Professional Documents
Culture Documents
The Fast Moving Consumer Goods (FMCG) sector is a corner stone of the Indian
economy. This sector touches every aspect of human life. The FMCG producers now
realize that there is a lot of opportunity for them to enter into the rural market. The sector
is excited about the rural population whose incomes are rising and the lifestyles are
changing. There are as many middle income households in the rural areas as there are in
the urban. Thus the rural marketing has been growing steadily over the years and is now
bigger than the urban market for FMCGs. Globally , the FMCG sector has been
successful in selling products to the lower and middle income groups and the same is true
in India. Over 70% of sales is made to middle class households today and over 50% of
the middle class is in rural India. The sector is excited about a burgeoning rural
population whose incomes are rising and which is willing to spend on goods designed to
improve lifestyle. Also with a near saturation and cut throat competition in urban India,
many producers of FMCGs are driven to chalk out bold new strategies for targeting the
rural consumers in a big way. But the rural penetration rates are low. This presents a
tremendous opportunity for makers of branded products who can convert consumers to
buy branded products. Many companies including MNCs and regional players started
developing marketing strategies to lure the untapped market. While developing the
strategies, the marketers need to treat the rural consumer differently from their
counterparts in urban because they are economically, socially and psycho-graphically
different to each other. This paper covers the attractions for the FMCG marketers to go to
rural, the challenges, the difference between the rural and the urban market and the
suitable marketing strategy with the suitable example of companies and their experience
in going rural.
1
ABOUT THE PROJECT
The report also provides the details about the history of FMCG sector in rural
India. There is a plenty of data analysis and conclusions are given in the research paper.
Our analysis is based on sample results. It was a difficult task to gather the
information from respondents by meeting them personally in order to get questionnaire
filled. There was a lot of time pressure and sometimes unwillingness of respondents to
respond.
2
CONTENTS
1. INTRODUCTION
2. LITERATRE REVIEW
3. RESEARCH METHODOLOGY
4. DATA ANALYSIS
5. SWOT ANALYSIS
6. CONCLUSION
7.REFERENCES
8. APPENDIX
INTRODUCTION
3
There was a time when the FMCG companies ignores rural market,
they took no any interest to produced or sell products in rural market in India. It was the
initial stage of FMCG companies in India. As per as the time had passed, the strategy and
marketing style of FMCG companies had been changed.
The Fast Moving Consumer Goods Sector is the fourth largest sector of Indian
economy with total market size of more than 60000 crore.
The FMCG sector in India is expected to grow at a compounded annual growth
rate (CAGR) of 9% to a size of Rs 1,43,000 crore by 2010 from Rs 93,000 crore
at present.
With a growth of 52.5%, the BSE FMCG Index has, during the last one year,
outperformed the Sensex, which could manage a growth of 41% only.
A well-established distribution network, intense competition between the
organized and unorganized segments, low operating cost, strong branding
characterizes the sector.
4
Now at the present time, rural market is one of the best opportunity and focusing
sector for the major FMCG companies in India. Each and every company is set to invest
a huge capital for competition in rural market. According to the Federation of Indian
Chambers of Commerce and Industry, the number of rural households using FMCG
products has grown from 136 million in 2004 to 143 million in 2007, a clear indication
that rural consumers are shifting from commodities to branded products. Urban
consumers, on other hand, could go slow on FMCG expenses, thanks for inflation spiral,
rise in fuel cost and costlier credit. Evidence suggests that for the first time, the rural
market has grown faster than the urban market in key product categories in April-May
2008, the latest months for which such information is available, according to market
research firm AC Nielsen.
In those days, the rural market is the one of the best opportunity for
the FMCG sector in the India. It is more wide and less competitive market for the FMCG.
As the income level of the rural consumers increasing, the demand of FMCG is
increasing continuously. The various need of the study is given as follows:-
To determine the raising demand of FMCG products in rural
area.
Know about the different choices of rural consumers.
Scope of study:-
5
With a population of 1 bn people, India is a big market for FMCG
companies. Around 70% of the total households in India reside in the rural areas. The
total number of rural households is expected to rise from 135 m in 2002 to 153 m in
2010, which represents the largest potential market in the world.
Urban Rural
Population 2001-02 (m household) 53 135
Population 2009-10 (m household) 69 153
% Distribution (2001-02) 28 72
Market (Towns/Villages) 3,768 627,000
Source: Statistical Outline of India (2001-02), NCAER
Changing lifestyles:
Rising per capita income, increased literacy and rapid urbanisation have
caused rapid growth and change in demand patterns. The rising aspiration levels, increase
in spending power has led to a change in the consumption pattern.
