OVERVIEW OF THE INDIAN F.M.C.G. INDUSTRY

MAJOR SEGMENTS :The Indian F.M.C.G can be broadly classified into the following segments on the basis of the products being consumed.

Food products lead the pack with an estimated value of Rs 228 bn.This is followed by personal care and food care segments. As the size of the pie is bigger in these segments it is no wonder that some of the biggest F.M.C.G companies have their majority of business concentrated in this segment.

MAJOR FMCG COMPANIES

SERIAL NUMBER

COMPANY NAME MAJOR SEGMENTS OF OPERATION

1) Hindustan Unilever Ltd. PROCESSED FOOD PRODS/FABRIC CARE/PERSONAL CARE

2) ITC CIGARETTES/PERSONA CARE3) Nestlé India PROCESSED FOOD PRODUCTS

4) GCMMF (AMUL) PROCESSED FOOD PRODUCTS

5) Dabur India PROCESSED FOOD PRODS/PERSONAL CARE

6) Asian Paints (India) *HOUSEHOLD

7) Cadbury India PROCESSED FOOD PRODUCTS

8) Britannia Industries PROCESSED FOOD PRODUCTS

9) Procter & Gamble Hygiene and Health Care

FABRIC CARE/PERSONAL CARE

10) Marico Industries PERSONAL CARE

GROWTH RATE AND OPPORTUNITY FOR FMCG SECTOR:

URBAN AREAS -Rise In Per Capita Consumer Expenditure from Rs 932 IN 2001 To Rs 1312 IN 2007.A Rise OF 41% In a Span Of 6 Years.

RURAL AREAS -Rise in per Capita Consumption Expenditure From Rs 494 In 2001 To Rs 695 In 2007. A rise of 39.5% in a span of 6 Years.

SHIFT INSHARE OF WALLET-In Rural Areas Per Capita Consumption Expenditure on food has reduced from a level of 59% of total consumption expenditure in 2001 to a a level of 52% of total consumption expenditure in 2007

Consumer Behaviour in FMCG Sector

1. Indian consumers have a high degree of value orientation. Hence, they exhibit keen insight and a good sense of judgment. Therefore, even luxury brands have to design a unique pricing strategy to get a firm foothold in the Indian market.

2. Indian consumers have a high degree of family orientation. Hence, brands with identities that support family values tend to be popular, and are accepted easily in the Indian market.

3. Indian consumers are also associated with values of nurturing, care and affection. These values are prioritized over values of ambition and achievement. Products which communicate feelings and emotions conforming to these are preferred.

4. Over the years, increasing literacy rates, exposure to the West, and other forms of mass media have increased consumer awareness among Indians. This awareness has made the Indian consumer prefer more reliable sources to purchase goods, such as organized retail chains that have a corporate background, and where there is a high degree of accountability. However, in the rural sector, customers prefer to purchase goods from the nearest location.

5. There has been a significant rise in brand awareness in the rural markets, and in many areas, people upgrade from the use of tooth powder to tooth pastes, and from traditional mosquito repellants to mats and coils. Also, in the rural sector, the consumers are more easily influenced by brand ambassadors then the urban sector.

6. In rural India, most of the consumers buy smaller packs of a product, as they are perceived as value for money.

7. There is a high degree of brand loyalty among the rural consumers. Hence, a consumer in the rural areas is highly likely to buy a brand out of habit, and not necessarily by choice. Therefore, brands rarely have to fight for market share as they just have to be visible in the right place.

8. In majority of the households, the purchase decision of a product is made by the homemaker, who may not be the end user. In many cases, customers are not so conscious about the sophistication of the product, so they also leave the decision of purchase to anybody in the house, and it can be a mixed decision.

9. Payment habits of consumers are also important when we study consumer behavior. Rural consumers sometimes pay in cash for their purchase, but the practice of buying on credit is highly prevalent due to the degree of personal relations and bonhomie they share with the local shopkeepers. This is not very prevalent in the urban sectors due to the wide variety of outlets available to the consumer.

