. For us, the household names among FMCGs could be HUL, ITC, Nestle India, Britannia or the like (e.g. Britannia biscuits). But the news is that the space is warming up to more players (e.g. Reliance, Adani and Tata). Even as the impact of these new entrants(Haldiram,  Patanjali, Zydus Wellness, Mama earth, Bikanerwala, Venky’s) are debated widely, their capital infusion is already underway. Incidentally, business analysis of FMCGs forms an interesting case study topic for students who pursue an MBA/Online MBA.

Speed Thrills
Typically, FMCGs are affordable products that are high in demand and are sold and consumed quickly (e.g. processed foods, beverages, cosmetics, and toiletries). Their USP is quick returns on invested capital(ROIC) which, incidentally, is high (20%) too. Quick returns make FMCG the businesses’ favorite.

A Mirror Disposable Income
What do we do on the salary day? Eat out? Buy clothes? Or hang out? All these have FMCG tags. Hence, the saying, spending starts with FMCG. If you have more money at hand, you may go for a second pair of clothes or party at a high-end restaurant. So the spending is proportional to the affordability (disposable income) It is said that on an average household spend 8% of their income on FMCG. This is expected to rise further (thanks to the new budget proposals that aim to boost spending).

FMCG shines, In India too
India is looking forward to becoming the world’s third-largest economy (after the US and China) and the Indian retail market is one of the fastest growing. The visible parameters of growth include, among other things, a rise in disposable income, rapid urbanization and more demand for luxury products. According to an online resource, India is expected to add about 300 million people into the middle class bracket by 2030. This is good news for FMCGs and the major chunk of their customers belongs to this category. Additional FMCG capacities are fertile zones for new players.

Do Not Ignore the Rural
Traditionally, FMCG brands are tagged with the urban class. But a growing economy powers the remote life as well. This is because more industries coming up in the interior parts, and more people are moving to smaller towns to settle down. This facilitates FMCG’s spreading to the interior markets.

Budget 2024
Budget 2024 has many aggressive proposals. Many of these are aimed to hike up disposable income, boost spending and support expansion of FMCG sector in rural and urban areas. This translates the newfound interest of the big conglomerates in FMCG sector, as they don’t want to miss the opportunity to claim the additional space.

Conclusion
The expansion of FMCG sector in India would help consolidation of existing players and provide opportunities to biggies and also relatively small newbies. The expansion is expected to be deeper (additional capacities), wider (to new viz. rural markets) and innovative (catering to young and choosy and experiment-liking customers) How fast the brands adapt to these new realities would script their success stories.

Discussion Question
Given that you are ordering a personal care product, say a shampoo, what would you choose? Your favorite product? Or experiment with a new one? Why?

Reference:

• https://brandequity.economictimes.indiatimes.com/news/marketing/why-are-titans-like-ambani-and-adani-doubling-down-on-this-fast-moving-market/113088735?
• https://economictimes.indiatimes.com/markets/stocks/news/budget-2024-boost-to-disposable-income-augurs-well-for-fmcg-companies/articleshow/111959778.cms?from=mdr
• https://retail.economictimes.indiatimes.com/news/food-entertainment/personal-care-pet-supplies-liquor/fmcg-biggies-react-to-budget-2024-expect-more-job-opportunities-boost-in-demand-for-fmcg-products/111963632