Majority FMCG demand to be driven by rural, semi-urban segments

New Delhi, Dec 24 (UNI) Increasing demand for Fast Moving Consumer Goods (FMCG) in rural and semi-urban segments at a growth rate of 60 per cent is likely to carry forward its total market size to around Rs 1,23,363 crore from the present level of Rs 70,000 crore by 2012.

The urban pockets which currently are the biggest market size for all FMCG products, in the next 4-5 years will switch over their consumption patterns for organic products to keep their health better, thus making an erosion in their present consumption patterns for FMCG products, according to industry chamber Assocham.

As per its assessment, in urban pockets, the current demand for FMCG products may stagnate by 2012 and force the FMCG manufacturers to shift their supplies with assured qualities towards rural and semi-urban folks.

By 2010, while the total market size of FMCG products will rise to over Rs 98,344.96 crore and touch a level of Rs 1,23,363.91 crore with a CAGR of 12 per cent by 2012, about 60 per cent of it will be consumed by folks living in rural and semi-urban areas of the country which works out to be Rs 74,018.35 crore by 2012 against the projected figure of Rs 59,006.97 crore in 2010, in view of the chamber.

The FMCG products like toothpaste, skin and hair wash, talcum, powder, branded Atta, dish wash, instant coffee, R&G coffee, ketchups, deodorants, jams, etc which currently have less than 30 per cent penetration out of 100 people in rural and semi-urban areas will grow at least by 50 per cent in the next 5-7 years on account of rising per capita income of rural and semi-urban folks.

As per current estimates, while the per capita income of semi-urban folk is around Rs 14-15,000 per annum, the per capita income of rural folk is measured at less than Rs 7,000 per annum.

The industry body in a paper on 'Future of FMCG Products in India' said by 2012 while the per capita income of rural folk will double, the per capita income of semi-urban people will more than double and the reflections of rising per capita income will also lead to hike in their consumption patterns for FMCG products.

Around 70 per cent of the total households in India reside in the rural areas. The total number of rural households are expected to rise from 135 million in 2001-02 to 153 million in 2009-10. This presence is the largest potential market in the world, said the findings of the paper.

In the rural and semi-urban areas, FMCG market penetration is currently about 2 per cent in general as against its total growth rate of about 8 per cent, said Assocham President Anil K Agarwal.

Though the rural and semi-urban demand of FMCG products will grow larger and higher, it will put a severe pressure on the margins of manufacturers of FMCG products because of cut-throat competition, says the analysis.

The branded companies in the FMCG sector that will make killings will include a known number like Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola, Pepsi, etc.

The rising rural and semi-urban income levels coupled with massive advertisement of FMCG products in the electronic media will spread so much of awakening in the rural and semi-urban folks towards the sector so much that these will enlarge their affordability for them.

UNI PV DKS HT1340