Consumer Goods

 

Overview

An insatiable perceived need of domestic buyers has had the consumer goods industry in India growing swiftly in the past decade until recently the industry, especially in its FMCG sector has seen a discursive trend that has diminished the consistent high growth rates. The sector being a Capital intensive sector has been severely affected by the present dip in sales of capital goods. Adding to this, the fourth largest sector in Indian economy - FMCG was challenged by feeble economic growth and high inflation reporting a shy growth from the year 2011 to 2012. But 2015 has seen some remarkable change in its swiftly growing CAGR of 14.7% which is boosted further by a vast potential in the rural markets. The monopolistic structure of FMCG markets is dominated by Whirlpool and Blue Star holding 23% and 22% market share respectively. Unlike durables, non-durable goods' sector would mostly see an inelastic demand and therefore its celerity is justified by the increasing per capita income of India. Unfortunately, prejudices in domestic customers to favor foreign products, be it in any segment, has hampered possible growth for domestic participants. This industry is characterized by costly working capital requirements and quick operating cycles depending on the segment as well as strict regulations in terms of safety for consumption by various regulatory authorities.
 

Buy Industry Analysis

Outlook
On a closer look at the FMCG sector, it has sprung up owing to the favorable Government policies with regard to the relaxation of license terms and approval of 51% FDI in multi-brand and 100% FDI in single brand. The implementation of this policy however, has been inefficient as by many market leaders like Walmart, companies find it hard to function and build businesses in India, thus there is no actual addition to the market in terms of competition. This sector caters to demand for consumption of goods, thus to create a brand, high advertisement costs strain the margins of companies. The capital goods producers have reaped benefits of a fall in metal prices combined with a surge in growing demands from all capital industries which have to be met. This is owed to the increased industrial growth that the economy is realising in the year 2014-15.
Share repurchases and dividend payout ratios have been proliferated which has produced a temporary aid to earnings per share to an extent but the industry itself has critical success factors that have to be considered and strategized for. Nationally and internationally, this industry has witnessed many deals. As the industry enters in to a shakeout, industry participants strive to consolidate their positions through both organic and inorganic sources by diversifying both vertically and horizontally.

Future Potential
The two most important potential arenas that this industry must focus on are the growing rural sector and the increasing purchasing power parity of India. With higher disposable incomes and a growing affinity towards better lifestyles, nationally, this industry should embark on being one of the fastest growing industries but the focus should be to tackle competition within the industry in terms of technology leadership and cost performance. The issue in question is not the customer base but the cramping of the industry from domestic and foreign participants. With judicious use of resources and innovation as well as some strategic buyouts, all the segments must opt for sophistication in operations and increasing their RCAs. The capital goods' sector needs to create sound institutional mechanisms to intensify export credit as well as promotion since India has extremely high export transaction costs which damage business in overseas markets. Since the Total Factor Productivity of capital goods relies on infrastructure, support from the Government and strategic assimilation, the Public Sector has to intervene and radically change the growth structure of the capital goods segment. The growth of the consumer goods industry is an intricate function of performance of various macro- and micro- economic parameters, but largely the excessive dependence on foreign consumer goods has damaged the market due to higher competition and barriers to entry.

 

What this report contains:

  • A detailed overview of the industry

  • Structure of the industry from both, domestic and international perspectives

  • Related industries that this industry has inter-dependencies with and their understanding

  • Detailed analysis of industry segments in terms of the value and depth of corresponding market

  • Analysis & insights about the elements and critical success factors of this industry using strategic models

  • A forecast on the state of this industry in 2020, predicting the growth and movement patterns for 2016 - 2020

  • Our professional analysis on the future of the industry based on strategic actions adopted by major industry participants

  • Quantitative estimates and forecasts of the growth prospects of the industry using revenue and financial forecasting models

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