Competition in the FMCG Sector

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An Overview on the Growth of FMCG Sector in India-

There is stiff Competition in the FMCG sector in India and the competition is expected to increase in the coming years. FMCG sector in India is most likely to witness more than 50% growth in the semi-urban and rural areas in India by the year 2010 according to the reports of the Associated Chambers of Commerce and Industry of India (Assocham) of July 2005. The sector is estimated to grow by 10% per year and reach a market size of ` 100,000 crores by 2010 from ` 48,000 crores in 2005.

The people of both rural and urban regions in India are consuming high volume of fast moving consumer goods these days due to the higher disposable income. This has led to a surge in the setting up of a number of FMCG companies in India to meet the rising demand of the consumers. The rural market has grown significantly over the years. The FMCG companies which have grown significantly in India in the last few years are Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola, and Pepsi.

Competition in the FMCG Sector in India-

India's huge population has always been a significant factor for the growth of FMCG sector in the country. Between 1950 and 1980, the consumption of FMCG products were relatively low due to the low per capita income. The post-liberalization era in India has witnessed a massive growth in the selling of products in the domestic market. The Indian market also imported loads of products from overseas markets which made increased the competition between the organized and the unorganized sector.

The easing of the trade barriers encouraged the MNCs to invest in the Indian market to cater to the needs of the consumers. The living standards rose in the urban sector due to high disposable income along with the rise in the purchasing power of the rural families which increased the sales volume of various manufacturers of the FMCG products in India. The large-scale companies such as HLL, Godrej Consumer, Marico, Henkel, Reckitt Benckiser and Colgate have targeted the rural consumers and have also expanded their retail chain in the mid-sized towns and villages. On the contrary to this, Nestle has always targeted the market of urban India and focuses largely upon the value added products for the elite class or upper middle class population.

Future of Indian FMCG Sector-

The consumers today are endowed with a wide range of options to make their pick in FMCG products. There is a lot of competition in the FMCG sector as a number of factors are to be considered while selling the products. This precisely denotes that only the innovators can survive this tough competition. The investors must be very proactive to the market needs and also build strong and powerful distribution channels.

Last Updated on 3/16/2011