India’s consumer market is growing rapidly both as a result of increasing population and increasing spending power by the population. Tens of millions of Indians join the middle class each year and are ready to spend on branded toilet soap, shampoo, laundry detergent and packaged foods. With the wind in their back, CPG companies (referred to as FMCG companies in India) are growing by over 20% year over year.
Domestic publicly traded legacy brands such as Dabur and Marico have profited handsomely since liberalization began in 1991. Recent upstarts such as Cavin Kare (privately held) and Emami have done well, while companies such as Godrej have bought our their US collaborators (Sara Lee in this case). But the story in 2010, according to a Nielsen report indicates that the large foreign multinationals have gained disproportionately lately. MNCs such as Hindustan Unilever, Procter & Gamble , Reckitt Benckiser and L’Oreal increased their market share in terms of value between 0.1 and 1.1 percentage points between July and September 2010, as against the year-ago quarter, at the cost of homegrown firms.
Multinationals say product innovations and aggressive distribution helped them turn the tide. “During the quarter we had some good innovations, driving consumption strongly to develop the market,” a spokesperson for Unilever said. P&G said it addressed consumer needs by delivering superior product technology and good marketing communication across touch points. The higher prices of foreign products also has an effect when measuring value rather than volume; French cosmetic giant L’Oreal , has seen its share increase by 1.1 percentage points to 28% in the $300 million hair color market. “We market our products, predominately premium , in urban centers only where people are more brand conscious with more disposable income in hand,” said Vismay Sharma , director (consumer products division).