82 DALAL STREET INVESTMENT JOURNAL I JULY 22 - AUG 4, 2019 DSIJ. in^
Financial Review For FY19
FMCG
I
ndia being the one of the fastest growing economy in the
world has aided high growth of consumption and this in
turn is driving the growth of FMCG sector. The FMCG
market has grown from USD 31.6 billion in 2011 to USD
52.75 billion in 2017-18 and is fourth largest sector in the
Indian economy.FMCG companies operate through two primary sales channels,
viz; general trade and modern trade. General trade consists of
kirana stores which generate largest sales channel for overall
FMCG retail sales. Modern trade includes supermarket,
hypermarkets etc. and within modern trade, e-commerce has
been gaining traction in recent times. The growth in sales
through modern trade, especially e-commerce, is gaining
momentum and is likely to contribute to the growth of FMCG
s ec tor.In the last couple of years, the FMCG sector is facing subdued
demand, but the sector is expected to witness revival. Though
the sector performed well in the first half, the growth in the
second half of the year, especially in the last quarter. was muted
owing to reasons such as tight liquidity conditions and sluggish
rural demand.The per capita consumption in countries like Indonesia and
China is 2x and 4x that of India, which provides strong
headroom for India's consumption story in the long run.The FMCG market has grown from USD 31.6 billion in 2011
to USD 52.75 billion in 2017-18 and is fourth largest sector
in the Indian economy.The lacklustre growth in the industry has led to lower
inventory turnovers, which resulted in pile up of
inventories, thereby stretching working capital and higher
debtor/creditor days.The rural segment is a major revenue contributor to the
FMCG sector (45 per cent of revenue). In the past, the rural
consumption has grown faster than the urban. Thus, the
slowdown in demand from the rural segment has
dampened the growth of overall FMCG sector.Sector Sponsor