PESTLE ANALYSIS

Political – Legal Environment

The government needs to rapidly implement GST to replace the multiple indirect taxes currently levied on FMCG products. This would have several benefits, including uniform, simplified and single-point taxation and reduced prices.The FMCG sector accounts for around 3 per cent of the total FDI inflow and roughly 7.3 per cent of the total sectoral investment. The food-processing sector attracts the highest FDI, while the vegetable oils and vanaspati sector accounts for the highest domestic investment in the FMCG sector.India has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reduced excise duties, automatic foreign investment and food laws resulting in an environment that fosters growth. 100 per cent export oriented units can be set up by government approval and use of foreign brand names is now freely permitted.

FDI Policy Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI). 24 per cent foreign equity is permitted in the small-scale sector.

Removal of Quantitative Restrictions and Reservation Policy The Indian government has abolished licensing for almost all food and agro-processing industries except for some items like alcohol, cane sugar, hydrogenated animal fats and oils etc., and items reserved for the exclusive manufacture in the small scale industry (SSI) sector. Quantitative restrictions were removed in 2001 and Union Budget 2004-05 further identified 85 items that would be taken out of the reserved list. This has resulted in a boom in the FMCG market through market expansion and greater product opportunities. Central and state initiatives Various states governments like HP, Uttaranchal and J&K have encouraged companies to set up manufacturing facilities in their regions through a package of fiscal incentives. Five-year tax holiday for new food processing units in fruits and vegetable processing have also been extended in the Union Budget 2004-05. Excise and import duty rates have been reduced substantially. Many processed food items are totally exempt from excise duty. Customs duties have been substantially reduced on plant and equipment, as well as on raw materials and intermediates, especially for

export production. Capital goods are also freely importable, including second hand ones in the food-processing sector.

Budget & FMCG ( which year budget?) Launch of a four prong strategy to promote agriculture sector. This strategy includes extending

the green revolution to the eastern states, reduction of wastage in produce, increase in credit support and thrust on food processing sector.

Readjustment of tax slabs will help increase the disposable income in the hands of urban consumers. Adjustment in income tax slabs thereby increasing the in-hand income for 60% of the tax payers.

Allocation of Rs 661 bn toward rural infrastructure development. Provision of a further 73 bn towards Backward Region Grant Fund to develop infrastructure in backward areas.

Allocation of Rs 401 bn towards Mahatma Gandhi National Rural Employment Guarantee Scheme (NREGS). Employment guarantee schemes will help provide an additional source of income to the rural youth thereby increasing their spending ability.

Decrease in excise duty on corrugated boxes and cartons will reduce packaging costs. Reduction in excise duty for corrugated boxes and cartons is a positive for all FMCG companies as it will help reduce packaging costs.

Increase in excise duty for cigarettes and tobacco is a negative for companies like ITC, VST and Godfrey Phillips as it will increase the price of cigarettes

India has a location advantage that can be exploited to use it as a sourcing base for FMCG exports. Export of pre-prepared meals with Indian vegetables for large Asian ethnic population settled in developed countries is a very big opportunity for India. Also, lower freight costs add to this.

Investments can also be made in Indian dairy industries to manufacture and package dairy food (through contract or local collaboration) for export to Middle East, Singapore, Malaysia, Indonesia, Korea, Thailand and Hong Kong.

Growth of modern retail is likely to benefit the FMCG sector. Better access to rural areas through an improved road network will also enhance the distribution system of FMCG players.

Economic environment

Large domestic market India is one of the largest emerging markets, with a population of over one billion. India is one of the largest economies in the world in terms of purchasing power and has a strong middle class base of 300 million.

Income class 1995-96

2006-07

Growth %

Annual income households

Estimated population

households

Estimated population

urban

rural overall

Rich (>2,15,000) 1.2 7 5.2 30 400%

200% 95%

Consuming class (45,000-2,15,000)

32.5 186 75.5 432 145%

119% 132%

Climbers (22,000-45,000) 54.1 312.2 81.7 472 -19% 83% 51%Aspirants (16,000-22,000) 44 253.9 20.2 117 -54%

Defaulters (<16,000) 33 190.4 16.5 95 -50%

Source: R.K. SHUKLA “the marketing whitebook 2003-04(New Delhi: Businessworld)p.64

Household income distribution – 2003 Household income distribution - 2015 Source: HLL, NCAER.

