Overview of the FMCG Industry
The household and personal care account for 50 per cent of the FMCG sales in India. The other two segments of the FMCG sector comprise of healthcare which comprise of 31 percent and food and beverages account for the remaining 19 percent. The urban segment accounts for revenue share of 55 percent is the largest contributor to the total revenue generated by the FMCG sector in India. However, in the last few years, the FMCG market has grown at a fast pace in rural India compared to urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50% of the total rural spending.
The reason for the growth in the FMCG market include changing habits, better access, effective supply chain mechanism and rise in literacy etc. With the objective of promoting FMCG sector in India, the Government of India has approved 100 percent of FDI in the FMCG segment in single brand retail and 51 percent FDI in multi-brand retail.
Market Size of the FMCG Industry
The Global FMCG market has been registering a Compound Annual Growth Rate (CAGR) of 5.4% from 2018 onwards to 2025. The Global FMCG market is expected to reach approximately $15,360 billion by the end of 2025. The Indian market is also projecting promising targets with Indian FMCG sector to grow at the CAGR of 15% to reach the ambitious target of 7.8 trillion rupees in 2020 and 15.6 trillion by 2025.
With the objective of boosting India’s manufacturing capabilities, the Government of India has put the FMCG sector under Production Linked Incentive (PLI) Scheme.
The recently introduced Consumer Protection Act, 2019 brought by the government will ensure accessible, simple, quick and timely delivery of justice to the consumers. GST has also been cut down to 5% to promote consumption.
The rural sector of India houses 65% of India’s population. Some estimates suggest that rural households contribute around 35-37 percent of the total FMCG sales in the country.
Over the years, the consumption patterns have been seeing upword trends because of rising income levels and rising demand for branded products. The rising wage levels and changes in the lifestyle habits of the consumers has open the floodgates of premiumization in India where the consumers are well informed and are willing to shell extra rupees to buy branded items that suit their lifestyle and social status.
Further, the pace at which e-commerce is penetrating in India has revolutionized the way customers buy goods. New players use these platforms to test their new product or new concept to reach wider audiences and the speed and seamlessness with which goods are sold on these platforms has significantly increased the consumption levels of the public.
The young population of India has played the role of a catalyst for a significant rise in consumption. India has a significant young population within the age group of 20-35 years and with their changing consumption habits shifting towards packed food, they have given a big boost for the development of the FMCG sector in India.
Laws applicable to the FMCG Industry in India
There are several laws that regulate various aspects such as licensing, sanitation and other permits of the FMCG industry in India. The legislation that dealt with food processing and food safety in India was the Prevention of Food Adulteration Act, 1954 (PFA) which remained in force for over five decades after which it was replaced with another legislation keeping in mind the changing needs and requirements of the industry.
The legislation that replaced PFA is the Food Safety and Standards Act, 2005 (FSSA) that overrides all other laws regulating food. FSSA specifically repealed the following eight laws which were in place before the FSSA came into force:
- The Prevention of Food Adulteration Act, 1954
- The Meat Food Products Order, 1973
- Essential Commodities Act, 1955
- The Edible Oils Packaging (Regulation) Order, 1998
- The Vegetable Oil Products (Control) Order, 1947
- The Milk and Milk Products Order, 1992
- The Fruit Products Order, 1955
- The Solvent Extracted Oil, De Oiled Meal and Edible Flour (Control) Order, 1967
Regulations related to Packaging and Labelling
FSSA has provided separate regulations related to packaging and labelling of food products known as Food Safety and Standards (Packaging and Labelling) Regulations, 2011 (Packaging and Labelling Regulations). A reading of the Packaging and Labelling Regulations show that there are multiple products: Proprietary, Pre-packaged and other products as mentioned in the regulations.
‘Proprietary food’ has been defined under Food Safety and Standards (Food Products Standards and Food Additives) Regulations, 2011 that has not been standardised and the “pre-packed food” or “pre-packaged food” has been dealt with under Packaging and Labelling Regulations as food which has been placed in a package of any nature where the contents of the package cannot be changed without tampering with it and which is ready for sale to a consumer.
Following are the requirements that have been prescribed by Packaging and Labelling Regulations related to labelling of the foods products under FSSA:
- The details required to be specified on the label under these regulations have to be either in English or in Hindi in Devnagri script. These regulations do not prevent the use of any other language in addition to the language required under these regulations;
- Pre-packaged food cannot be described or presented on any label or in any other manner which is false, erroneous, misleading, deceptive or likely to create an erroneous impression regarding the character of the food;
- The label in pre-packaged food has to be put in such a manner that it cannot be separated with the container;
- The contents on the label should be clear, indelible, prominent and legible by the consumer under normal conditions of purchase and use;
- In case where the container is covered by a wrapper, the wrapper should contain all the required information or the label on the container should be easily legible through the outer wrapper and in no way be obscured or blocked by it.
