Semi-urban areas crucial to FMCG growth: Assocham

Urban size of FMCG products will see growth of more than 100% by 2010.

Fast Moving Consumer Goods (FMCG) will witness over 40 per cent growth in the semi-urban and urban areas, the size of which will go up from Rs 38,500 crore to Rs 50,000 crore by 2010, according to an analysis by the Associated Chambers of Commerce and Industry of India (Assocham) on Future Prospects of FMCG products.

As against this, the assessment suggested that the urban size of FMCG products will register growth of more than 100 per cent from the current Rs 16,500 crore to Rs 35,000 crore by 2010, adding that the overall size of the sector will grow to Rs 85,000 crore.

In 2003-04, the total FMCG size stood at Rs 47,500 crore which increased to Rs 55,000 crore by December 15, 2005, registering an increase of 16 per cent.

The study pointed that the semi-urban area will be the epicentre of huge demand of FMCG products which will cater to the FMCG requirements of the rural folk because of growing penchant and insatiable appetite of semi-urban folks for consumer products.

Assocham President Anil K Aggarwal said the Indian semi-urban and urban market with its vast size and demand base offered a huge opportunity that the FMCG companies could not afford to ignore. "With 128 million households, the rural population is nearly three times the urban populace," he pointed out.

Aggarwal predicted cut-throat non-price competition among the leading monopolistic FMCG companies to enhance their market size in the semi-urban areas, which would witness a massive concentration of these products because of the higher demand factor. The semi-urban areas would be the major source for further supplies of FMCG products to rural areas and beyond them, said the Assocham analysis.

Aggarwal said that the FMCG products, which would attract the rural and semi-urban folks would include soaps, detergents, cold drinks, consumer durables, toothpaste, batteries, biscuits, namkeens, mosquito repellents, refined oil and hair oil.

The chamber however added that though the semi-urban and urban demand of FMCG products would grow bigger, it would put severe pressure on the margins of FMCG manufacturers because of competition.

Assocham was also of the view that low per capita disposable incomes, large number of daily wage earners, acute dependence on the vagaries of the monsoon, seasonal consumption linked to harvests and festivals and special occasions, poor roads, power problems, and inaccessibility to conventional advertising media threaten the progress of consumer goods in the rural market.

The other difficulties which the FMCG companies are likely to face include availability of the product or services as delivering products to 750 million Indians living in rural areas will be a tough task.