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Indian consumer goods sector could grow 9-17% over 3 years: study

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09 March 2017

India is at the cusp of the FMCG 'S-curve', with significant room to grow over the next 5 to 10 years but the winning brands will be those that achieve greater household penetration, a CII-Bain & Co report says

Consumer goods brands in India will not be able to win consumers and raise market share unless they have greater household penetration, an industry report said.

The consumer goods sector could grow 9-17 per cent in the next three years, depending on the business decisions made, the report, 'Winning with the Indian Consumer' by the Confederation of Indian Industry and Bain & Co, said.

''India is at the cusp of the FMCG S-curve, and there is significant room to grow over the next 5 to 10 years'', the report said. ''As brands strive to outperform competition, it will be imperative to have a well-thought-out plan that captures consistently improving brand penetration.''

Bain said that one out of seven brands in India performs well to ''win'' a category. According to Nikhil Prasad Ojha, partner at Bain & Co, a winning brand is one which is able to capture a 0.2 relative market share, meaning 2 per cent of the category leader's market share.

''Brand winners are differentiated from non-winners by those who grow household penetration,'' Ojha said. ''This finding is consistent across China, Indonesia, and developed markets like the US also. Penetration refers to the percentage of a product's total market that it is present in.''

The report, released at the CII National FMCG Summit in Mumbai, also identified brand memorability and a ''productive'' range of brands as important factors to identify growth.

Bain found that 50 per cent of brands in the 22 categories it surveyed lost market share in the two-year period of the study, owing to increasing competition in each category over time.

However, Ojha said how long a brand has been in a market did not significantly determine how likely it was to ''win'' a category. ''We are seeing that both old and new brands, brands which are in fragmented or consolidated categories, those that are multinational or Indian dominated, all of these have roughly the same percentage of brand winners,'' he said.

''So your pedigree does not matter, what you do or don't over the course of a year is what matters. In our list of winners, there are brands which have been around for no more than 3 to 4 years and then those that have been around for 30-40 years.''

However, he added that a successful brand would have to have a certain size.

The report also found that winning brands were those that launched fewer products and worked on making each one successful.

''Brands spend too much money on non-working advertising, where you are not reaching and repeating the message at scale,'' Ojha said. ''We see a lot of talk about new products but not enough news around existing products. A foray into new products or ventures should only be if it is getting you incremental household penetration. Don't just do new things for the sake of doing new things.''

The report's conclusions are based on a survey conducted among 81,000 Indian households in 22 consumer goods categories and 220 brands in food, beverage, and personal and home care businesses.





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