Apart from the above-mentioned labelling requirements, every package of the food has to carry the following information on the label:
- Name of the food
- List of ingredients
- Information related to nutrition
- Declaration regarding vegetarian food or non-vegetarian food
- Declarations regarding food additives
- Name and address of the manufacturer
- Net quantity
- Batch/ Lot/ code identification
- Country of origin for imported food
- Date of packaging or manufacturing
- Best before date and use by date
- Instructions of use
Keeping in mind the fact that a large number of products are imported in India, the Packaging and Labelling Regulations make it mandatory to mention the name of the country of origin on the label of the food products imported into India and in case where the food goes under processing in a secondary country which changes its nature, then the country where the processing is being performed becomes the country of origin for the purpose of labelling requirements.
Therefore, the above conditions are the statutory and regulatory requirements that need to be adhered to with regards to the labelling of the products when they are sold in the Indian market as “pre-packaged goods”.
Regulations related to Signage and Customer notices
From the viewpoint of the food outlet, there are statutory requirements related to the signage and customer notices. Though FSSA do not explicitly provide any statutory requirements for the signage or customer notices, but there are certain provisions regarding advertisement of products by Food Business Operators (FBOs).
According to FSSA, the term “advertisement” includes a notice as any audio or visual publicity, pronouncement or representation made using light, smoke, sound, website, internet, electronic media and includes through any circular, notice, invoice, wrapper or other documents.
Further, FSSA also provides that no advertise of food can be made which is misleading, deceiving or is in contravention of the provisions, rules and regulations made under FSSA. It also bars anyone from engaging in any unfair trade practice with respect to sale, supply, consumption of articles of food or adopting any deceptive or unfair practice including the practice of making any statement, orally or in writing or by visible representation which:
- falsely represents that food is of a particular standard, quantity, grade-composition, quality; or
- makes a misleading or false representation concerning the usefulness or need for;
- gives any guarantee to the public about the efficacy of the product without scientific or adequate data. However, in case a defence is raised to that effect that the guarantee is based on adequate and scientific justification, the burden of proof of such defence will lie on the person raising such defence.
Since, the provisions of FSSA are applicable to all the Food business operators in India, the provision related to advertisement would have to be complied with.
Registration, Licensing and health and Sanitary Permits in India
The provisions of FSSA are also applicable for getting the registration and licenses for both health and sanitary permits throughout India being the only legislation to food industry.
- The registration and license aspects of a food business operator are governed by the Food Safety and Standards (Licensing and Registration of Food Business) Regulations, 2011 (Licensing and Registration Regulations).
- Regulation 2.1 of the Licensing and Registration Regulations makes it mandatory that all the food business operators in the country are have to be registered and procure license in accordance with these regulations. Any person who is operating the food business need to comply with all the conditions with regard to the sanitary, safety and hygienic requirements at all times.
- The main purpose of these regulations is to ensure that the food and business operators maintain sanitary and hygienic conditions in each food category.
- It shall be the deemed responsibility of every food business operator to comply with the standards related to the labelling, packing, health, sanitary and safety that have been laid down in the License and Registration Regulations. The labelling requirements provided under the regulations need to be complied with at all times especially in relation to pre-packaged foods.
FSSA is the central legislation to which every food business operator in India needs to comply with at all times. Apart from FSSA, there are several local laws which a food business operator needs to comply with.
Some of the local licenses that a food business operator needs to obtain include:
- Health and trade license from local municipal authorities
- NOC from the Fire department
- Environment clearance
- Registration with the Police Department of each state/city
- Verification certificate under Standards of Weights and Measures Act, 1976
- Registration under Shops and Establishments Act of the respective State
- Eating House license
- Liquor license
Penalties on non-compliance
Penalties under FSSA are mainly imposed on instances of non-compliance. Generally, non-compliance with various provisions of FSSA attracts a penalty up to Rupees 2 lakhs. However, under section 63 of the Act, if any person or a food business operator either himself or by any other person on his behalf who has been mandated under law to obtain license manufactures, sells, stores, distributes or imports any food article without proper license, then such person can be punished with imprisonment for a term which may extend to 6 months coupled with a fine which may reach up to Rupees 5 lakhs.
Enterslice can give you overall advisory and assistance in entering and establishing yourself in FMCG sector and filing of the necessary compliances for your organisation as we are a team of highly skilled & dedicated professionals. We specialize in providing legal consultancy services too.