Indiantelevision.com Team

(25 January 2008 5:00 pm)

NEW DELHI: Heavy doses of advertisements pouring into regional and national media is likely to push the Fast Moving Consumer Goods (FMCG) industry to a hike of ten in rural areas and six per cent in semi-urban markets in Fiscal 2007-08, according to the latest estimates of the Associated Chambers of Commerce (Assocham).

The study says these advertisements tremendously helped FMCG products penetrate successfully in this segment and have already attracted about 180 million rural and semi-urban population attention towards FMCG products. In the first nine months of the current fiscal, FMCG's ads budgets witnessed an increase of nearly 20 per cent to promote FMCG products, massively influencing and motivating the rural youth to consume higher volumes of such products.

The Chamber estimates reveal that FMCG products rural market size is estimated at 52 per cent, which is projected to reach at 57 per cent by the end of March 2008. The increase in the growth pattern works out to be by nearly 10 per cent. Likewise, in the semi-urban segment, the present FMCG market size is around 19 per cent and as per the Assocham estimates, it would scale up by 6 per cent to touch 21 per cent by the end of current fiscal, says Assocham president Venugopal N Dhoot.

Releasing the findings, Mr. Dhoot added that in Urban India in which the FMCG market size is currently estimated at 29 per cent level is likely to come down to 22 per cent and register a fall of 25 per cent as its consumer numbering about 120 million are gradually renouncing their ageold habits for excessive FMCG products and are now more opting to use organic products. The major reason for this consumption shift is basically on health grounds though the differential in the prices for organic and inorganic FMCG products is quite substantial, he pointed out.

The Chamber estimates that the reason for the growth in rural and semi-urban market size for FMCG products will be the rising population of youngsters in this segment which has already touched 180 million and has special attraction for FMCG products. Their temptation to use such products in volumes will grow manifold and fuel FMCG demands in this segment, Mr Dhoot added.

Secondly, the rising sales in the FMCG companies in semi-urban and rural segment as against the urban market acceptability is gradually weaning away as consumers in this segment are becoming more health conscious to keep them mentally fit to take on the onslaught of competition and shifting their consumption patterns more towards organic products rather than sticking on to packaged food.

The current FMCG urban market size is estimated at 29 per cent which used to be more than 50 per cent five years ago, shows the fastness and accelerated pace at which the FMCG size in urban India is falling.

Assocham analysis says the domestic FMCG total size in terms of volume is currently US$ 15 billion, of which US$ 7.9 billion is rural contribution as against US$ 4.2 billion of urban and metros. US$ 2.85 billion is the semi-urban FMCG market.

The Assocham Chief who is also the leader in consumer durables, admitted that in 2006-07, the profitability of FMCG companies which on an average rose by 20 per cent was more influenced by FMCG product sale in rural and semi-urban segment. This is indicative of the fact that the FMCG urban base has been facing a serious challenge and that is why these are busy devising new ways and strategies to enlarge their rural and semi-urban sale to cater to rising demand.

He also pointed out that since 100 per cent FDI's and foreign equity are allowed as also 100 per cent NRI's and overseas corporate bodies investments is allowed in FMCG, these would be channelised to fuel rural and semi-urban demand as their larger chunk will find a space in India in its cities and sub-urbans located beyond metros.

Quantitative restrictions on FMCG have also been lifted in 2004 which will spur up foreign investments. Currently, 40 per cent of total FMCG consumers spend their total income on grocery and 8 per cent on personal care products. This is going to witness a rise in future and particularly rural folk.

The total consumer expenditure on food is around $ 125 billion as against $ 160 in China. Around 45 per cent of people in India are up to 20 years of age which will drive and fuel the demand for FMCG products particularly in rural and semi-urban segments.

The survey says over 70 per cent of sale of FMCG products is made to middle-class households and over 50 per cent of middle class is in rural India. The sector is excited about burgeoning rural population whose incomes are rising and which is willing to spend on goods designed to improve life style. With near saturation and cut throat competition in urban India, many producers of FMCG are driven to chalk out bold new strategies for targeting the rural consumers in a big way.