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Consumer goods industry in India and abroad

Consumer Goods Industry in India & Abroad

Overview, market size, growth trends, news resources

The consumer goods industry is a flourishing, enchanting place. Consider these facts:

  • Ninety-four percent of people the world over recognise Coca-Cola’s red-and-white logo.
  • Wal-Mart records a profit of $1.8 million every hour on an average.
  • The economy of McDonald’s would make it the 68th largest country in the world, just ahead of Sri Lanka.

Be it their quality or price, taste or flavour, or packaging or ease of use, or even the celebrities promoting them, there’s something about our favourite brands that make us love them, sometimes beyond reason.

They are our daily must-haves, and we are almost always well-stocked for a week or month or more. But we could still go out for some retail therapy.

What really are these things that we call “consumer goods”? Here’s a concise definition:

Consumer goods are products that are manufactured for use by individuals and sold through retail outlets.

They include not only processed food and beverages, toiletries, cosmetics, and household cleaning products, but also home appliances, and electronic goods. The list could go on and on, of course.

Moving on to their classification: there are two types of consumer goods—durable goods and non-durable goods. While durable goods last, and buyers can use them over a long period, non-durable goods are consumed over a much shorter period.

Non-durable goods are better known as “fast-moving consumer goods” (FMCGs), or consumer-packaged goods (CPGs). FMCGs move off shop shelves faster than other goods, either because there is a huge demand for them or because they have a shorter shelf-life and deteriorate rapidly.

Examples of FMCG products are processed food and beverages, toiletries, cosmetics, household cleaning products, pet-care products, footwear, and over-the-counter drugs.

On the other hand, consumer durable goods usually have lifespans ranging from one to three years or more. Examples are electronic goods, kitchen appliances, and leisure equipment. They have a longer utility value than FMCG goods, and consumers require fewer repeat purchases of durables.

Consumer durable goods can be further categorised into white goods (such as air-conditioners, washing machines, refrigerators, and other domestic appliances), brown goods (microwave ovens, electrical chimneys, mixers, grinders, irons, and fans), and consumer electronics (such as PCs, mobile phones, TVs, camcorders, and digital cameras). Often, home décor products and furniture are also called consumer durables.

The consumer goods industry is closely connected with other industries such as manufacturing and technology. For its survival and progress, it depends a great deal on advertising through various media and on retail outlets, such as shops, malls, franchise stores, discount stores, and online platforms.

Consumer goods companies find themselves jostling with one another for market share, and they take brand-building and product differentiation seriously. Many of the top players are big conglomerates with wide portfolios of products.

History of the consumer goods industry

During the Second Industrial Revolution in the mid-19th century, goods began to be manufactured on a large scale (see the post on the manufacturing industry).

Machines helped make goods, particularly those targeted at individuals and households, available in large numbers at affordable prices. Gradually, the “consumer goods industry” became well-established, first in the industrialised world and later in all parts of the world.

Looking back at recent history, from the mid-1967 to 2012, consumer goods companies did better than their counterparts in other sectors.

A McKinsey Insights global report on the industry divides these 45 years into four eras: the golden age of growth (1967 to 1985), when revenue soared; the era of expansion (1985-2000), when margins broadened, thanks mainly to low input prices; the M&A (mergers and acquisition) wave (2000-2007), when revenue increased but the total return to shareholders (TRS) decreased; and the Great Recession (2007-2012), when revenue growth was limited.

The industry’s future

Today, the consumer goods industry is the favourite child of every nation’s economy. But what about its future? Companies in the sector, be they global conglomerates or local wannabes, can grow if they identify markets where they have the most potential, be they in the developing or the developed world, and build effective strategies.

They could follow the example of a few local companies that have dared to venture out of their comfort zones to explore new markets and are now reaping rich rewards.

One challenge is to evolve strategies of managing the prices of their inputs. Technology advances, which have made possible online sales, 3D printing technology, and radio-frequency ID (that helps improve supply-chain efficiency), present companies with opportunities for growth.

Social media allows them to reach out to customers, and companies need to increasingly, and more seriously, use these channels for brand-building.

Government regulations are likely to become stricter under pressure from consumers, who are now more aware of health and safety, and companies will need to have an eye on this situation as well.

In today’s marketplace, it is no longer enough for consumer goods companies to achieve “product differentiation” (that is, make their products stand out in a crowd of competitors).

They need to create brands interesting. As Saatchi and Saatchi CEO Kevin Roberts says, products should leave “lovemarks” — that is, build brand loyalty that goes “beyond reason.”

Quick facts and statistics

The largest market for the consumer goods industry is the US, followed by China. India, Indonesia, Brazil, Mexico, and other developing countries are expected to be the new growth engines for the sector.

In 2014, the global FMCG sector was worth $8 trillion, which is nearly the GDP of Japan and Germany combined (India’s GDP is $2.05 trillion).

The top ten global FMCG companies, based on net sales in 2014, are Nestlé ($100 billion), Proctor and Gamble ($83 billion), PepsiCo ($66.6 billion), Unilever ($66.1 billion), JBS ($49 billion), AB Inbev ($ 47 billion), Coco- Cola Company ($45 billion), Tyson Foods ($37 billion), Mondelēz ($34 billion), and Archer Daniel Midlands ($31 billion). The ten most purchased brands globally are Coca-Cola (Coca-Cola Company), Colgate (Colgate-Palmolive), Maggi (Nestlé), Lifebuoy (Unilever), Nescafé (Nestlé), Pepsi (PepsiCo), Lay’s (PepsiCo), Knorr (Unilever), Dove (Unilever), and Tide (P&G), according to online sources.

