FMCG sector poised to see growth after stagnation period

MUMBAI: The AAAI seminar titled Beyond the Horizon; to celebrate the Diamond Jubilee of the industry body was held in Mumbai on 22 July. The first session was dedicated to the FMCG industry.



The session was chaired by Madison Communication CMD Sam Balsara and the speakers were CavinKare Ltd CMD C K Ranganathan and Marico chief marketing Saugata Gupta.



Balsara said, "The advertising and marketing industry in its earlier days was synonymous to the FMCG sector. Even when the broadcast media first came into the country, its mainstay was the FMCG sector. Today, a big show on Indian television has eight sponsors and sadly none of them are FMCG products."



Quoting AdEx figures, he said that in 1999, advertising spend from the FMCG sector was 76 per cent, but in 2004 it had reduced to 50 per cent. "This sector has been registering a compound growth of 2? per cent in the last three-four years. The sector has stagnated in the last few years but thankfully it is slowly resurrecting, having registered a growth of six per cent last year. Hopefully this growth will continue in the coming years," he said.

According to Balsara, the three reasons why the FMCG sector had stagnated were:

The stagnation had something to do with the corporate ownership structure. Most of them are publicly listed and hence their main focus is on quarterly results. Hence the focus shifted from brand building to sales.

Marketing professionals therefore began to lose confidence in above the line brand building.

This stagnation also came about because management became highly risk averse. They didn't spend money on innovations. Risk averse also meant that no new products were being launched unless they were backed by clinching data from research.

Gupta assured Balsara that the worst was over as far as the FMCG sector was concerned. Citing some consumer trends, he said that today's India was getting younger since 70 per cent of its population was under 35 years of age and the figure will reduce year on year.

"The need for innovations in the FMCG sector will be stronger in the coming years. The challenges that the sector will face will be scarcity of talent in brand management. There will be a surge in demand for brand consultants and strategic account planners. The mantra is to survive is to promise what you will deliver and deliver what you promised," Gupta emphasized.

Ranganathan said that some of the factors that will drive volume growth in the FMCG sector will be innovations, increasing value for money and the increase in the per capita income of Indians. "There is a correlation between penetration levels of various FMCG products and the per capita income of the country. There is a great opportunity for low penetration categories of FMCG products if marketers offer bite size products to the consumers," he said.

"Today the consumer is looking at various ways to look good and feel good. It is a great opportunity to drive per capita consumption in this sector," he concluded.

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