Incumbent FMCG brands continue to corner 65% market share in India
In India, fast-moving consumer goods (FMCG) majors continue to hold sway, with incumbent brands cornering 65 per cent of the market share, shows a Bain & Company report.
While identifying the continued preference of Indians for incumbent brands, the report says that the dominance of general trade in the country has allowed national brands to maintain their supremacy. The low penetration of e-commerce in the country has also helped large brands.
The report, titled “Resilience Amid Disruption: How Some Asia Pacific Incumbents Are Outmanoeuvring Insurgents”, analysed 23 consumer product goods categories such as beverages, food items, beauty and personal care, and home care in 11 Asia-Pacific markets from 2018 to 2022.
It utilised Euromonitor’s database and tracked the performance of what it categorised as “large incumbent brands” — the top 10 brands by market share in each category and country as of 2018. Its analysis took into account performance till 2022, excluding any brands that ceased to exist by that year. It measured the relative success of large incumbents in each category and country by assessing whether their aggregate market share changed by more than 1 percentage point from 2018 to 2022.
Singapore and China emerge as the most favourable environments for new entrants due to the strong presence of e-commerce and well-established networks of third-party suppliers.
In contrast to these geographies, the report said, Malaysia, the Philippines, and India were the most favourable markets for incumbents. The report attributes this to the dominance of traditional trade, especially in the Philippines and India, and the relatively low penetration of e-commerce. It also said that the complex channel dynamics in these markets create a challenging environment for new entrants.
Ravi Swarup, partner at Bain & Company, told Business Standard that large, domestic incumbent brands in the country had fared really well because they knew the Indian consumer better. He added that even foreign brands that had localised in the country have performed well.
“Understanding the consumer and creating a product price proposition that is actually giving disproportionate value to consumers, and winning in the general trade are really important,” Swarup said.
FMCG companies in the country, however, have been reporting stiff competition from regional brands over the last three quarters. Companies have said that they saw more regional brands entering the market at the mass end.
Having a strong distribution and taking their stock to kirana (mom-and-pop) stores is a strength that incumbents enjoy over new brands trying to enter the category. The report said that besides India, local incumbent brands were showing stronger growth momentum in the Philippines and Indonesia as well. “However, in India, the Philippines, and Indonesia, while foreign incumbents also lead in market share across most categories, it is the local incumbents that exhibit a stronger ability to gain share in the winning categories,” it said in its report.
The Covid-19 pandemic also went in the favour of incumbent brands, Bain & Company said, pointing out that consumers opted for well-known brands in this period. Also, large companies showed they were better equipped to navigate supply-chain disruptions.
The report pointed out that in India, Tata Sampann has achieved approximately 20 per cent compound annual growth rate in the past five years by addressing consumer needs for high-quality, healthy, and nutritious staple foods. It was one of the first movers in the branded pulses market in India, gradually expanding into categories such as spices, poha, and dry fruits.
BRAND VALUE
· Local incumbent brands are better poised to gain market share in India
· However, foreign brands in the country still lead in most categories
· In India, Tata Sampann has achieved an approximately 20% compound annual growth rate in the past 5 years by addressing consumer needs for high-quality, healthy, and nutritious staple foods
· Bain & Company analysed 23 consumer goods categories across beverages, food items, beauty and personal care, and home care in 11 Asia-Pacific markets from 2018 to 2022
First Published: Feb 05 2024 | 6:35 AM IST