05-09-2012, 09:53 AM
The Great Indian Bazaar
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The Indian FMCG sector is the fourth largest sector in the
economy with a total market size in excess of $13.1 billion.
It has a strong MNC presence and is characterised
by a well established distribution network, intense competition
between the organised and unorganised segments and low
operational cost. Availability of key raw materials, cheaper labour
costs and presence across the entire value chain gives India a competitive
advantage. The FMCG market is set to treble from $11.6
billion in 2003 to $33.4 billion in 2015. Penetration level as well
as per capita consumption in most product categories like jams,
toothpaste, skin care, hair wash etc in India is low indicating the
untapped market potential. 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. With 200 million people
expected to shift to processed and packaged food by 2010, India
needs around $28 billion of investment in the food-processing
industry.
POLICY
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. Cent per cent export
oriented units can be set up by government approval and use of
foreign brand names is now freely permitted.
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 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 Himachal Pradesh, Uttaranchal
and Jammu & Kashmir have encouraged companies to set up manufacturing
facilities in their regions through a package of fiscal
incentives. Jammu and Kashmir offers incentives such as allotment
of land at concessional rates, 100 per cent subsidy on project
reports and 30 per cent capital investment subsidy on fixed
capital investment upto $63,000. The Himachal Pradesh government
offers sales tax and power concessions, capital subsidies and
other incentives for setting up a plant in its tax free zones
FOOD AND BEVERAGES
The size of the Indian food processing industry is around
$ 65.6 billion, including $20.6 billion of value added products. Of
this, the health beverage industry is valued at $230 million; bread
and biscuits at $1.7 billion; chocolates at $73 million and ice
creams at $188 million.
The size of the semi-processed/ready-to-eat food segment is
over $1.1 billion. Large biscuits & confectionery units, soya processing
units and starch/glucose/sorbitol producing units have also
come up, catering to domestic and international markets.
The three largest consumed categories of packaged foods are
packed tea, biscuits and soft drinks.
The Indian beverage industry faces over supply in segments like
coffee and tea. However, more than half of this is available in
unpacked or loose form. Indian hot beverage market is a tea dominant
market. Consumers in different parts of the country have heterogeneous
tastes. Dust tea is popular in southern India, while
loose tea in preferred in western India. The urban-rural split of the
tea market was 51:49 in 2000. Coffee is consumed largely in the
southern states. The size of the total packaged coffee market is
19,600 tonnes or $87 million. The total soft drink (carbonated
beverages and juices) market is estimated at 284 million crates a
year or $1 billion. The market is highly seasonal in nature with consumption
varying from 25 million crates per month during peak
season to 15 million during offseason. The market is predominantly
urban with 25 per cent contribution from rural areas. Coca cola
and Pepsi dominate the Indian soft drinks market.