The Hindu Business Line : `FMCG cos must adopt aggressive strategies to realise growth potential'

INDIA'S fast moving consumer goods (FMCG) sector has the potential to reach Rs 1,43,000 crore in 2010 from its current size of Rs 93,000 crore if it grows at a rate of 9 per cent every year, a CII-A T Kearney FMCG Survey 2005 has said.

A key component for realising this potential is that FMCG companies need to develop aggressive strategies for operation efficiency and topline growth, the survey said.

Initiatives at the company, industry and Government would also be required to realise this growth potential, Mr Tejpawan Gandhok, Vice-President, A T Kearney, said.

The industry needs to have a National VAT, Mr Harsh Mariwala, Chairman and Managing Director, Marico Industries, said at the release of the survey report.

Fringe benefit tax in its present form is an irritant to the FMCG sector. There is some degree of discrimination against FMCG compared with the pharma sector. Mr Mariwala said there is hope that some issues will get resolved in the forthcoming budget.

Counterfeiting is another big issue in the sector. Not only does it erode margins and goodwill, it also affects consumers adversely. There has to be some mechanism to reduce duplication levels.

The emergence of organised retailing in India presents both opportunities and challenges for leading FMCG companies, Mr Gandhok said.

The survey urges companies to move beyond its simplistic, conventional three-pronged strategy of power branding marketing innovations aimed at fighting price wars and improving distribution and pricing for the rural market. According to the study, FMCG players should look at five additional strategic growth options — better segmenting rural Indian market, better servicing the affluent urban consumer, collaboration with organised retail, contract manufacturing to boost exports and international expansion.

"Operational efficiency is also an area that has potential for additional improvement. The industry has, on average achieved a 6 per cent reduction in expense-to-sales ratio. The study believes there is scope in India to enable further cost reduction by as much as 9-10 per cent," the report said.

The study also urges FMCG companies to leverage on the country's agriculture potential.

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