This report discusses developments in India’s fast-moving consumer goods (FMGC) industry through H2 2013. The report also profiles the market position and provides a comparative matrix of the leading market players including Hindustan Unilever, Godrej Consumer Products, and Dabur India.

The Indian economy experienced an economic slowdown with high inflation in fiscal year 2013. India’s FMCG industry had to face the heat of high consumer price inflation with a decrease in consumer demand. The weak demand and rise in input prices affected both sales and profitability. In the third quarter of 2013, consumer confidence in the Indian market was hit slightly, with the index falling by seven points on a y/y basis. India was ranked third in the Asia-Pacific region in terms of consumer confidence behind Indonesia and the Philippines, according to a survey published by Nielsen. Consumer price inflation was hovering around the 10% mark, which prevented the Reserve Bank of India from initiating any cuts in the benchmark interest rate. High food price inflation ate away at the disposable income of middle-class Indians, thus bringing down demand. The manufacturing index for the food and beverage industry also touched a three-year low.

Despite the tough conditions that prevailed in 2013, the outlook for the Indian FMCG industry is stable because of growing sales, the strong financials of leading players, and increasing urbanization. Moreover, the wide distribution network built by erstwhile 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

• This study includes detailed financial information on the following leading market players: Hindustan Unilever Limited (HUL), Godrej Consumer Products Limited (GCPL), and Dabur India Limited (DIL).

• 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 slower credit off-take, which in turn transpired into a full-blown industrial slowdown affecting almost all sectors of the Indian economy. As a result, the index of industrial production (IIP) recorded a growth of only 1% in FY13. The food and beverage manufacturing industry was also affected with a growth of only 3%.

• India suffered from a high consumer price inflation rate throughout 2013. It declined slightly in the month of April. Since then, it has remained around the 10% mark.