6
Due to the large size of the market, penetration level in most product
categories like jams, toothpaste, skin care, hair wash etc. in India is low. This is more
visible when comparison is done between the rural and the urban areas. The average
consumption by rural households is much lower than their urban counterparts. Existence
of unsaturated markets provides an excellent opportunity for the industry players in the
form of a vastly untapped market as the income rises.
Penetration %
Category All India % Urban % Rural %
Deodorants 2.1 5.5 0.6
Toothpaste 48.6 74.9 37.6
As per given in Skin Cream 22 31.5 17.8
Shampoo 38 52.1 31.9
the above chart,
Utensil Cleaner 28 59.9 14.6
rural market
Instant Coffee 6.6 15.5 2.8
shows a good Washing Powder 86.1 90.7 84.1
improvement. Detergent Bar 88.6 91.4 87.4
In the presence Toilet Soap 91.5 97.4 88.9
of some product Source: HLL investor meet 2006
categories like, toilet soap, detergent bar, washing powder etc, it is same as in the urban
level. Rural market is also improving in the other products category.
Objectives:-
There are following objectives of the project:-
To determine about the rural consumers preference towards
FMCG products.
7
To know about the recent demand of FMCG products in rural
area.
Hypothesis:-
Limitations:-
While surveying I encounter with some problems like some people were
not willing to respond and few of them who responded were in hurry hence the active
participation was lacking. Due to which we faced difficulties in collecting information
regarding our questionnaire. Another problem which we face was that people were
hesitating to give information about their income. Except it, the sample size we have
taken for survey was small and it’s a difficult task to draw accurate conclusion or reach to
an exact result on the basis of limited sample size. Moreover, our investment was limited
and time was also less to go in depth.
Threats to us are that- as people were hesitating to give their income
details so there is chance of error regarding income.
Literature review:-
8
Operational Research
Rural market is one of the best opportunity for the FMCG sector. In
some sense we can say that rural market is future of FMCG. As per research of Purba
Basu, (faculty of ICFAI business school), the lifestyle of rural consumers is changing.
Rural Indian market and the marketing strategy have become the latest marketing
buzzword for most of the FMCG majors. She added the strategies of different FMCG
companies for capturing rural market like Titan’s Sonata watches, Coco Cola’s 200ml
bottle,different strategies of HUL and Marico etc. She takes into consideration the study
of National Council for Applied Economic Research (NCAER). According to the
NCAER projections, the number of middle and high-income households in rural area.
India is expected to grow from 80 million to 111 million by 2007. In urban India, the
same is expected to grow from 46 million to 59 million. Thus, the absolute size of rural
India is expected to be double that of urban India.
9
Availability, Affordability, Acceptability and Awareness provide us with a means of
developing appropriate strategies to tackle the marketing issues for marketing telecom
services in rural areas. Successful cases like the Grameen Phone in Bangladesh and Smart
Communications Inc in Philippines also provide us with some guidelines to tackling the
issue.
Operations management is about the way organizations produce goods and services.
Everything you wear, eat, sit on, use, read or knock about on the sports field comes to
you courtesy of the operations managers who organized its production. Every book you
borrow from the library, every treatment you receive at the hospital, every service you
expect in the shops and every lecture you attend at university all have been produced.
10
Operations are a transformation process; they convert a set of resources (INPUTS) into
services and goods (OUTPUTS). These resources may be raw materials, information, or
the customer itself. These resources are transformed into the final goods or services by
way of other 'transforming' resources - the facilities and staff of the operation.
Objectives
11
Buying products with the attributes they want at the lowest price possible
• Attributes
• Price
• Quality
• Image
• Performance
• Safety
• Place – distribution
• Time – delivery, availability
• What process?
• What resources do you need?
• Where do you get those resources?
12
Marketing Research
Information can be useful, but what determines its real value to the organization?
In general, the value of information is determined by:
The ability and willingness to act on the information.
The accuracy of the information.
The level of indecisiveness that would exist without the information.
The amount of variation in the possible results.
The level of risk aversion.
The reaction of competitors to any decision improved by the information.
13
The cost of the information in terms of time and money.
Once the need for marketing research has been established, most marketing research
projects involve these steps:
Problem Definition
The objective of the research should be defined clearly. To ensure that the
true decision problem is addressed, it is useful for the researcher to outline possible
scenarios of the research results and then for the decision maker to formulate plans of
action under each scenario. The use of such scenarios can ensure that the purpose of the
research is agreed upon before it commences.
14
Research Design
Exploratory research
Descriptive research
Causal research
15
There are two basic types of descriptive research: longitudinal studies and
cross-sectional studies. Longitudinal studies are time series analyses that make repeated
measurements of the same individuals, thus allowing one to monitor behavior such as
brand-switching. However, longitudinal studies are not necessarily representative since
many people may refuse to participate because of the commitment required. Cross-
sectional studies sample the population to make measurements at a specific point in time.
