Food segment to fuel FMCG growth

Over the last year, the growth in FMCG sector has been primarily fuelled by the foods segment that contributes to about 52 percent of the total FMCG market for branded packaged goods
retail store

According to the recent report by The Nielsen Company, the foods segment in India accounts for 65 percent of the incremental FMCG sales in value terms with categories such as packaged refined oils, non refined oils, biscuits, packaged tea and salty snacks driving this growth. Within the non-foods segment personal care categories like skin creams and toilet soaps have driven incremental sales. This rapid growth has been driven by wider, more systemic trends that have shaped the growth of these categories through changes in consumer montivation ad behaviour.

Impulse products

With the increase in disposable income and busy life-schedule of urban Indian consumers, on-the-go impulse products such as biscuits, snacks, chocolates and confectionary are witnessing double digit growth. The emergence of the modern trade has also helped the category sales. The increased product innovation and new product launches by both national and regional players are acting as a catalyst to boost the growth of the category. “On the product formulation front, newer attributes like low fat, sugar free, baked and whole grain are being introduced to entice and attract various consumer segments by creating greater relevance and empathy with consumers needs,” says, Roosevelt D’souza, executive director, the Nielsen Company.

Value growth %

Grocers

General stores

Chemists

Paan plus

Food stores

Modern trade

Biscuit

18

10

16

18

13

38

Salty snacks

28

23

29

30

19

30

chocolates

19

11

18

28

20

49

confectionary

14

8

12

12

12

56

Value Growth in Impulse Category Products by Channel (Source: The Nielsen Company, MAT OCT’10)

Health and Wellness Products

The FMCG product portfolio is growing to accommodate the health and wellness segment that caters to the increasingly affluent, urban, health conscious Indian. This portfolio is no longer about preventive or supportive nutrition but instead, it is reflects a mix of indulgence, invigoration and narcissism. This trend explains the emergence of ‘modified’ products. For instance, chewing gums, usually considered an item of impulse for children and youngsters have now assumed a new avatar as an oral health aid for adults.

“Categories that outwardly represent ‘health’ like “Anti-ageing creams” have shown significant growth. Anti-aging products as diverse as anti-aging lipsticks, eye balms, facial creams and hair lotions have taken their place across shop shelves to cater to the health and beauty conscious Indian. Expanding distribution and a wave of consumer interest in these sub-categories have resulted in a surge in their growth rates on a small base.” says D’souza.

Lifestyle Products

The market for ‘lifestyle’ products – products that are the markers of a better lifestyle for consumers is on the rise. Consumers from lower population stratas i.e. rural and semi-urban areas are now seen to “trade up” from unbranded to branded products. As the lower end of the market becomes more broad-based, the middle and upper end of the market is growing to include new specialized products that will try to make consumers migrate further up the value chain. More importantly, these changes have been all pervasive across geographies with at a tremendous pace that signals a genuine shift in the purchase basket and lifestyles. From a distribution perspective, while Grocers continue to be the leading channel for this segment, the ‘lifestyle’ segment saw an increased presence of “high end” products in modern trade (supermarkets/hypermarkets).

Value growth percent

Floor cleaners

Toilet cleaners

Glass cleaners

Pre-post washes

Liquid toilet soaps

All India (U+R)

27.8

10.8

12.8

26.5

46.3

All India - Urban

28.3

10.9

12.4

24.6

45.6

Metro

27.9

10.2

10.6

18.8

43.0

Town Class 1

30.4

14.2

15.1

30.8

49.9

Rest of urban

25.7

8.0

13.1

38.8

58.0

 

Rural

17.4

9.9

19.7

38.5

87.8

Value Growth of Lifestyle Products by Market Type (Source: The Nielsen Company, MAT OCT’10)

Convenience Products

In the last decade, Indian consumers have seen growing urbanization, increasing disposable income and lack of time, prompting them to move towards convenience food products. This trend appears to have stabilized most noticeably in the breakfast and mid-meal segment with these categories gaining consumer acceptance. “Marketers too have spent their time getting these products right to make them available to the Indian consumer across geographic zones and fine-tuned to local tastes. This process will continue as the market evolves and those who win at innovating based on consumers needs and preferences are more likely to create winning brands” says D’Souza.

Value Growth percent

All India

North

East

West

South

Breakfast Cereals

26

29

25

29

25.0

Vermicelli and noodles

29

34

32

33

20

Jams and jellies

19

13

23

20

21

Squashes and cordials

26

30

20

23

31

Cheese

22

20

17

16

55

Value Growth in the Convenience foods by region (Source: The Nielsen Company, MAT OCT’10)

Future Growth

Key themes of impulse, health and wellness, lifestyle and convenience emerge as categories that have registered more than 20 percent growth get set to define the shape and direction of the FMCG sector in future. Focused marketing strategies that include new product innovation, portfolio expansion and aggressive distribution across channels and geographies will enable changes in consumer behavior.

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