Around 70 per cent of the total households in India (188 million) resides in the rural areas. The total number of rural households are expected to rise from 135 million in 2001-02 to 153 million in 2009-10. This presents the largest potential market in the world.The annual size of the rural FMCG market was estimated at around US$ 10.5 billion in 2001-02. ( want latest 2007 atleast)

India - a large consumer goods spender An average Indian spends around 40 per cent of his income on grocery and 8 per cent on personal care products. The large share of fast moving consumer goods (FMCG) in total individual spending along with the large population base is another factor that makes India one of the largest FMCG markets.

It’s a very interesting pie chart but unfortunately not readable, so create it yourself with diff colours for diff categories.

Consumer expenditure on food (US$ billion) Source: KSA Technopak Consumer Outlook 2006

total consumer expenditure on food in India at US$ 120 billion is amongst the largest in the emerging markets, next only to China.

Penetration and per capita consumption ( make a good presentable table)

Rural - urban penetration (2006)Category Market Size Urban Rural Total

(US$ million) Penetration(%) Penetration(%) Penetration (%)

High Penetration categories >50%: Drive upgradation and consumption

Fabric Wash 1210 89.6 82.9 84.9Personal Wash 938 97.9 90.7 92.8

Low penetration categories: Drive penetration

Toothpaste 409 69.8 32.3 43.5Skin 312 36.6 19.8 24.7Hair Wash 230 40.1 16.3 23.3Talcum Powder 148 66 36.8 45.1

Ketchups 25 12.5 0.7 4.2Deodorants 19 --- --- ---Jams 13 --- --- ---

Low penetration level in most product categories like jams, toothpaste, skin care, hair wash etc provides an excellent opportunity in rural markets. Improvement in income, affordability, change in tastes and preferences, is further expected to boost FMCG demand.

Growth is also likely to come from consumer "upgrading" in the high penetration product categories (fabric wash, personal wash).

Demand for FMCG products is set to boom by almost 60 per cent by 2007 and more than 100 per cent by 2015. This will be driven by the rise in share of middle class from 67 per cent in 2003 to 88 per cent in 2015.

The BRICs report indicates that India's per capita disposable income, currently at US$ 556 per annum, will rise to US$ 1150 by 2015 -another FMCG demand driver.

Spurt in the industrial and services sector growth is also likely to boost the urban consumption demand.

CHALLENGES IN INDIAN MARKETSHighlights :Disparities in earnings Urban income levels are around 85 % more than rural ones. Since expenses in urban areas are substantially higher, the difference in the surplus income (of urban and rural areas) that can be saved or invested is not all that huge in absolute terms. The average urban household saves nearly double that of a rural household.

1) INCOME INEQUALITIES

People belonging to the lowest income quintile (Q1) have an average annual per capita income of Rs 3,500. While they comprise 18 % of the households, their share in total income is only 5.4%. In contrast, the highest income quintile (Q5) accounts for 22% of the households, but half of the total income. At Rs 33,000 per annum, the average annual per capita income of the top-most quintile is about 9 times that of the lowest quintile.

2) REGIONAL DISPARITIES As per CSO estimates, the per capita net domestic products at current prices for 2004-05 vary significantly across the country, ranging from Rs. 29,000 for Delhi to Rs. 6,300 in Bihar, a difference of around five times between the richest and the poorest states. If the various states are bunched into three categories6 of low, middle and high income (based on the level of their per capita income), we will find that 48% of Indians live in the low- income states, 30 % in the middle income ones and the balance in the high-income states. While accounting for 48% of the population, these low-income states account for just 36 % of the country’s GDP. The high income states account for 21% of the population and 30% of the total GDP. The bulk of the population in the low income states is poor – 30% of households in these states fall in the lowest quintile, and just 12.5% of households fall in the top-most income quintile.

Looked at another way, nearly 67 % households in the lowest income quintile (Q1) are those residing in the low income states; 21% of households in the lowest income quintile are from middle income states and just 12% are from high income states.In the highest income quintile, around 27% of households are from the poorest states, 38% from the middle income states and 35% from the high income states

Investment in the FMCG sectorThe FMCG sector accounts for around 3 per cent of the total FDI inflow and roughly 7.3 per cent of the total sectoral investment. The food-processing sector attracts the highest FDI, while the vegetable oils and vanaspati sector accounts for the highest domestic investment in the FMCG sector.

Investments in the FMCG sector (August 1996-April 2007)

Source: SIA Newsletter, DIPP.

