For FMCG sector, which is the fourth largest in economy with market size of US$13.1 billion year 2015 has been a mixed bag. It was a roller coaster ride right from Union Budget to impending implementation of GST Bill for consumer goods sector.
Summit Chairman and CEO, PepsiCo India of “Re-Imagining FMCG in India” ,D Shivakumar aptly summarised the present scenario of FMCG sector in India saying,“The FMCG industry has always been bedrock of talent to all other industries. It is one of the largest sectors in India and is a largely a Make-in-India industry. FMCG has to be re-imagined for a future world, owing to the varied changes and opportunities seen in this sector. "
For FMCG sector, which is the fourth largest in economy with market size of US$13.1 billion year 2015 has been a mixed bag. It was a roller coaster ride right from Union Budget to impending implementation of GST Bill for consumer goods sector. There were cloudy days involving the Maggi ban, increase on tax of tobacco and heavy rains affecting rural market. However, the sector is estimated to be among the key factors in reviving India. Despite of lackadaisical economic growth and weak performance in the past two years, outlook remains positive for India’s consumer goods industry in the new year.
Nielsen, a leading global information and measurement company, predicts India’s FMCG industry to grow from $37 billion in 2013 to $49 billion in 2016. Digital communication, e-commerce and premium products are foreseen as key drivers for growth. Its future depends on how they evolve around this sections. By 2020, around 150 million consumers are expected to be digitally influenced in FMCG and these digital consumers alone would spend ~ 40 USD Bn on FMCG categories, elucidated a report by Boston Consulting Group.
Right from the time the Union Budget 2015 was presented in the Parliament, FMCG sector had a fair share of its peak and crests. .25% hike on excise duty of cigarettes for length not exceeding 65mm and by 15% for cigarettes of other lengths was announced. Similar increases were proposed on cigars, cheroots and cigarillos. Also, changes were made in the compounded levy scheme applicable to pan masala, gutkha and certain other tobacco products. This did not augur well for major tobacco producers like VST Industries, Godfrey Phillips, and ITC. In a glimmer of hope however, FM Arun Jaitley, vowed to implement Goods and Service Tax bill (GST bill) by April 2016, which would provide a respite to the industry plaguing from several taxation structures.
Perhaps the biggest controversy for the year came from major food maker Nestle, which reported its first quaterly losses in India due to Maggi ban. India is among the largest consumer of Maggi noodles across all Nestle operations in the world, with a topline at 8-9%. The ban was enforced on the accusation that Maggi contained excess levels of lead and mono-sodium glutamate (MSG). After much hue and cry and dozens of law cases the company had to eventually withdraw Maggi noodles of worth Rs. 210 crore from the market.
Distress compounded for Nestle, as during April-June quarter, the company reported loss of Rs 64.4 crore, while recalling Maggi worth Rs. 320 crore. Later, apex court of consumer issued a notice to Nestle to cough up Rs. 640 crore, for unfair trade practices, false labeling and misleading advertisements of Maggi noodles.
Though the Swiss-based food manufacturer remain convinced on Maggi being safe, authorities in India sent samples of it to several food test labs. After facing tough objections from Food Safety and Standards Authority of India (FSSAI), apex court has finally allowed it to be brought back on shelves. Now that everyone’s favourite snack is back, Nestle seeks double digit growth for their brand by increasing its consumption capacity, and new marketing stragies like partnership with Snapdeal
GST merriment or dismay!
India Inc is waiting with bated breath for GST to be implemented. However, things might not turn out to be As per a Religare Capital Market report, at a GST rate of 18% on food items, edible oils, biscuits, chocolate, cocoa and baked items, FMCG companies will take a hit as indirect tax incidence will go up. Carbonated drinks may take a larger hit at 40% proposed GST.
However, clarity on GST bill is yet unclear. The panel is suggesting taxation in three categories where some essential goods will be taxed at a lower rate of 12%, demerit goods such as luxury cars, aerated beverages, pan masala and tobacco products at a higher rate of 40%; and all remaining goods at a standard rate of 17-18%. If these changes are brought into practice, it could be downside for tobacco players in India, as cigarettes sales account for 17% of the top 100 FMCG sales, and just below the personal care category. ITC alone holds 60% volume market share and 70% by value of all filter cigarettes in India. So, unlike other sector, GST is not playing Santa to the FMCG.
