Overview of the Sector

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The FMCG sector in Bangladesh has experienced significant growth in recent years due to increased consumer spending, making it one of the fastest-growing industries. In the fiscal year 2021-2022, the sector’s total sales reached approximately USD 3.9 billion, up from USD 3.7 billion in the previous fiscal year 2020-2021. Moreover, it is expected that the revenue will continue to increase, with a projected growth rate of 16.18% from 2022 to 2027¹. In Bangladesh, the Fast Moving Consumer Goods (FMCG) sector is divided into three primary segments: the Food and Beverage industry, the Personal Care industry, and the Household Care sector.  Currently, in the year 2023, the market size is roughly USD 4 billion and it is set to become the 9th largest consumer market in the world by the year 2030². 

Beverage Segment: Since the food sector will be discussed in a separate section, we will focus on the FMCG sector, which includes the beverage industry, personal care sector, and household care center. The Beverage segment in 2023 generated approximately USD 72 million³ in revenue, and it is anticipated to experience a growth rate of 24.1% from 2023 to 2027. leading to an estimated value of USD 169.1 million by 2027.  In Bangladesh, aside from potable water, the available drinks can be classified into five groups: Carbonated Water (CW), Juice and nectars (J&N), Energy Drinks (ED), Electrolytes (E), and Dairy-Based Beverages (DBB). This market is occupied by both local and international companies. With the exception of the carbonated water category, local companies hold a commanding position in the other segments⁴.

In Bangladesh, carbonated water ranks as the most consumed beverage item after regular water with  Mums as the dominant player in the bottled water sector. In the health drinks segment, Horlicks from GSK Bangladesh leads the market, with other well-liked options like Complan, Maltova, Tang, and Foster Clarks. When it comes to carbonated drinks, brands such as Pepsi, 7up, Coca-Cola, Sprite, Mirinda, Mountain Dew, RC Cola, Lemon, Virgin, Zam Zam Cola etc are dominating the market. Lastly, in the juice segment, Frutika, Starship, Shezan, and Danish are among the top brands. 

Personal Care Segment: Subsequently, the yearly market for cosmetics and personal care goods currently stands at around USD 909 million and is further expected to have a CAGR of 8.1% from 2021 to 2027⁵. The cosmetics sector in Bangladesh heavily relies on imports, with 90% of cosmetic chemicals being sourced from various foreign countries. Bangladesh typically imports these materials from nations such as India, Singapore, Uganda, Thailand, and China. Specifically, about 41% of the total imported cosmetic products come from India. However, the import of personal care products experienced a significant decline of almost 50% by February 2023 due to the government’s imposition of up to a 20% regulatory duty (RD) on these items in May 2022. 

Household Care Segment: Regarding the household care market, the sector is estimated to generate approximately USD 101.8 million in revenue for the year 2023. It is anticipated to exhibit a compound annual growth rate (CAGR) of 28.42% from 2023 to 2027, resulting in a projected market size of USD 276.90 million by 2027. User adoption is expected to be at 6.2% in 2023, with a projected increase to 8.2% by 2027⁶. The widespread use of online shopping is a significant driving force behind the global home care industry. Savlon leads the market in this subcategory and was one of the most favored brands in 2017. Dettol holds the second position in this sector. Other available brands in Bangladesh include Lizol, Zici, Midas, Suthol, Lifebuoy (hand wash), Shinex, and Bionil.

Currently, the BCI score of -16.41, mainly derives from the current negative industrial and firm-level performance. Although faced with a situation where volume growth has leveled off or slightly decreased due to rising prices, companies, however, continue to demonstrate strong performance when assessed in terms of their overall value.

[1] FMCG market in Bangladesh rises to $3.9bn – Business Insider
[2] Leveraging growing Middle and Affluent Class for a vibrant consumer goods sector – Unilever
[3] Turnover tax on beverage may jump eight times – The Business Standard
[4] A Liquid Future: Beverage Industry of Bangladesh and its Prospects – Niloy, 2023
[5] Can local cosmetics edge out the global competitors? – The Daily Star
[6] Statista

Key Factors Driving the FMCG

1. Expanding Middle and Affluent Class Population: According to a report from the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the middle and affluent class is set to grow significantly, increasing from its current size of 12 million individuals, which makes up 7 percent of the population, to reach 34 million individuals by 2025.
2. Escalating Demand Driven by Rural-to-Urban Migration: Consequently, the majority of spending on FMCG products originates from these urban centers. In 2022, the urban population stood at 39.7%, a significant jump from 8.6% in 1973.
3. Growing Consumption in Rural Regions: Based on statistics from the Bangladesh Bureau of Statistics (BBS), consumption expenditure in rural areas has surged over the past 15 years, rising from 81% to 103%.
4. Emergence of Social Media and Mass Communication Channels: Through the utilization of social media, companies have been able to enhance brand awareness through promotional campaigns in various media channels, leading to a broader reach and increased demand.
5. Prosperity Generated by Export Processing Zones (EPZs): EPZs have, in turn, created numerous employment opportunities for women, contributing to poverty reduction. With rising incomes, one of the first product categories to experience increased demand is FMCG products.
6. Growing Technological Adoption: Smartphone usage, which stood at 31% (45 million users) as of 2017, is projected to reach 75% (138 million users) by 2025. The increasing prevalence of e-commerce and e-grocery platforms like Chaldaal, Meena Click, and Panda Mart has made goods more accessible, resulting in increased demand and sales.