A special type of cross-sectional analysis is a cohort analysis, which tracks an aggregate
of individuals who experience the same event within the same time interval over time.
Cohort analyses are useful for long-term forecasting of product demand.
Secondary Data
Before going through the time and expense of collecting primary data, one
should check for secondary data that previously may have been collected for other
purposes but that can be used in the immediate study. Secondary data may be internal to
the firm, such as sales invoices and warranty cards, or may be external to the firm such as
published data or commercially available data. The government census is a valuable
source of secondary data.
Secondary data has the advantage of saving time and reducing data
gathering costs. The disadvantages are that the data may not fit the problem perfectly and
that the accuracy may be more difficult to verify for secondary data than for primary data.
16
republished data, one should obtain secondary data directly from its source. One also
should consider who the source is and whether the results may be biased.
There are several criteria that one should use to evaluate secondary data.
How current the data is and whether it applies to time period of interest.
Errors and accuracy - whether the data is dependable and can be verified.
Primary Data
Intentions - for example, purchase intentions. While useful, intentions are not a
reliable indication of actual future behavior.
Motivation - a person's motives are more stable than his/her behavior, so motive
is a better predictor of future behavior than is past behavior.
Behavior
17
Primary data can be obtained by communication or by observation.
Communication involves questioning respondents either verbally or in writing. This
method is versatile, since one needs only to ask for the information; however, the
response may not be accurate. Communication usually is quicker and cheaper than
observation. Observation involves the recording of actions and is performed by either a
person or some mechanical or electronic device. Observation is less versatile than
communication since some attributes of a person may not be readily observable, such as
attitudes, awareness, knowledge, intentions, and motivation. Observation also might take
longer since observers may have to wait for appropriate events to occur, though
observation using scanner data might be quicker and more cost effective. Observation
typically is more accurate than communication.
Industrial Segment
Personal Care
Household Care
Branded and Packaged Food and Beverages
Spirits and Tobacco
Branding
Distribution Network
Contract manufacturing
Large Unorganized Sector
18
Market Players
Domestic Players:-
ITC Limited
Marico
Nirma Limited
Foreign Players:-
Cadbury India Limited
Cargill
Coca Cola
Colgate Palmolive India
Hindustan Unilever Limited
Nestle India Limited
PepsiCo
Trends in Sectors
The FMCG sector has been registering double-digit growth in sales since the last
couple of years. Currently, with annual revenues of US$ 14. 74 billion, it is the
one of the most promising sectors.
The FMCG sector is witnessing rapid growth in rural areas and is estimated to
grow by 40 per cent compared to the growth of 25 per cent in urban areas.
PepsiCo has announced a US$ 500 million investment in India over the next three
years.
FMCG companies have acquired about 15 companies and have spread their
presence in more than a dozen countries.
19
Market size
20
Product Review
Cellular/Mobile phone
In addition to the standard voice function of a telephone, current mobile phones can
support many additional services such as SMS for text messaging, email, packet
switching for access to the Internet, and MMS for sending and receiving photos and
video. Most current mobile phones connect to a cellular network of base stations (cell
sites), which is in turn interconnected to the public switched telephone network (PSTN)
is called a cell. Generally, cellular telephone service is available in urban areas and along
major highways. As the cellular telephone user moves from one cell or area of coverage
to another, the telephone is effectively passed on to the local cell transmitter. A cellular
telephone is not to be confused with a cordless telephone (which is simply a phone with a
very short wireless connection to a local phone outlet). A newer service similar to cellular
21
Brand preferences and advertisement
Students leant about cellular phone from many sources, mainly from
friends and families, through advertisement and from their own experience. Whether a
promotion and advertising hurt or help a brand is under-researched (Mela, Gupta &
Lehman, 1997). In the long-run, advertisement help brands by making consumer less
consumer knowledge, attitude and behaviour (Evans,Moutinho & Van Raaj, 1996). And
for the ad to be seen, it must grab the attention of its target audience. ‘Ads originality’ as
defined from Pietes, Warlop and Wedel, (2002) were easier for customer to remember
than ordinary ads by increasing attention to it. This thus increased attention to the brand
being advertised.However, regardless of the content, ads for brand leaders are more
successful due to the influence of the brand (Simon, 1970). Ads for less popular brands
Liking towards the brand itself can influence liking for the brand (Hawkins, Best &
Coney, 1992). However according to study by Biehal, Stephens and Curlo (1992)
whether consumers like or dislike an ad does not necessarily lead to brand acceptance or
rejection. So, even though consumers may like the ad that they see, it does not necessarily
mean that they will go out and buy the brand advertised.Usually the consumer uses their
attitude towards the ad (Aad) in brand choice equaled that of attitude towards the brands
(AB).