Weak Monsoon, Low rural consumption:
Major FMCG players are stressed on rural consumption for the next two-three quarters. For the two successive year, there has been shortfall in rains which has impacted incomes and adversely affecting sales across product categories. In the past four quarters, rural growth of household items right from toothpastes to detergent and biscuits to beverages has been contracting to single digit growth of 5-6% compared to 11-12% of last year.
Dabur, the world’s largest Ayurvedic medicine & related products manufacturer in a report stated, there has been a decline in net disposable income of rural households specially in drought-affected areas. The fall is led by poor monsoons, unchanged NREGA scheme and low lower-than-normal increase in minimum support price. For the September 2015 quarter, Coca-Cola reported 4% growth in its volume, which the beverage maker attributed to lower farm income.
All the sun shines here!
Year 2015, belonged to debt free companies in FMCG market.
HUL has stunned the market with its volume growth, with its soap segment among the top 10 list. Despite of new entries of various products, the company maintained to dominate competitors with its four brands Lifeboy, LUX, Dove and Pears in the personal care category. The domestic major also acquired Indulekha and Vayodha from Mosons Group for Rs 330 crore so as to strengthen its ayurvedic section and also tapping its personal care segments.
Companies like Dabur, HUL, Marico and Britannia has started targeting weaker states to strengthen their market value. In a year, Dabur Red, the ayurvedic toothpaste brand of Dabur has overtaken Colgate-Dental cream in states like Odisha and Bihar, doubling its shares. In September ended quarter 2015, Dabur witnessed 8% yoy increase in its revenue, led by its consumer care business which was up by 10% yoy.
Britannia Industries consolidated profit from operations witnessed 56% increase in Q2 and 70% rise for the six months at Rs. 298 crores & Rs. 559 crores respectively. The industry has lined up capex of around Rs. 500 crore and plans significant investment for the next two-three years.
Marico’s key products Coconut Parachute have continued to perform, with growth of 10% maintaining its fundamentals strong. During September ended quarter, the company witnessed consolidated net profit of Rs. 150.72 crore, up by 27% against Rs. 118.26 crore for the same period in the previous year.
To pacify the consumer sentiment, Government has allowed 100 percent Foreign Direct Investment (FDI) in the electronics hardware-manufacturing sector through the automatic route. It has also permitted 51% FDI in multi-brand retail and 100 per cent in single-brand retail in order to attract foreign investment for the sector. Policies such as National Electronics Mission and digitisation of television and setting up of Electronic Hardware Technology Parks (EHTPs) is expected to boost the growth of this sector.
What Future Holds?
The consumer electronic segment is forecast to rise to US$ 400 billion by 2020. By 2016, the production is expected to reach around US$ 104 billion. In India, urban market consists of 65 percent share of total revenues in the sector. Demand for non-essential products such as LED TVs, laptops, split ACs and, beauty and wellness products are expected to be driven in urban markets. In the coming years, rural market will see increase in demand of durables like refrigerators as well as consumer electronic goods as the government plans to invest significantly in rural electrification. By 2025, India is expected to become fifth largest consumer durables market in the world. It remains to be seen how India will cope to that challenge, starting 2016.
Foreign portfolio investors (FPIs) lapped up a fresh supply of Indian government debt which came up for bidding on Monday—a testament to the attractiveness of these bonds which offer the best returns among emerging-market economies.
Bids worth double the amount on offer were put in by FPIs, who were willing to pay a premium as high as 82 basis points (bps) to get access to the increased limits. One bps is one-hundredth of a percentage point.
FPIs were allowed to buy an additional Rs.5,500 crore in government bonds from 1 January as part of the Reserve Bank of India’s (RBI) plan to throw open up to 5% of the outstanding stock of government bonds to global investors in tranches by March 2018. At present, FPIs can hold an aggregate ofRs.1.35 trillion of government paper.
A total of Rs.7,396 crore worth of unused investment limits, including the new limit and previously unused amounts, were up for grabs on Monday, for which 60 investors bid. The highest bidder offered to pay a premium of 82 bps, according to an auction summary released by BSE Ltd. The cut-off premium was 44.05 bps.
“At a time when 70% of sovereign bonds across the globe yield only 2%, Indian bonds give a good return. India looks good on fundamentals as well,” said Ananth Narayan G., regional head for global markets (South Asia and ASEAN) at Standard Chartered Bank.
