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FMCG sector set for better times

05-July-2004
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FMCG sector set for better times

The Rs 60,000 crore Indian Fast Moving Consumer Goods (FMCG) industry is showing signs of buoyancy on the back of rising demand, growing Gross Domestic Product (GDP), good monsoon, strong economic fundamentals, availability of various tax benefits and several cost saving measures undertaken by companies. A survey conducted by Federation of Indian Chambers of Commerce and Industry (FICCI) says that the expected policy package announcements by the new government for farmers for raising rural income is bound to stimulate growth further.

However, offshoots and mushrooming of regional companies are posing a threat to some of the bigger FMCG companies like the HLL. The rise of Jyothi Laboratories, throwing challenge to Reckitt Benckiser is a case in point, says the survey.

There has been a pronounced improvement in volume terms rather than in value terms for most of the products. The overall industry has achieved a growth rate of 1.5 per cent in value terms and about 4 per cent in volume terms.

Post liberalisation period provided the consumers the opportunity to make choices amongst the products of domestic companies and imported products.

The domestic FMCG market remains highly fragmented with almost half of the market represnting unbranded, unpackaged home made products. This represents a huge opportunity for makers of branded products who can convert consumers to branded products.

Ficci survey points out that there has been a trned shift to own manufacturing from third party manufacturing or procuring goods from third party small-scale manufacturers.

Though the companies are going global, they are focussing on the overseas markets like Bangladesh, Pakistan, Nepal, Middle East and CIS countries because of the lifestyles, consumption habits similar to India. Godrej Consumer, Marico, Dabur, Vicci Laboratories are among many who are aggresively tapping these markets, the survey says.

The survey adds that a package of fiscal incentives (excise and income tax exemptions) provided by various state governments like Himachal Pradesh and Uttaranchal, have encouraged companies to set up manufacturing facilities in these regions.

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