Mumbai, June 12: Despite rising short-term economic uncertainty and GDP projections cut to 5-6 per cent, the consumption in India is expected to touch USD 3,600 billion in 2020 from USD 900 billion in 2010, says the CII and Boston Consulting Group (BCG) report on Retail and FMCG.
"Organised retail in India is at an inflation point. There is healthy revenue growth of 25 per cent CAGR over the last 5 years, however, organised retail contributes to less than 10 per cent of overall sales across multiple categories". "This gap in sales forms the biggest growth opportunity for organised retail, especially with consumption expected to touch USD 3.6 trillion by 2020 from the 2010 figure of USD 900 billion," the report titled 'Winning with Uncertainty' by CII and BCG said.
Hence, it is imperative that FMCG and retail organisations balance caution due to short-term uncertainty with investment required to drive long-term growth, it said.
"Businesses are capital constrained (due to a global slowdown), facing volatile commodity prices and seeing a cautious consumer sentiment". "The Indian consumer however, is still willing to spend and trade up for the right value proposition, differentiation and innovation. Hence consumer businesses in India, need to constantly walk the tight rope balancing growth and efficiency," Titan Industries Managing Director Bhaskar Bhat said.
The report highlights the need for FMCG and retail companies in India to prepare for an increasingly uncertain future and proactively take measures to leverage market volatility to create competitive advantage.
The report said that uncertainty in business environment in India was primarily being driven by six structural factors, namely, changing macroeconomic scenarios in the country; heightened volatility in commodity prices; uncertainty in policy making; rapidly evolving consumer base and behaviour; emergence of new breeds of competitors within industries and development of game-changing technology.
FMCG and retail sectors have shown strong resilience in the face of this uncertainty, a trait that has been rewarded by investors, the report said. The BSE FMCG Index gained approximately 150 per cent in the last five years, almost 15 times the growth achieved by the bellwether Sensex.
Organised retail has also been growing at a CAGR of approximately 14-15 per cent over the last 5 years, the document said.
According to a survey of senior management of leading FMCG and retail companies in India conducted by The Boston Consulting Group and CII, 54 per cent of the respondents believe the composition of the top three players in their industry will change over the next five years.
FMCG has been one of the more resilient sectors in Indian industry.
FMCG sector has grown at a remarkable 15-20 per cent CAGR over the last 5 years with both sales growth and margin growth steadier than other industries. However, FMCG sector also faces persistent uncertainty, it said.