According to estimates based on China's current per capita consumption, the Indian FMCG market is set

to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. The dominance of Indian markets by

unbranded products, change in eating habits and the increased affordability of the growing Indian

population presents an opportunity to makers of branded products, who can convert consumers to

branded products.

The investment potential in rural marketsThe Indian rural market with its vast size and demand base offers a huge opportunity for investment. Rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income. With population in the rural areas set to rise to 153 million households by 2009-10 and with higher saturation in the urban markets, future growth in the FMCG sector will come from increased rural and small town penetration.

Technological environment

Delivering consistent excellence has become critical given the challenging competitive environment in which FMCG companies operate. Hyper-competition has presented the consumer with an explosion of choice; for the first time established players have had to tackle the problem of down-trading as traditional value equations changed.

Accelerated lifestyles and increasing awareness are making it harder to please consumers, thereby shortening product life-cycles drastically. A fragmented and proliferating media adds to the complication of targeting consumers as effectively as before.

All this means that generating value on a consistent basis will require much more than just doing things better; it will require doing things differently.

Producing soap more cost-effectively, for instance, may no longer be enough; it is more important to produce soap with a novel usage proposition -- just as, say, single-serve sachets revolutionised the shampoo market in the early 1990s. Innovation can no longer be considered an exception; it needs to become an integral driver of growth.

Innovation is increasingly becoming a metric by which corporate performance is being measured. For instance, a Fortune magazine study put "degree of innovativeness of the company" as the strongest predictor of investment value. Hard data corroborates this.

A study of over 200 companies entitled "Winning New Products" conducted by the Kellogg Graduate School of Management shows that successful innovation firms were more likely to generate growth rates of 20 per cent or more compared with less successful ones.

FMCG products can be broadly split into two sectors when it comes to technology:

Better efficacy – Toiletries, household goods, air care, detergents Better taste and convenience – Food and Drink

Using technology in food and drink requires us to examine whether the benefits that technology brings actually delivers a benefit to the consumer which is motivating enough to persuade the consumer to switch to your brand.

SOME KEY POINTS:

Screen and develop ideas: Testing insight and concepts at an early stage to identify the clear winners

Identify the volume potential of concepts: Developing winning concepts and identifying clear volume performance, prior to any product development taking place

Reviewing your range: Prior to launching, reviewing your range potential to ensure it is maximised to meet the needs of all consumers.

Communicating key benefits: Identifying and communicating the key triggers (founded in the product itself) to ensure a successful marketing campaign and launch.

Socio-cultural environment of FMCG Sector Population: Total population of India is 1.2 billion and annual growth rate is 1.55%. FMCG

Industry meets day-to-day needs of consumers and hence is directly related to the population. Thus it’s expected to maintain a robust growth rate.

Young Population: Moreover, India has an astonishing demographic dividend where more than 50% of its population is below the age of 25 and more than 65% hovers below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years. Current median age is 25.1 years.

Implications of young population on FMCG sector:-1. Increase in pci( what is PCI) - This year, pci increased to Rs. 44345 rising by 10.5% over the

previous fiscal. A young, working population means higher disposable income and consequently, greater expenditure on personal care and household care items.

2. Nuclear families- More than 80% of the households in India are nuclear families. This leads to greater consumption expenditure.

3. Rise in proportion of working women- The proportion of women in workforce has been steadily increasing over the years. About 15% of urban women and more than 30% of rural women are paid workers. This statistic is especially significant for FMCG goods like- personal grooming products like shampoos, soaps, creams and the fabric care industry as women are the main buyers and consumers. Greater economic independence is also reflected in greater standards of living and changing lifestyles. Brand awareness and health and beauty-consciousness are also on the upswing.

4. Changing lifestyles- People are becoming conscious about health and hygienic. There is a change in the mindset of the Consumers and they are now looking at “Money for Value” rather than “Value for Money”. Consumers are switching from economy to premium product. We have witnessed a sharp increase in the sales of packaged water and water purifier. Findings according to a recent survey by A. C. Nielsen shows about 71 per cent of Indian take notice of packaged goodsʹ labels containing nutritional information compared to two years ago which was only 59 per cent.

