Hindustan Unilever Limited (HUL) belongs to the industry popularly known as the FMCG (Fast Moving Consumer Goods) industry. This chapter gives a brief overview of an industry profile of FMCG industry of the country. The next chapter is focused towards HUL in particular and provides a brief overview of a company profile of HUL.
Goods in the FMCG (Fast Moving Consumer Goods) category are popularly known as consumer packaged goods. The FMCG goods include all consumables (except groceries and pulses) bought by people frequently. Some examples of the FMCG goods include toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged food, household accessories, and certain low frill electronic items. India is one of the largest economies in the world with respect to purchasing power, increasing consumer spending, and a population of over a billion, only next to China. The Indian FMCG Industry is the fourth largest industry of the country, which has an expected market size of approximately INR Two Trillion. Further, the FMCG industry of the country contributes to approximately 2.4% of the GDP. Over the last five years, the FMCG industry of the country has grown at a CAGR of approximately 17.3%. Factors contributing to the healthy growth rate of the FMCG industry include a presence of a large number of established global business houses, fierce competition existing players of organized and unorganized FMCG sector, well setup distribution network, and low operation costs. Further, the Indian FMCG industry enjoys cost advantage due to cheap raw materials, low labor costs, and low transaction costs across the entire value chain.
The Indian FMCG industry is highly fragmented, driven by volumes, and characterized by low margins. Further, the FMCG industry of the country enjoys a strong MNC presence and high competition between organized and unorganized players. The FMCG industry enjoys a well established distribution network that is spread across six million retail outlets including two million outlets in 5160 towns and four million outlets in 627,000 villages of the country. FMCG industry players, selling branded products in the country, have to incur heavy advertising, marketing, packaging, and distributing expenses. This reduces their operating margins. Thus, cost of raw materials used in the products may influence the pricing of the final product to a great extent. The growth of the FMCG sector in the country is driven by both the urban and the rural markets. In fact, rural India contributes to over a third of the Indian FMCG industry’s revenue. Further, with the relaxing of FDI norms in the country, India has become an attractive investment destination for foreign FMCG companies due to easy availability of raw materials and cheap labor. Some of the key drivers of the FMCG industry in India include, but are not limited to, stable and growing economy, large market size, growing urban middle class, rising rural consumption, rising population and spending, changing lifestyles, increasing per capita income, and FDI support.
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