Aim : Provide the rich availability of the products before the customer and maintain the quality through the latest engineered technique.
Food and grocery retailing is a massive market with huge growth potential. FMCG stands for fast-moving consumer goods, and it covers all businesses that sell directly to consumers; essentially any company that sells packaged products rather than raw materials or intermediate goods. This article provides an in-depth look at the food manufacturing sector, focusing specifically on its scope, trends, challenges, and opportunities as well as the risks involved. Moreover, we go through the various elements of creating a successful FMCG business like Market Analysis and Strategy, Business Model and Value Proposition, Supply Chain Strategy, Operational Blueprint, and Financial Plan.
What is the scope of FMCG in India?
The Indian FMCG market is expected to reach $620 billion by 2026, growing at a CAGR of 8.5% during the forecast period. The fastest-growing sectors will be processed foods, dairy products, frozen food, beverages, spices, and confectionery. The scope of FMCG in India can be attributed to various factors. Firstly, the rising urbanization and growing population have increased the demand for processed food. Secondly, changing lifestyles, dietary preferences, and increasing health awareness have opened up new avenues for FMCG companies. In addition, the increasing number of women entering the workforce has led to an increase in working hours, which, in turn, has increased the demand for ready-to-eat food items.
Which are the most profitable FMCG businesses?
The Indian FMCG sector can be broken down into three main categories - food, tobacco, and grocery, each with its own set of opportunities and challenges. Here is a quick snapshot of each category: Food: Food is an essential commodity and the most important part of FMCG. It accounts for almost 50% of the total market and includes items such as processed meat and fish, bakery products, jams and preserves, breakfast cereals, and dairy products. Within the food segment, the most profitable businesses are the dairy, bakery, and confectionery industries. Confectionery: The confectionery sector is expected to grow at a CAGR of 8.3% during the forecast period. It is driven by changing consumer preferences, growing health consciousness, and innovation in product offerings. Bakery: The bakery sector is expected to grow at a CAGR of 8.6% during the forecast period and is driven by changing consumer preferences, an increase in the number of working women, and growth in the food service industry. Dairy: The dairy sector is expected to grow at a CAGR of 8.2% during the forecast period and is driven by changing consumer preferences, rising health consciousness, and increased urbanization.
Key Trends in the Indian FMCG sector
Increasing health awareness amongst consumers: Consumers are becoming more health-conscious as they are more aware of the health risks associated with unhealthy diets. As a result, there has been an increase in demand for healthier food items, such as organic produce and dairy products that are fortified with vitamins. - Increasing demand for convenience food: Consumers are looking for quick and easy solutions to fit into their busy lifestyles. As a result, they are switching to ready-to-eat food items, such as instant noodles, pre-packed sandwiches, ready-to-eat cereals, and frozen meals. - Growing adoption of online shopping: Consumers are increasingly using digital platforms to shop for their groceries. Online retailers like BigBasket, Amazon, and Grofers have seen a rise in popularity as they offer convenience and ease of shopping. - Changing eating habits of Indian consumers: Indian consumers' eating habits are changing significantly, and they are now eating more frequently outside the house. This is being driven by a few factors, including increased income levels and more women joining the workforce.
Key Challenges for an FMCG business
The FMCG business is characterized by high risks, long payback periods, and low returns on investment. Here are a few challenges that an FMCG business will face: - Competitive landscape: The Indian FMCG sector is highly fragmented with a high number of small and large players. To succeed in this highly competitive environment, businesses need to be creative and disruptive in their marketing strategies. - Significant capital requirement: The manufacturing and distribution process is capital-intensive and requires significant investment. Moreover, there is a long payback period on such investments. - Unpredictable demand: FMCG businesses are susceptible to changes in weather patterns and other environmental factors. The monsoon, for example, can cause significant fluctuations in the demand for certain products, especially those that are consumed regularly such as milk and other dairy products.
Opportunities for an FMCG business
Now that we have looked at the challenges of the FMCG sector, let us turn our attention to the opportunities that are available to entrepreneurs. There are various lucrative business opportunities in the Indian FMCG sector. Businesses that are positioned toward health and wellness are expected to grow at a robust pace. The demand for items such as probiotic yogurt, granola, and protein bars is expected to grow significantly in the coming years. Consumers are increasingly becoming health-conscious, and businesses that are able to cater to this demand are likely to see high growth rates in the long run. Moreover, the Indian FMCG sector is expected to see an increase in the demand for organic food and dairy products. Businesses that are able to cater to these demands are likely to be able to generate a significant amount of revenue.