5. Baby care products- 33.59% of the population is below 14 years of age. India has emerged as the most preferred market for the companies involved in baby care product manufacturing and marketing, says an RNCOS report. The growing segment of population in the age group of 0-4 years has been providing tremendous opportunities as compared to any other baby product market worldwide. Several international players are planning to introduce specialized premium products in a bid to grab market share from well-established players like Johnson & Johnson. The total market for baby care products in India is estimated at INR 15 bn in 2008. It is expected to witness a CAGR of 17% and reach INR 28 bn by 2012. Market comprises of four segments Baby Food, Skin Care, Toiletries and Diapers, and Hair Care.

Vast Rural population: Proportion of Rural Population 72.2% ie more than 0.7 billion people. Penetration of FMCG goods is very low in these segments. The working rural population is approximately 400 Millions. And an average citizen in rural India has less than half of the purchasing power as compare to his urban counterpart. Still there is an untapped market and most of the FMCG Companies are taking different steps to capture rural market share. The market for FMCG products in rural India is estimated ~ 52 per cent and is projected to touch ~ 60 per cent within a year. In 2008, the rural areas grew at a robust rate of 25% as compared to 10% growth in urban retail market. While the per capita income is lower than urban areas, the customer base is thrice that of urban areas.

Tapping this rural market can drive the future growth of FMCG sector because of the following reasons:-1. Rise in Disposable income- An increase in agricultural output due to a good harvest,

Government employment and welfare schemes like NREGA and Bharat Nirman and increase in non-agricultural employment opportunities in rural India have led to an increase in rural pci. This augurs well for FMCG goods’ demand. As rural income increases and distribution network improves (in line with road development projects), the penetration levels are set to increase. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounts for the remaining 34%. However, rural India accounts for more than 40% of the consumption in major FMCG categories such as personal care, fabric care and hot beverages. FMCG companies cannot overlook these households as they account for 12.2% of the world’s population.

2. Greater access to mass media like Television, Radio and Internet has created greater awareness of personal care and household care products. Brand awareness has also increased.

3. Low penetration levels and untapped market- For example, the penetration level of toothpowder/toothpaste in urban areas is three times that of rural areas. Also, products like shampoos, detergents, baby care products etc have very low penetration levels in rural areas. Reasons for this are- presence of unorganized sector which sell low quality, low priced substitutes, lack of road and rail infrastructure facilities, lack of a strong distribution network, lack of awareness and hence, lower demand. However, companies like HUL and other FMCG giants have realized that tapping this vast rural segment can fuel industry growth.

4. Improving infrastructure- Better communication, roads, distribution networks have enhanced connectivity with the rural markets.

Rural areas: driving growth

Value growth (%) Hair oil Coconut oil Shampoo Toothpaste

All India - Urban 14.3 13.5 14.6 12.2

All India - Rural 20.4 22 10.3 17.4

Volume Growth (%)

All India - Urban 13.3 13.5 7.8 8

All India - Rural 19.8 21.2 7.4 14.6

Source: AC Nielsen.

% share in population Share of BPL Population (%) Per capita APL Income BPL Per annumRatio (APL/BPL)

SC/ST 22.9 31.8 10,854 3,431 3.16

OBC 35.6 19.8 13,388 3,734 3.59

GENERAL 27.7 12.0 18,602 4,032 4.61

Drivers of Growth FMCG sector has grown consistently during the last three to four years and has reached the

level of Rs 1.25 lakh crore ($25 billion) sales in 2008. The industry is poised to grow at 10-12 per cent for the next 10 years to reach Rs 2.06 lakh crore by 2013 and Rs 3.55 lakh crore by 2018. Opening up of FDI and implementation of GST in India will further boost the sector, which may take the size of the industry to 4.5 lakh crore by 2018.

Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products. Growth is also likely to come from consumer 'upgrading' in the matured product categories.

An average Indian spends around 40 per cent of his income on grocery and 8 per cent on personal care products. The large share of fast moving consumer goods (FMCG) in total individual spending along with the large population base is another factor that makes India one of the largest FMCG markets.

Demand for FMCG products is set to boom by almost 60 per cent by 2007 and more than 100 per cent by 2015. This will be driven by the rise in share of middle class (defined as the climbers and consuming class) from 67 per cent in 2003 to 88 per cent in 2015. The boom in various consumer categories, further, indicates a latent demand for various product segments. For example, the upper end of very rich and a part of the consuming class indicate a small but rapidly growing segment for branded products. The middle segment, on the other hand, indicates a large market for the mass end products.

