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    JANUARY 2023

    Greetings from Capital Sprout !


    It gives me pleasure to share with you January-2023 issue of
    Capital Sprout’s Wealth Bulletin. Where this month’s bulleting is
    about Fast-Moving Consumer Goods (FMCG) & importance of this
    sector in financial market & overall economy of the country.

    We have been witnessing many global unprecedented events since 2020 viz. Corona
    virus, Global recession, Russia-Ukrain War, Rising inflation & interest rates, Downfall
    of European economy and what not.. Amongst all, Corona Virus has changed the
    whole world in all aspects. Many giant economy like USA, CHINA, UK, JAPAN, INDIA
    completely stopped their business activities since long period of time. But one
    sector alone stands strongly against this lockdown is Fast-Moving Consumer Goods
    (FMCG). FMCG products are in daily need of human being irrespective of age, cast,
    country, culture, earning. All country had allowed the production, distribution,
    wholesale & retails sales of FMCG products in restricted manner during the
    lockdown period also.

    But Covid-19 has also changed the consumption pattern, purchase pattern of
    consumers which forced FMCG industry to change their Business model drastically.
    Consumers prefer bulk purchasing and keeping buffer stock of non-perishable items
    at home to tackle lockdown like situation, also prefer on-line purchasing etc. FMCG
    Company is also providing on-line & off line options to consumers. In short, both
    consumer & FMCG industry have changed their model according to changing time.

    This bulletin will look deeply in importance of FMCG sector in economy of the
    country, potential of this sector in overall growth of economy and importance of
    this sector in Capital Market.

    An effort has been made to present comparative analysis of FMCG Market size
    across world’s major economy, India’s growth story of FMCG sector, analysis market
    share of FMCG products in India. Historical stock market return of FMCG index of
    some of world’s giant stock market, & FMCG stock of Indian company

    I hope readers find this bulletin useful and help them understand FMCG sector in
    Equity market & Mutual fund industry.

    CA DR Rajesh Khandol
    2
    What is FMCG product?
    Fast-Moving Consumer Goods (FMCG) those products which are always
    highly in-demand, sold quickly and affordable to common people. Such
    items are considered “fast-moving” as they are quick to leave the shelves
    of a store or supermarket because consumers use them on a regular
    basis. As its name suggests, FMCG goods are consumed rapidly hence it’s
    purchased frequently, are priced low, and normally its sells in large
    quantities. Usually, FMCG products have low profit margins and high-
    volume sales.

    One of the major factors drives the growth of the FMCG market is ever
    increasing global population coupled with rising disposable income &
    purchasing power. Furthermore, these goods are an essential part of
    daily life of every human being irrespective of the rich-middleclass-
    poor, child-adult-old age, irrespective of cast, religion etc because usually
    these items are consumed in daily by a human being.
    Supermarkets, hypermarkets, grocery stores, online stores, and other
    retail outlets frequently sell these items.
    3
    Household Personal care Food & Consumer
    Items products Beverages durable & non-
    durable goods

    There are no set rules for categorization of FMCG


    items. World’s different countries categorizes FMCG
    products according to their economic parameters.

    Key Factors

    In order to survive in this industry, with ever-


    changing consumer preferences, it’s
    imperative that constant innovation & changes
    are inevitable to retain consumers and attract
    potential customers.

    A strong distribution channel plays a crucial


    role in the FMCG industry as it ensures that
    the products are delivered to the stores on
    4
    time.
    FMCG – World Scenario
    The Covid-19 outbreak & stringent lockdown has
    restricted economic activity across the world and
    has impacted the economy’s growth of whole
    world. One sector where most of commercial
    activities were not stopped even during the peak
    period Covid is FMCG sector. As it is said
    earlier, majority FMCG products are daily necessity
    of human being and hence it's
    manufacturing, logistic, distribution, selling were
    allowed in restricted & Covid protocol by majority
    of countries during the pandemic also.

    As per alliedmarketresearch.com, a leading US based research firm, the


    global fast-moving consumer goods market size was valued at $11,490.9
    billion in 2021 and is projected to reach $18,939.4 billion by
    2031, registering a CAGR of 5.1% from 2022 to 2031.

    Growth in awareness in consumers about FMCG products, increase in the


    disposable income of middle-class population, frequent launch of new
    products by the manufacturers, effective advertisement of the
    brands, and strong distribution channel system of the FMCG industry
    boost the market growth.
    Table clearly shows that USA is way
    Name of FMCG ahead in FMCG market size. It is the
    Country Market Size largest FMCG consumption market in
    USA 8,300 USD Billion^ the world. FMCG sector contributes
    6% -7% in GDP of USA.
    CHINA 210 USD Billion
    INDIA 142.95 USD Billion * The FMCG market has grown
    significantly due to developed
    * Estimated at 14% CAGR growth
    from actual 110 USD BILLION of markets such as the U.S., China, and
    2020 . others. These are expected to
    account for over 70% of the global
    ^ Estimated based on actual data
    increase in consumer expenditure.
    of 2020 & growth % estimation.
    5
    FMCG – Indian Scenario
    Fast-moving consumer goods (FMCG) sector is India’s fourth-largest
    sector and has been expanding at a healthy rate over the years as a
    result of rising disposable income, a rising population, and rising brand
    awareness among consumers. India’s FMCG industry has an added
    advantage to India’s FMCG sector over other countries. India is a
    country that no FMCG player can afford to ignore due to its middle class
    population which is larger than the total population of USA. The Indian
    FMCG market continues to rise as more people start to move up the
    economic ladder and the benefits of economic progress become
    accessible to the general public.

