`FMCG sector to grow over 50 pc by 2010'

The Hindu

New Delhi , July 18

FAST Moving Consumer Goods (FMCG) sector will witness more than 50 per cent growth in rural and semi-urban India by 2010, according to an analysis carried out by the Associated Chambers of Commerce and Industry of India (Assocham).

In totality, it is projected to grow at a CAGR (compounded annual growth rate) of 10 per cent and increase its market size to Rs 100,000 crore from the present level of Rs 48,000 crore.

The growing penchant of rural and semi-urban folks for FMCG products will be mainly responsible for this development, as manufacturers will have to deepen their concentration for higher sales volumes.

In the rural and semi-urban areas, FMCG market penetration is currently less than 1 per cent in general as against its total growth rate of about 6.2 per cent, the President of Assocham, Mr Mahendra K. Sanghi, said while releasing the analysis.

The analysis is based on the feedback obtained from various district industry centres all over the country on the future demand-supply situation of FMCG products.

Mr Sanghi said the Indian rural market with its vast size and demand base offered a huge opportunity that FMCG companies cannot afford to ignore. With 128 million households, the rural population is nearly three times the urban.

Though the rural and semi-urban demand of FMCG products will grow, it will put a severe pressure on the margins of manufacturers of FMCG products due to cut-throat competition, finds the analysis. Companies in the sector to benefit will include known names such as Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola, Pepsi, among others.

The chamber is of the view that the rural market may be alluring but it is not without problems such as low per capita disposable incomes and large number of daily wage earners.

Some of the other problems associated with rural markets are acute dependence on the vagaries of the monsoon, seasonal consumption linked to harvests, festivals and special occasions, poor roads and power problems.

The other difficulty that FMCG companies are likely to face is that of logistics. India's 627,000 villages are spread over 3.2 million sq km. Delivering products to the 750 million Indians living in rural areas will be a tough task.