The global consumer durables goods industry, on the other hand, was estimated to be worth $13 trillion in 2013.

Consumer Goods industry in India

FMCG sector

India’s FMCG sector is worth $35 billion and is the fourth largest of its economy. India continues to top the Nielsen’s global consumer confidence index (a measure of how people feel about their own finances and their country’s current and future financial positions).

FMCGs were sold through 8.5 million outlets all over the country. Among the top companies are ITC ($ 7 billion), Hindustan Unilever and Godrej (turnover $4 billion), Amul ($2.15 billion), Parle Agro ($1 billion), Marico ($850 million), Britannia Industries ($730 million), Procter and Gamble ($83 billion), Nestlé ($87 billion), and Colgate Palmolive (global turnover $17 billion). Dabur, Cadbury India, and Asian Paints are also included in the toppers’ list by some sources.

The most loved brands in the country are Colgate, Parle, Wheel, Clinic Plus, Fair and Lovely, Lifebuoy, Tata Salt, Lux, Rin, Britannia, Kwality Walls, and Nestlé.

Food and beverages have a more than 50 percent share of the FMCG market in India. Personal care products (20 percent), tobacco products (15 percent), and household care products (10 percent) come next.

FMCG companies reach their customers through retail stores, department stores, malls, and franchisee outlets. Among the biggest names in the retail business are Shoppers Stop, Reliance Retail, ITC-LRBD, Westside, Pantaloons Retail, Big Bazaar, and Aditya Birla Retail.

The growth of rural markets has been a major factor in the improving fortunes of FMCG companies. Nielsen predicts that the rural FMCG market alone will increase to $100 billion by 2025. Companies have been quick to target it by creating specific products.

In urban areas, double-income couples and bigger disposal incomes have made consumers switch from value products to high-quality goods. The quantity of foods purchased has also increased.

The other drivers of the FMCG market are changing lifestyles, advertising, and foreign investment. The government’s decision to relax licensing rules and allow 100 per cent foreign direct investment (FDI) in single-brand retail and 51 per cent FDI in multi-brand retain have helped the sector to no small extent.

The reduction in customs duty on machinery used by food units and the cut in excise duty on food mixes have been a blessing.

However, the sector also faces some challenges, including relaxation of import restrictions, and thereby greater availability of foreign brands, which might result in customers shifting to these brands in place of domestic ones. The problems of the farming sector will affect sale in rural areas.

Consumer durables sector

The Indian consumer durables sector was worth about $10 billion in the 2014-15 financial year and is expected to grow to $12.5 billion in 2015-16. The sector is seeing tough competition, as a result of which prices are coming down.

Among the top brands are Sony, Samsung, Whirlpool, LG, Godrej, Sony, Hitachi, Haier, Blue Star, Carrier, Khaitan, Kelvinator, Videocon, Titan, TTK Prestige, Bajaj Electricals, HP, Philips, VIP, and Siemens. Although domestic demand is growing, high-end products continue to be imported. Similarly, there is high reliance on imports for components, such as semiconductors.

Urban areas account for 65 percent of the consumer durables market. In cities, the demand for LED TVs, split ACs, and laptops are increasing, whereas, in rural areas, more households are purchasing refrigerators and mobile phones.

The government’s initiatives, such as the National Electronics Mission and digitisation of television broadcasting and the setting up of electronic hardware technology parks, are likely to facilitate the growth of the sector.

The challenges for the durables sector include the complex taxation system (the central and state governments both levy taxes on goods), the availability and quality of raw materials (only about 35 percent of electronic components can be sourced in India), the competition from China and South Asian countries (which have specific advantages such as availability of raw materials), and the high cost of finance.

Jobs in Consumer Goods industry in India

First, the headlines:

  1. Many roles in the FMCG sector are interconnected, and you can jump roles, especially at the beginning of your career.
  2. Your degree is not your most important qualification for interviewers.
  3. Listening skills are a most advantageous asset.

From a career perspective, too, the consumer industry, particularly the FMCG sector, is a land of opportunities. It is also an exciting field, as the challenge is always to please the consumers.

Generally speaking, two categories of jobs in the FMCG are available for graduates: jobs in product processes and jobs in retail and marketing.

Companies look for candidates with engineering degrees for the first category, and those with degrees in business and economics, marketing, advertising, and public relations for the second category.

Jobs are available for engineering graduates and graduates with a background in product design, merchandising, retail management, and procurement.

With the right personality traits and skills, a fresher can hope to rise to such managerial positions as production manager, logistics and warehouse manager, purchase manager, retail communications manager, and private label brands manager.

Popular degree courses include BSc and MSc in Retail Management and Fashion Merchandising, MBA in Retail Management, and Bachelor of Fashion Retail Management. Among diploma and certificate courses are Postgraduate Certificate and PG Diploma in Marketing and Retail Management.

Top FMCG companies are continuing to hire from the best B-schools in the country. The companies that are reported to be paying the best salaries are Cadbury India, Procter and Gamble, Hindustan Unilever, Britannia Industries, Marico, Godrej Consumer Products, GlaxosmithKline, Nestlé India, and Colgate Palmolive.

Consumer durables may not be as recession-resilient as the FMCG sector, but the employment scenario here is equally bright. Positions in areas such as research, sales and marketing, servicing and maintenance, finance, legal affairs, human resources, training, and public relations and advertising are advertised.

Of course, starting your own store or becoming a franchise of a top brand may be interesting options. Promoting your own choicest brands might prove to be more rewarding than retail therapy—it might lay the foundation for a fulfilling career as a business person.

Back to the list of industries.

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