Export Potential

This sector possesses significant potential to enhance the country’s export portfolio and reduce its reliance on the Ready-Made Garments (RMG) industry. Currently, the nation’s exports in this sector are limited to a small range of products, including tea, processed foods, and toiletries. Nevertheless, with the implementation of appropriate policies and investments, the FMCG sector can broaden its product offerings and access new markets. Developing innovative products that are distinctively Bangladeshi, and investing in research and development to enhance product quality and packaging, can enable Bangladesh to compete effectively with other countries that already have a strong global presence. Exploring avenues such as the creation of unique tea blends like organic or flavored teas, and expanding the processed food industry by introducing value-added items like ready-to-eat meals, healthy snacks, and convenient foods tailored to busy consumers in various markets, are among the strategies that can be pursued. Pran products are currently exported to over 145 countries worldwide, and the company has been receiving the National Export Trophy for its export achievements since 1999. Furthermore, industry players are bullish about growth in the sector which is likely to attract investments. 

Competitive Landscape (including Market Share)

Beverage: In the beverage sector, global company PepsiCo commands the largest share at 35%, followed by Coca-Cola with 25% in Bangladesh on the market share front. Among the domestic players, Akij Beverage Ltd. and Pran Beverage Limited (Pran Group) hold 15% and 10% market shares, respectively. Royal Crown (Partex Beverage Ltd.) accounts for 8% of the share, while the remaining 7% is distributed among other companies like Globe Soft Drinks Ltd. and Global Beverage Company Ltd. Currently, Pran Beverages Ltd. is the only player catering to all the categories in the beverage segment. 

Personal care and cosmetics:
Coconut-based oils comprise 46% of the total hair oil market share, while Light hair oil accounts for 16%, Amla-based oil makes up 15%, and cooling oil constitutes 11% of the market share. In the local market, eight major domestic companies, namely Unilever Bangladesh, Kohinoor, Square, Keya, Kashem Group, Kollol Group, Moushumi Industries, and Delta Group, collectively dominate, holding over 95% of the market share for local products. Among these, Unilever alone holds a 45% share, Kohinoor has a 20% share, Square commands 18%, and Keya holds 13%. In the Toilet Soap segment, Unilever Bangladesh Ltd stands as the dominant player, controlling approximately 43% of the local market share. The other three major players, including Keya Cosmetics Ltd, Lily Cosmetics Ltd, and Kohinoor Chemical Company Ltd, each have around 10% of the market share⁷.

Household care: During the pandemic, there was a significant surge in the demand for household care items such as detergents, liquid disinfectants, and cleaning products. Reckitt Benckiser Bangladesh Ltd. (RBBL), a subsidiary of Reckitt Benckiser Plc, one of the world’s largest manufacturers of household products, experienced substantial growth. Their popular brand, Harpic, commanded an impressive 85% market share in the toilet cleaning market of Bangladesh. Major competitors for this brand include Clean Master of Kohinoor Chemical Company Ltd., Vanish of ACI Consumer Brands, and Shakti of Square Toiletries. Another key brand under RBBL, Dettol, held a 7-8% share of the health soap market in Bangladesh right before the pandemic.

[7] LOCAL PLAYERS NOW DOMINATE IN BOOMING BANGLADESH COSMETICS AND TOILETRIES MARKET

Government Support & Policy Incentives

Investors are poised to experience a gradual reduction in tax incentives over the next seven years, with a 10% decrease in benefits each year until the tenth year. Companies that establish factories within economic zones will benefit from the duty-free import of raw materials and bonded warehouse advantages. Additionally, these firms will receive a 50% discount on land registration fees, stamp duties, and local government taxes. Investors will also be exempt from taxes on royalty and dividend payments, while their foreign employees will enjoy a 50% reduction in income taxes.

Investment Challenges and Mitigation Strategies

• Insufficient investment in research and development for sustainable and environmentally friendly production:
• Infrastructure and Accessibility Issues: Enhance road infrastructure to ensure more efficient lead time management and improve the overall business environment.
• High Supplementary Duties: It is crucial to reduce the supplementary duty on beverages to a range of 12-15%. At present, the beverage industry is subject to a combined rate of (25% SD and 15% VAT) 43.75% for carbonated soft drinks (CSD) and (35% SD and 15% VAT) 55.25% for energy drinks, marking the highest rates in Bangladesh’s history. These rates surpass those in neighboring countries.
• Over-Reliance on Imports: A substantial 90% of cosmetic chemicals are sourced from various foreign countries.

Future Trends and Opportunities

Bangladesh’s per capita expenditure on FMCG products is only US$23, in contrast to India’s US$44, or more than US$100 in China and Indonesia. It is anticipated that the revenue will exhibit an annual growth rate (CAGR 2023-2027) of 24.10%, leading to an estimated market size of US$169.10 million by 2027. This paves a pathway for further growth of the sector. 

In the FMCG sector in Bangladesh, there are several opportunities for foreign direct investment (FDI). Some of these opportunities include:

1. Introducing new product lines.
2. Enhancing product quality.
3. Expanding production capabilities.
4. Strengthening the supply chain.