FMCG growth largely depends on quality, positioning, distribution and confidence. The first two are entirely dependent on the brand, but the latter two are dependent on the environment and govt policies.
FMCG, the goods that move fast, and move as cheap. Cheap, but about US$ 80 billion in collective market-size, and the fourth largest sector in the Indian economy. To add perspective, about 10-15% of this will be sold online in the next couple of years. Beverages, biscuits, batteries. Soaps, snacks and sugar. It’s a complex sector and can include apparel, but only socks and inner wear. Consumer electronics is a part of it but limited to memory cards and headphones. Ice-creams are definitely a part of it. Cosmetics cannot be excluded, and even the candy that is handed as change sometimes gets included in the category. They are products easy to buy, quick in consumption and not too heavy on the pocket. These products form a part of our daily usage, our weekly purchases. The brands in this category are deeply personal to customers and reflect their sense of self-identity.
FMCG products growth largely depends on quality, positioning, distribution and confidence. The first two are entirely dependent on the brand, but the latter two are dependent on the environment and policy. This is where the Government comes in. There are three things it can and must do to facilitate distribution and confidence, with one word being central to everything- Balance.
The most important is to have a more balanced policy for e-Commerce towards consumption growth. With nearly 500 million internet users, of which 40% are rural and semi-urban, e-Commerce will be the future of product access by the consumer. Opposing forces pressure the government, and though it is a tough stance to take, their policy-view on e-Commerce must clearly be to facilitate long-term consumption growth. It must be realized that this is not a zero-sum game, where the gain of one is the direct loss of the other. e-Commerce will not only fulfil the current needs of buyers but will also create new demand, because new things will be available to a completely new audience. The results will be quick to see, as buying through the internet almost always sees, quick adoption by the under-accessed, rural young Indian buyers.
The second factor (with many other concomitant benefits) is easing logistics costs, currently at nearly 15%. A balanced approach to building roads, which not only connects cities but also rural hubs should be the infrastructure investment approach, with each infrastructure built, purely measured in terms of overall economic growth. Cities run with vacant monorails, metros have been built in cities where none may have been needed diverting scarce resources to political constituencies rather than to the economic engine.
The last, but as always, the most significant, is to build business confidence balance, which today, has ebbed to an all-time low. Without the faith and trust businesses place in the future, they baulk at business investment risks and reluctantly conserve what they should be spending.
I emphasize on the meanings of balance which should encourage a second read of the above. Balance implies fairness, evaluation, stability, impartiality and equilibrium. The FMCG sector, as others, will see an unprecedented fillip if policy balance, infrastructure balance and confidence balance were to be achieved without stops and stalls.
- By- N. Chandramouli, CEO at TRA Research.