FMCG and consumer

Business model

Fast Moving Consumer Goods (FMCG) make small-ticket, fast-turning products bought repeatedly - soap, biscuits, toothpaste, tea, paint, packaged food. The economics:

• Brand-driven pricing - once a customer trusts the brand, they pay a premium and rarely switch.
• Massive distribution - 8-12 million retail touchpoints across India. Scale advantage is enormous.
• Asset-light - most FMCG plants run high utilisation with modest capex.
• Working-capital negative - receive from distributors before paying suppliers. Cash machine.

This gives FMCG companies the highest, most-durable return on capital in Indian listed equities.

Key metrics

• Volume growth - number of units sold; the cleanest demand signal. 3-7% sustained is healthy.
• Price-led growth - pricing actions taken in the year.
• Gross margin - 50-60% for typical FMCG.
• EBITDA margin - 18-25%.
• Ad spend % of revenue - 8-15% for premium brands; staying flat as scale grows is operating leverage.
• Rural vs urban mix - rural ~35-40% of FMCG demand; growth in rural often leads urban.
• Direct distribution coverage - number of outlets serviced directly.