Almost every auction of the investment limits in government bonds since June 2014, when over 90% of it got used up, has seen strong demand and aggressive bidding by FPIs. The last auction of limits worth Rs.497 crore on 14 December received bids worth Rs.902 crore from FPIs.
The Securities and Exchange Board of India (Sebi) requires stock exchanges to offer unused investment limits to the FPIs through an auction process, once the threshold of their holdings reaches 90% of the permitted amount.
“This response at the auction is in keeping with the trend of strong demand for Indian paper from foreign investors,” said Ajay Manglunia, executive vice-president and head of fixed income at Edelweiss Financial Services.
Global funds, such as Pimco, Aberdeen and Pinebridge, are favouring rupee sovereign bonds to other emerging-market debt because of the high returns for two straight years now, according to a Bloomberg report Monday. Indian bonds gave a return of 8.1% in 2015 and 16.5% in 2014, the report said.
The yield on the benchmark 10-year bond, currently at 7.72%, is the second-highest in Asia— after Indonesia. Yields dropped by 30bps between January and October after RBI signalled an accommodative policy stance and slashed policy rates by a cumulative 125bps. However, yields have rebounded 15bps since then in response to concerns over the government’s fiscal deficit and a rise in global bond yields due to the US Federal Reserve’s 25bps rate hike announced on 16 December.
Apart from relatively high yield offered by Indian government bonds, a steady currency too has attracted foreign investors. In 2015, when most emerging market currencies lost value in double digits, the rupee was among the best performers and depreciated by a relatively lesser 5%. FPIs increased their Indian bond holdings, including government and corporate debt, by Rs.46,555 crore in 2015 over and above their net purchases of a massive Rs.1.59 trillion in 2014.
In addition to central government debt, FPIs gained access to an additional Rs.3,500 crore worth of state bonds as well from 1 January. FPIs can now hold Rs.7,000 crore of state development loans (SDLs) after RBI allowed foreign investment in state bonds for the first time in October.
SDLs offer a higher yield compared with central government bonds but also carry higher risk.
In October, when investment limits in the SDLs were thrown open, FPIs grabbed the entire quota within three trading days.
Supply of SDLs has increased by 26% to an aggregate Rs.3 trillion for fiscal 2016, pushing up yields on these bonds.
In the January-March quarter, states will borrow an aggregate Rs.1.05 trillion—a rise of 35% from a year ago and highest in at least five years, according to RBI data.
“SDLs are viewed differently from government bonds because they are issued by the state. So while investing in these, finances of the specific state will have to be looked at,” said Narayan. In all, FPIs can hold Rs.4.3 trillion worth of Indian debt including sovereign and corporate debt.
The e-commerce industry in the country is likely to be worth $38 billion (roughly Rs. 2,51,720 crores) by 2016, a 67 percent jump over the $23 billion (roughly Rs. 1,52,357 crores) revenues for 2015, as per industry body Assocham.
"India's e-commerce market was worth about $3.8 billion (roughly Rs. 25,172 crores) in 2009, it went up to $17 billion (roughly Rs. 1,126,11 crores) in 2014 and to $23 billion (roughly Rs. 1,52,357 crores) in 2015 and is expected to touch whopping $38 billion mark by 2016," Assocham said in a statement.
Increasing internet and mobile penetration, growing acceptability of online payments and favourable demographics has provided the e-commerce sector in India the unique opportunity to companies connect with their customers, it said.
There would be over a five to seven fold increase in revenue generated through e-commerce as compared to last year with all branded apparel, accessories, jewellery, gifts, footwear are available at a cheaper rates and delivered at the doorstep, it added.
It noted that the the buying trends during 2016 will witness a significant upward movement due to aggressive online discounts, rising fuel price and wider and abundant choice will hit the e-commerce industry in 2016.
It observed mobile commerce (m-commerce) is growing rapidly as a stable and secure supplement to the e-commerce industry.
"Shopping online through smart phones is proving to be a game changer, and industry leaders believe that m-commerce could contribute up to 70 percent of their total revenues," the statement added.
In India roughly 60-65 percent of the total e-commerce sales are being generated by mobile devices and tablets, increased by 50 percent than the last year and also likely to continue upwards, it added.
