Monday, November 29, 2010

The future of FMCG

Fast moving consumer goods will become a Rs 400,000-crore industry by 2020. A Booz & Company study finds out the trends that will shape its future. Read the full report here. Following was one of the key take outs from the report and worth quoting here as under;

Accelerating ‘premiumisation’
The rising income of Indian consumers has accelerated the trend towards ‘premiumisation’ or up-trading. The trend can be observed prominently in the top two income groups — the rich with annual income exceeding Rs 10 lakh, and the upper middle class with annual income ranging between Rs 5 lakh and Rs 10 lakh. The reports says, the rich are willing to spend on premium products for their ‘emotional value’ and ‘exclusive feel’, and their behaviour is close to consumers in developed economies. They are well-informed about various product options, and want to buy products which suit their style. The upper middle class wants to emulate the rich and up-trade towards higher-priced products which offer greater functional benefits and experience compared to products for mass consumption.

While these two income groups account for only 3 per cent of the population, the report estimates that by 2020 their numbers will double to 7 per cent of the total population. The rich will grow to approximately 30 million in 2020, which is more than the total population of Sweden, Norway and Finland put together. Similarly, the upper middle segment will be a population of about 70 million in 2020, which is more than the population of the UK.
Over the next ten years, these groups will constitute large enough numbers to merit a dedicated strategy by FMCG companies. “We have seen companies focused on selling primarily to the mid segments. Often, there is no clear segmentation being offered. Players will do well to clearly separate their offerings for the upper and mid segments,” says Malhotra and adds that the two should be treated as separate businesses with a dedicated team and strategy for each.

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