Fast Moving

Consumer Goods
By:
Pratyush Mulukutla
Amit Sharan Jain
Fast Moving Consumer Goods
Supply Abundant supply in metros. Distribution networks are being beefed
up to penetrate the rural areas.

Demand HLL expects the FMCG market to triple in market size by FY10,
which highlights the potential.

Barriers to Entry Huge investments in promoting brands, setting up distribution

networks and intense competition, but the sector is not capital
intensive.
Bargaining Power of Some of the companies are integrated backwards, which reduces
Suppliers the supplier's clout. Manufacturing is largely outsourced.

Bargaining Power of In case of branded products, there is little that the consumer can
Customers influence, but intense competition within the FMCG companies
results in value for money deals for consumers (e.g. buy one,
get one free concept).
Competition Competition is faced from both domestic, MNCs and also from
cheaper imports, which are increasingly visible in urban
markets. Price wars are a common phenomenon.
FMCG – Evolution
 1950’s-80’s – Low Investment in the sector
 Low purchasing power
 Govt’s emphasis on small scale sector
 HLL and other company’s urbane focus
 Post liberalization
 Entry of MNCs
 Focus shifted to getting to rural consumer first
 Others, like Nestle, remained with the urban population
 Latest fad to hit the market is the ‘sachet’ bug.
 Mushrooming of regional brands
 Nirma enters and changes the focus to ‘Value for Money’ in the 70’s
 Post liberalization, Jyothi Laboratories, ‘Ghari’ Detergent and ‘Anchor’
toothpaste giving the nation-wide brands a run for their money.
Financial Analysis – Key
Players

Company Name Revenue 3- Year PAT (Rs. 3-Year PBDIT 3-Year

(Rs. Cr.) CAGR Cr.) CAGR
Hind. Lever 11193.88 4.6 1408.1 -10.85 1722.71 -15.22

Dabur India 1345.5 11.28 188.57 36.54 242.01 33.41

Colgate Palm. 1127.55 9.65 137.6 12.87 224.7 12.76

Marico Ltd. 1045.16 11.05 98.88 30.57 140.79 34.3

Reckitt Benckiser 757.35 18.17 95.19 138.8 135.71 63.26

Procter and 567.59 -0.63 139.51 23.03 201.37 16.43

Gamble
Forecast 2010
 Rural and semi-urban
 128 million population thrice the urban
 Market size growth from 48k to 100k Crores (Growth of 50% at
10%CAGR)
 Increase penetration from the current less than 1%
 Problems in the rural sector
 Low per capita disposable incomes
 Large number of daily wage earners
 Acute dependence on vagaries of monsoon
 Seasonal consumption
 Poor infrastructure – roads and power supply
 Urban
 Market 16.5k to 35k Crores (Growth of 100% at 20%CAGR)
 Intense competition – severe pressure on margins – Focus on
newer products, such as fruit juices

Source: Assocham Report ‘Future Prospects of FMCG’