It noted that the browsing trends, which have broadly shifted from the desktop to mobile devices in India, online shopping is also expected to follow suit, as one out of three customers currently makes transactions through mobiles in tier-1 and tier-2 cities.
In 2015, 78 percent of shopping queries were made through mobile devices, compared to 46 percent in 2013.
In 2015, the highest growth rate was seen in the apparel segment almost 69.5 percent over last year, followed by electronic items by 62 percent, baby care products at 53 percent, beauty and personal care products at 52 percent and home furnishings at 49 percent.
It revealed that Mumbai ranks first in online shopping followed by Delhi, Ahmedabad, Bangalore and Kolkata.
On the mode of payment, almost 45 percent of online shoppers reportedly preferred cash on delivery mode of payment over credit cards (16 percent) and debit cards (21 percent).
Only 10 percent opted for Internet banking and a scanty 7 percent preferred cash cards, mobile wallets, and other such modes of payment, it said.
Among the above age segments, 18-25 years of age group has been the fastest growing age segment online with user growth being contributed by both male and female segments.
The survey revealed that 38 percent of regular shoppers are in 18-25 age group, 52 percent in 26-35, 8 percent in 36-45 and 2 percent in the age group of 45-60.
Almost 65 percent of online shoppers are male as against 35 percent female.
Source: NDTV Gadgets
The handicrafts sector has an important role to make the Indian Government's 'Skill India' mission a success. The Indian handicraft industry contributes in a major way in uplifting the social and economic lives of the artisans.
With more than seven million artisans and nearly 67,000 export houses, the Indian handicrafts industry is one of the largest employment sectors of the country.
Skills and knowledge are the driving forces of economic growth and social development for any country.
The Government of India launched a massive 'Skill India' campaign to tap the huge potential of artisans from the nook and corner of the country under its National Skill Development Mission.
The Indian handicrafts industry is highly labour intensive. Most artisans operate in unorganised sector.
"The handicraft has a very large spread over. The handicraft items are produced by the craft persons who are located in small villages and they are from the small and weaker sections of the society. We have about seven million craft persons working in the remote areas of the country," said Rakesh Kumar, Executive Director of Export Promotion Council for Handicrafts.
The Indian handcrafted items are much sought after both in the local and international markets.
Cottage Emporium in the national capital attracts a huge crowd. Customers from different countries visit the emporium and purchase handcrafted materials.
An NRI couple from the United Kingdom said they visit the emporium every time they visit India.
"We bought a few items. We bought Buddha and a few items for people back at UK. We buy quite a few things every time we come here. It's a fantastic place authentic item from authentic artisans and you know exactly what you are buying," the visitor said.
Another foreign customer said, "This is my fifth or sixth visit to this particular shop and I have good Indian friend here. We always come to this place because I like the handicrafts and buy presents to take home with me."
Indian artisans and their handcrafted products have huge demand in the world. India's total handicrafts exports stood at 4.5 billion USD in 2014-15.
The US alone accounted for approximately 26.1 percent of India's total handicraft exports in 2014-15. It was followed by the European Union.
Kumar said, "If we see export basket, out of total export of handicrafts 66 percent of our handicrafts are transported to US, Canada and European Union as well as Japan, Australia and New Zealand. We can say traditionally all these affluent markets say about 40 markets were importing 70 percent of the handicraft items."
Low capital investments, high labour pool coupled with traditional skills are some of the major factors for the success of Indian handicrafts industry.
Source: ANI News
India will sign an MoU with Norway for training of human resource to handle construction and demolition waste, in tune with the Clean India Campaign launched by Prime Minister Narendra Modi.
A Memorandum of Understanding (MoU) will be signed between SINTEF, Norway and Central Public Works Department (CPWD) for cooperation in the development of human resource capacity-building and scientific research in the field of Recycling of Construction and Demolition (C&D) Waste in India.
The proposal in this regard was cleared by the union cabinet on Wednesday.
India's construction industry generates about 10-12 million tonnes of waste annually.
There is a huge demand of aggregates in the housing and road sectors but there is a significant gap in demand and supply, which can be reduced to a certain extent by recycling construction and demolition waste.
While some of the items like bricks, tiles wood, metal are re-used and recycled, concrete and masonry, constituting about 50 percent of the construction and demolition waste, is not currently recycled in the country.
Source: Business Standard