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A Step-By-Step Guide to Set up a Company in the FMCG Sector

Published On
November 25, 2022
Read Time
Jay Magdani

The fast-moving consumer goods (FMCG) sector is the 4th largest sector of the Indian economy. Considering this, the Indian government also approved 100% foreign direct investment (FDI) in the FMCG market, bringing even more opportunities for future entrepreneurs. 

Promising Future of the FMCG Market in India

The recent shift in people’s lifestyles is linked directly to the 16% increase in the growth of the FMCG industry. Despite the countrywide lockdowns of 2020 and highly-priced staples, the industry saw consumption-led growth through and through.

Higher incomes lead to better living standards, and the consumption of FMCG goods skyrocketed in rural areas. People have become aware of the multiple brands available in the market and are choosing products more consciously. A report on the FMCG sector states that household and personal care products make up 50% of the FMCG revenue in India, whereas foods and beverages have a 19% share of the market, and healthcare products account for 31% of the industry.

There has not been a better time to set up a company in the FMCG sector in India. The market is growing rapidly, and all other parameters hint at the industry’s bright future.

However, setting up a business in the FMCG sector presents its unique challenges. Let’s look at the things you need to have in place when you want to set up a company in the FMCG sector.

A 6-Step Guide to Set up a Company in the FMCG Sector

You can capitalise on the timely growth of the FMCG sector and set up a company by following a few simple steps.

1. Achieve Product-Market Fit

Thorough market research can help you identify your target customers and achieve product-market fit. Ask yourself who you want to sell to and where the ideal customer might go looking for your product. In the process, you may be able to uncover a neglected customer need.

Market research can help uncover customer pain points and decide your value proposition. The next step would be to create a minimum viable product (MVP) and test the market response by showing the product to a small group of potential customers. Remember to consider both urban and rural markets, unless your product is only for a certain niche / section of the society.

Consider the feedback and suggested changes and incorporate those after considering costs and other factors. Repeat this until you see more positive responses to your product and can take it to market.

2. Make a Viable Business Plan

You need to do proper research along the following aspects to create a solid business plan:

1. Supply against current and future demand

2. Market potential of exporting goods

3. Raw material requirements and availability (imported or home-sourced)

4. Decide the scale of your business–retail store, mini-supermarket, mass brand, or providing logistic support to others

5. Appropriate location for setting up production plants or outlets

6. Manpower requirement and availability

7. Required funding for the project

3. Identify Competitors

You will likely have existing competitors in the same niche. Although your business’s value proposition and unique selling point (USP) can attract customers, it is also crucial to be mindful of the competitors’ USPs. To stay ahead, you can keep a tab on their changing strategies and improvise your own whenever needed.

4. Register Your Business and Acquire Appropriate Licences

Register your business with the Ministry of Corporate Affairs (MCA) for incorporation. Afterward, apply for GST registration, complying with the standard guidelines issued by the MCA.

Now, depending on whether your business deals with a single category of products or multiple products simultaneously, you will need licences to operate legally. Remember, different products will need different licences.

For instance, businesses that deal with food products must apply for a licence issued by the Food Safety and Standards Authority of India (FSSAI).

You must furnish the following information, along with a duly-filled form, for authorities to issue the licence:

1. The location of the company

2. Detailed list of equipment and machinery

3. Company’s statutory documents, like the register of directors

5. Raise Funding

In case you have everything else — great idea, functioning team, effective business plan, and vigour & grit – except for the funds, you should reach out to venture capitalists (VCs) or angel investors from a reliable network. You can conduct several funding rounds if the seed rounds don’t yield the desired outcome.

6. Have a Good Marketing Strategy

A good marketing plan can put your business in front of the right customers and drive sales. For a B2C or retail outlet, consider promoting launch dates, offers, and other business details through local communities, social media, ad campaigns, etc.; if you are in a B2B space, try reaching out to potential clients.

7. Determine the Distribution Process

Even if the product is excellent, it is doomed to perform poorly if there is an issue with product distribution. Consumers prefer readily available brands. You should aim for a pan-India outreach when it comes to the distribution process.

It is important to register on eCommerce platforms to expand your business’s reach since more consumers are leaning towards online purchasing. Total FMCG revenue via e-commerce platforms is expected to increase by 11% by 2030. In addition, it is crucial to find prime spots for physical stores while ensuring they are easily accessible. For example, a grocery store performs well in a local market compared to an isolated corner of an enclosed society.

Final Word

Anyone who wishes to start a business will need help along the way. A mentorship session with seasoned professionals can do wonders for you and your company. Consider putting yourself out there and networking with the right people. This can help increase your business outreach and help you find potential investors.

Being a part of a growing community of like-minded people has advantages like professional guidance, investment opportunities, and even psychological support that can help you set up a company.

With Scalix you can network with, meet, and learn from founders and experienced individuals who can contribute to your startup's growth. Reach out to us to know more.