With population in the rural areas set to rise to 153 million households by 2009-10 and with higher saturation in the urban markets, future growth in the FMCG sector will come from increased rural and small town penetration. Technological advances such as the internet and e-commerce will aid in better logistics and distribution in these areas.

The BRICs report indicates that India's per capita disposable income, currently at US$ 556 per annum, will rise to US$ 1150 by 2015 - another FMCG demand driver. Spurt in the industrial and services sector growth is also likely to boost the urban consumption demand.

Barriers to Growth of FMCG Sector1. Removal of import restrictions can result in replacing of domestic brands.2. Slowdown in rural demand- Though rural market has shown 25% growth this year and double

digit growth in the recent years, any fluctuation in agricultural output may hit disposable income of rural households and thus demand.

3. Government regulations and tax structure- a. Automatic investment approval (including foreign technology agreements within

specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI). Only 24 per cent foreign equity is permitted in the small-scale sector.

b. Increase in excise duty for cigarettes and tobacco is a negative for companies like ITC, VST and Godfrey Phillips as it will increase the price of cigarettes.

c. Increase in duty for sanitary napkins is a negative for P&G as it will increase the price of its sanitary napkins.

d. Indirect taxes constitute no less than 35% of the total cost of consumer products. However, the integrated Goods and Services tax is an exceptionally good move because the growth of consumption, production, and employment is directly proportionate to reduction in indirect taxes.

4. Competition from the unorganized sector- Despite the strong presence of MNC players, the unorganised sector has a significant presence in this industry. In most categories, the unorganised sector is almost as big as the organised sector, if not bigger. Unorganised players offer higher margins to stockists in order to gain market share. Also, these players have deeper penetration in key regional markets as compared to larger players. India's Rs.460 billion FMCG market remains highly fragmented with roughly half the market going to unbranded, unpackaged home made products. Factors that enable small, unorganized players with local presence to flourish include the following:

a. Basic technology for most products is fairly simple and easily available.b. The small-scale sector in India enjoys exemption/ lower rates of excise duty, sales tax

etc. This makes them more price competitive vis-à-vis the organized sector.c. A highly scattered market and poor transport infrastructure limits the ability of MNCs

and national players to reach out to remote rural areas and small towns.d. Low brand awareness enables local players to market their spurious look-alike brands.

Me-too" products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market

e. Lower overheads due to limited geography, family management, focused product lines and minimal expenditure on marketing.

5. Input cost pressures on margins- Only companies, which have the ability to maintain and increase the market share, offset cost pressures without sacrificing volumes would stand to benefit. For example, the rising costs of cereals milk and sugar have led biscuit manufacturers like Parle to reduce grammage to maintain the same price.

6. Barriers to entry- Following are the reasons why new entrants in FMCG sectors may face difficulty:

a. Presence of established brands- Entering the organized FMCG sector is made difficult by the presence of giants like HUL, P&G, Marico, ITC etc which enjoy economies of scale and brand loyalty. In an industry where intense price-based competition takes place, new companies may find it difficult to cope up and still maintain margins.

b. Huge Distribution Network - India is home to six million retail outlets, including 2 million in 5,160 towns and four million in 627,000 villages. Super markets virtually do not exist inIndia. This makes logistics particularly for new players extremely difficult. It also makesnew product launches difficult since retailers are reluctant to allocate resources and timeto slow moving products.

c. Heavy promotional and advertising expenditure- Ad expenditure is 100% of revenue in the first year. For established brands, advertisement expenditure varies from 5 - 12% depending on the categories.

d. Limited Mass Media Options - The challenge associated with the launch and/or brand-building initiatives is that few no mass media options. TV reaches 67% of urbanconsumers and 35% of rural consumers. Alternatives like wall paintings, theatres, videovehicles, special packaging and consumer promotions become an expensive but requiredactivity associated with a successful FMCG.

7. Logistics problems- Establishing and expanding the distribution network to remote regions, infrastructure bottlenecks, rising fuel costs and supply chain management are some problems that restrict the growth of FMCG sector.

You have used good amount of data point which is good but add Sources wherever possible.