Uncertainty in the global economy is increasing. On an average, rank changes in US food and grocery have been 3.2 times in the decade of 2010 vs the 1960s.

Short-term uncertainty in India is also increasing. GDP projections for India have also been cut to 5-6% and companies are dealing with the "new normal". However, in the long-term, consumption in India is set to triple, going from ~$900 million in 2010 to ~$3.6 trillion in 2020. Hence, it is imperative that FMCG and retail organizations balance caution due to short-term uncertainty with investment required to drive long-term growth.

The report titled "Winning with Uncertainty" by CII and The Boston Consulting Group highlights the need for FMCG and retail companies in India to prepare for an increasingly uncertain future and proactively take measures to leverage market volatility to create competitive advantage.

According to the report, uncertainty in business environment in India is primarily being driven by six structural factors: Changing macroeconomic scenarios in the country, heightened volatility in commodity prices, uncertainty in policy making, rapidly evolving consumer base and behaviour, emergence of new breeds of competitors within industries and the development of game-changing technology

FMCG and retail sectors have shown strong resilience in the face of this uncertainty, a trait that has been rewarded by investors. The BSE FMCG index gained approximately 150 per cent in the last 5 years, almost 15 times the growth achieved by the bellwether sensex. Organized retail has also been growing at a CAGR of approximately 14-15 per cent over the last 5 years.

However, volatility in global commodities, exchange rates, indigenous raw material prices and fluctuating consumer sentiment has put pressure on margins. WTI crude has gone to $95 in Jun 2013 from $85 a year ago. The commodity metals prices index was 256.24 in April 2011 and stands at 183.5 today (~30% reduction).

The ability of companies to deal with this volatility is likely to have a major impact on their market position. According to a survey of senior management of leading FMCG and retail companies in India, conducted by The Boston Consulting Group and CII, 54 per cent of the respondents believe the composition of the top 3 players in their industry will change over the next 5 years.

The report lays the frameworks that can be used to create winning business models in the face of uncertainty. It takes a value chain view of businesses and talks about embedding flexibility into every element of the value chain. It suggests measures that companies can implement to ensure that agility is encoded in their DNA. For example, companies should look to source raw materials locally and directly to shorten lead times and variability in the supply chain.

Keywords:global economy, US food , GDP projections , companies,FMCG ,CII ,market volatility, advantage, business environment , prices, policy making, consumer , technology, investors, BSE FMCG index , CAGR , exchange rates,frameworks , DNA,Business news