Now that the fast moving consumer goods (FMCG) sector in India has started showing signs of revival after a 3.8 per cent decline in top line growth between 2000-2004, the industry can grow at a CAGR of 9 per cent and is estimated to reach a size of Rs 1,43,000 crore by 2010 from Rs 93,000 crore presently.
A report released by the Confederation of Indian Industries (CII) and A T Kearney charts out some key areas the sector needs to focus on in order to unlock its value.
In keeping with the power brands strategy followed by some of the companies in the sector over the last few years, where the focus was on a select number of brands, the report says that this strategy would be beneficial for the companies in the long term.
Also, it is important that companies look at innovating marketing/product options and pay lesser attention to the price wars as has been the case for the last few years.
In terms of market expansion, companies need to maintain focus on rural markets and, at the same time, bring in a more segmented approach along with providing a wider range of product-service bundles.
With the growth of the organised retail sector, it is important for the FMCG companies to develop professional relationships which would benefit both the industries by bringing down supply and distribution costs.
Further, it needs to leverage the potential presented by India’s agricultural production in areas like food and beverage in order to grow the processed foods part of the business.
According to Pavan Gandhok, vice-president, AT Kearney, this is one sector which still holds a lot of potential for growth and is still a largely underpenetrated segment. If India leverages its capabilities in this sector, it has the potential to become a global export hub, which in turn would result in increased growth for the industry.
While a lot of the key findings are already starting to be visible within the sector, it is more at an individual company level, and once these come in across the industry, the potential for growth is tremendous.