This report profiles India’s Fast Moving Consumer Goods (FMCG) industry, discussing market trends and outlook into 2014 and beyond. The report also highlights leading players in the sector including Hindustan Unilever Ltd, Godrej Consumer Products Ltd and Dabur India Ltd.

Sales growth in the FMCG industry witnessed a multi-year low in FY14. Overall economic slowdown and inflation led to a contraction in consumer demand during the fiscal year. The trend continued in the first quarter of FY15 as well. However, decline in inflation post 1QFY15 and better economic growth is expected to result in improvement in sales figures for FMCG companies in FY15.

Despite the tough conditions that prevailed in FY14, the outlook for Indian FMCG industry is stable because of growing sales, strong financials of leading players and increasing urbanization. Moreover, the wide distribution network built by previous major players ensures the high penetration of the FMCG products in rural India, which is home to more than 65% of the Indian population. The ever increasing middle-class backed by rising per capita income will further act as a growth driver for this sector in the years to come.

Key Points:

• According to a study by the Confederation of Indian Industries (CII), the FMCG sector is projected to grow at a double digit rate (base case=12%; high case=17%) till FY20.

• The higher policy rates led to a lower credit off-take which transpired into a full blown industrial slowdown affecting almost all the sectors of the Indian economy. As a result, the index of industrial production (IIP) recorded a decline of 0.1% in FY14. The food products and beverage manufacturing industry was also affected witnessing a decline of 1%.

• Both the inflation indicators, namely Wholesale Price Index (WPI) and Consumer Price Index (CPI), were above the comfort zones of RBI in most part of FY14, declining slightly in the last quarter. WPI inflation declined considerably in 2QFY15, falling to a five-year low of 3.7%.

• Sales growth in the FMCG industry saw a five-year low in FY14. However, decline in inflation post 1QFY15 and better economic growth is expected to result in an improvement in sales figures for FMCG companies in FY15.