The Indian packaged consumer goods market is attractive for most global firms, especially given the muted growth in developed markets. They are either eyeing an entry, or attempting to expand their operations.
Also See | Expanding Segments (PDF)
The Indian market has risen by about 11% to Rs1.29 trillion in the 12 months ended September, according to researcher Nielsen Co.
Growth has slowed from 14% in the same period of the previous year, mainly because of a drop in the growth of home and personal care products to only 8%.
Price corrections in many large segments such as soaps, detergents and shampoos could be the main reasons for this, as companies are not experiencing any adverse effects of inflation on demand. The market can potentially grow at a higher rate than this.
In a recent study, Nielsen has identified some categories that are growing faster, by about 20% on an average, or nearly twice the market growth. In foods, impulse foods are growing at a much faster rate.
Some of this is attributable to companies expanding distribution to cover a wide number of retail formats. Salted snacks are growing by nearly 20-30% across formats, with the modern trade scoring the highest.
Chocolate sales are growing at 11-49% and biscuit sales at 10-48% across various retail formats. As far as the store format is concerned, general stores are showing the slowest growth, with the highest growth being reported in the modern trade.
The growing number of modern trade outlets, attractive displays and product positioning at the checkouts (preying on the impulsive shopper) could be the main reasons behind faster growth in these outlets.
Products that are positioned as being good for health and wellness are also growing at a fast pace. This includes chewing gums, which double up as a teeth-whitening agent, and anti-ageing creams. Then there are lifestyle home care products, replacing unbranded or traditionally used products.
Liquid soaps is one example. This category grew by 46% and sales in rural markets grew by 88%. Other fast growing products include floor, toilet and glass cleaners and pre-wash and post-wash products.
Convenience foods, such as breakfast cereals and noodles, are another segment seeing a rapid growth. Kellogg Co.expects sales of breakfast cereals in India to triple between now and 2015.
This trend presents a challenge and an opportunity for large consumer firms. The challenge is to move beyond their core categories and enter new ones. It is a riskier approach that will require significant investments and patience as some of these segments may take time to reach a critical mass.
But the alternative is sitting out on these growth opportunities and seeing nimbler companies become the market leaders.
Graphics by Sandeep Bhatnagar/Mint
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