    Category wise Market Share India’s FMCG Market Size

    Food & 142.96


    Beverages House Hold, 125.4
    18% Personal Care 110
    50% 83.3
    68.4
    49 52.8

    Healthcare
    32%
    2016 2017 2018 2019 2020 2021 * 2022*
    * Estimated at 14% CAGR growth
    Above statistics clearly shows that FMCG sector shifted
    gear since 2020 and encasing huge population,
    versatility of culture, increasing demand,
    branch consciousness amongst higher
    middle .
    Growing awareness, easier access
    and changing lifestyles have
    been the key growth drivers
    for the sector. 6
    Geographical Revenue Share
    The urban segment (accounts for a revenue
    share of around 55%) is the largest
    contributor to the overall revenue generated
    by the FMCG sector in India. However, in the
    last few years, the FMCG market has grown 45%
    55%
    at a faster pace in rural India compared to
    urban India. Semi-urban and rural segments are
    growing at a rapid pace and FMCG products account for 50% of
    the total rural spending.

    Changing Model Of FMCG


    Implementing changes in FMCG sector is the key to success of the
    industry. The traditional model of the FMCG industry in India is changing
    rapidly & adopting changes from the world. Those who take time in
    adopting & implementing changes in FMCG industry might face threat of
    vanishing.

    Key Changing Factors Of FMCG Industry

    These are some of the key statistics


    Digital platform of & chart showing how FMCG
    marketing. industry changing in terms of Sales
    & Marketing
    E-commerce & On 225
    line retail store .
    D 2 C BRANDS
    IN THOUSAND
    D2C (direct to
    consumer) model. 75
    35
    Shopping malls in
    Tier-3 & Tier-4 cities
    & small town in India 2018 2020 2025 (estimated)
    7
    Historical Performance Of FMCG Index
    FMCG Index – Absolute Return Table shows how FMCG sector
    Country has outperformed in terms of
    1 Year 3 Years 5 Years
    USA -12.95% 41.92% 37.05%
    share price as compared to
    other equity market of world’s
    INDIA 25.19% 44.19% 55.72%
    strong economy.
    SINGAPORE -0.02% -0.06% -19.30%
    UK -4.62% 2.65% -1.55%

    Historical share price return of some of the prominent FMCG


    stocks of India company
    CAGR % RETURN AS ON 12-02-2023
    The fast moving consumer goods
    Company 1 Year 3 Year 5 Year 10 Year (FMCG) space has been out of
    HUL 14% 5% 14% 19% action for a long time in the stock
    Nestle 7% 5% 21% 15% markets. Over the last two years
    Colgate 1% 3% 6% 8% the Indian stock markets have
    Dabur -5% 2% 9% 15% been dominated by stocks from
    Marico -1% 18% 9% 15%
    the Pharma and IT sector initially.
    Godrej
    Consumers
    14% 15% 7% 15% With both these sectors going out
    Tata Conumer
    of favor on US regulatory
    4% 22% 21% 18% concerns, the action has shifted
    Products
    in the last one year to sectors like
    automobiles, banking and capital
    goods.
    8
    Equity Market

    Indices 01st Jan, 2023 31th Jan, 2023 High Low

    BSE S&P SENSEX 60,871.24 59,549.9 61,343.96 58,699.2

    NIFTY 50 18,131.7 17,648.95 18,251.95 17,405.55

    Mutual Fund

    AUM Data of Mutual Fund for the Month of January 2023


    (INR. In Lakh Crore)

    Fresh Fund Redemption


    AUM As On AUM As On
    Particulars Mobilize During During
    31-12-2023 31-01-2023
    Jan – 23 Jan -23
    Total AUM of all mutual
    39.20 8.67 8.56 39.31
    funds scheme

    AUM of equity oriented


    14.94 0.29 0.17 15.06
    (growth) schemes

    Source: Association of Mutual Fund of India (AMFI)

    9
    SIP Contribution
    (INR. In Crore)

    SIP
    Year SIP AUM
    Contribution

    Jan-23 13,856 6,73,775

    FII & DII Inflow/Outflow Position

    FII’s Inflow has again started in the month of Jan-23., FII’S Net outflow
    in Cash segment Apr-22 to Jan-23 is approx Rs. -1.90 Lakh crore. DII’s
    Net Inflow in Cash segment during Apr-22 to Jan-23 is approx Rs.2.05
    Lakh crore which shows the positive impact in Mutual fund industry.

    Inflow/Outflow position in the month of Jan - 2023


    (INR. In Crore)

    For The Month


    Gross Purchase Gross Sale Net
    Of Dec 2022

    FII 1.55 Lakh 1.97 Lakh -0.41 Lakh

    DII 1.44 Lakh 1.10 Lakh 0.33 Lakh

    10

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