The Indian FMCG industry is over INR 1300 billion in size. It touches the life of every Indian and therefore has perhaps the widest reach among all industries in India! The industry has tripled in size over the last 10 years, growing much faster than in past decades. This has been facilitated by the many changes in the Indian economic and industrial landscape—reduced levels of taxation, easier import of materials and technology, reduced barriers to entry of foreign players, growing organizational maturity of Indian players, growth of media, and, of course, the growing affl uence and appetite for consumption of the Indian consumer. The industry’s potential to grow further and faster is awesome, given the low penetration of most categories and rising consumer incomes.
Though many changes have taken place over the last 20 years, the rate of change in the FMCG operating environment is set to accelerate. The waves of change will be propelled by government policy, channel customers, technological advances, leaders of social change such as NGOs, consumer behaviour and, of course, the players themselves. Change will therefore occur along many dimensions simultaneously, in a more compressed time scale at the intersection of these change vectors. This will produce signifi cant, if unpredictable, outcomes for the industry. Over the last 20 years, almost all FMCG companies have been riding the rising tide and almost all have prospered. That may, however, not hold true over the next 10 years. While the industry is set to grow at an even faster rate, in this round there could be as many losers as winners!
Winners will discard archaic models which prioritize urban markets over rural and innovate more complex but vastly more insightful segmentation models. They will alter the dialogue with modern retailers and the emerging specialize trade channel customers in meaningful ways, to grow the market and earn profi table market share. They will use technology to not just pare costs, but to create fl exible supply chains which can access more consumer segments an satisfy more consumer requirements. They will also use technology to both win more consumers and collaborate more intensely with consumers to create innovative products. Issues of sustainability will become far more central to their agendas.
In this context, all stakeholders in the FMCG industry will fi nd this report by Booz & Company valuable. Booz has developed an excellent model to understand the forces shaping the FMCG industry and this model is supported by a strong analytical foundation. Several interesting conclusions flow from the application of this model which should inform many board room discussions as companies in India and elsewhere grapple with issues of the future.