differently between different genders (Maldonando, Tansuhaj & Muehling, 2003; Hogg
& Garrow, 2003; Putrevu, 2001).Prevoius study have proven that females were more
22
likely to engagae in elaboration than men (Maldonado & Muehling, 2003). Hogg and
Garrow (2003) found that women paid more intention about the details of the characters
of an ad when asked to analyze advertising messages. They said that this may be
explained by the fact that females have a greater tendency than men to consider external
In building brand preferences, Alreck and Settle (1999) proposed six strategies:
slogans,songs.
motives.
influencing brand preference. It did not discuss tangible aspects (i.e product
23
perception of a product in terms of attributes content and proportion and also influence
Attributes are the characteristic or features that an object may or may not
have and includes both intrinsic and extrinsic (Mowen & Minor, 1998) .Benefits is the
positive outcomes that come from the attributes.People seek products that have attributes
that will solve their problems and fulfills their needs (Mowen & Minor, 1998).
Understanding why a consumer choose a product based upon its attributes helps
marketers to understand why some consumers have preferences for certain brands (Gwin
& Gwin, 2003). In the study by Gwin and Gwin (2003), the Lancaster model of consumer
demand (1966, 1979), also referred to as the product attributes model, was used to
evaluate brand positioning.This model assumes that consumer choice is based on the
constraints. However there were two limitataions of the model: (1) the model is static and
deterministic and (2) the model does not explain how the preferences for attributes were
formed.This article also also didi not mention if experience with the product played a part
in choosing a product or brand (Myers, 2003). There is no evidence that certain attributes
24
are more related to customer loyalty than others (Romariuk & Sharp, 2003). It was, found
though, that the more attributes (non-negative) associated with a brand, the more loyal
the customer (Romariuk & Sharp,2003).Romariuk and Sharp (2003) suggested that
marketers should focus more on how many attributes the brand should be associated with
and not what attributes. However, this study did not specify what sort of attributes
marketers should associate the brand with; i.e. whether they should be relevant or
consumer accurately lean about product attribute performances since it would influence
bias.Unfounded product attribute relationship beliefs can mislead them into expecting
something that is not there.(Mason & Bequette, 1998). Hence if products fall short of
choice.Persistent preferences for product attribute soccurs when there is low ambiguity in
the initial potential choice for salient attributes coupled with experience,although those
attributes maybe irrelevant (i.e. an attributes usually not associated with favourable brand
outcomes (Muthukrishnan & Kardes, 2001). Consequently, Mason and Bequette (1998)
also said that perceptions on product performance based on salient attributes are more
important in influencing the consumer purchase behaviour than actual product attribute
performances. Similarly, Myers (2003) concluded that brand equity may be more
the nature of the attrinutes (eg. food, cosmetics) because they are constantly being
25
advertised and promoted.Similarly Rioo, Vasquez and Iglesias (2001) sugggeated that
consumer evaluation of a product can be broken down into evaluation related to product
(tangible or physical attributes) and brand name (intangible attributes, or images added to
the product due to its brand names). In his study on the relationship between human
values and consumer purchases, Allen (2001) found there was a significant association
etc.), product preference and tangible attribute importance with how consumers perceive
the product (i.e tangible attributes) and how they evaluate the product (i.e symbolic
importance of the product’s tangible attribute importances that are already important to
consumers.
more important than actual performance (Mason & Bequette, 1998).Mowen and Minor
(1998) suggested that marketing managers should know the attributes that consumers
expect in a product and how positively or negatively they rate these attributes to help
product attributes perceived as the most important by each individual consumer group in
order to build and maintain market share (Warrington & Shim, 2000). It is the consumer
who determines which attributes matter to them. Different consumer groups place
different importance on different attributes (Warrington & Shim,2000).It was found that
placed greater importance on product attributes and product orientataions than LP/WB
(weak brand commitment) consumers, which placed the most importance on price.
26
Markerters should consider using advertisement, which may play a role in
making attributee important to consumers that might not have been considered before
(Gwin & Gwin, 2003),Romariuk & Sharp (2003) suggested two objectives of short-term
and long-term brand building. In the short term, managers need to identify a specific
need to build up a ‘bank’ of consumer perception about the brand to make it the one most
often thought of and make it difficult for competitors to have access to the minds of
The brand name of the product itself is an important attribute. Brands have
both functional (product-related) and symbolic dimensions (del Rio,Vasquez & Iglesiaz,
2001), On the product related benefit side, consumer evaluate product performance based
on its capabilities, usage effectiveness, value for money and reliability. The purchase and
communication to improve their self image and deliver certain impressions to other
people in their environment (del Rio,Vasquez & Iglesiaz, 2001), Therefore the brand
benefits. Big brand means a better image and a better product (del Rio,Vasquez &
Iglesiaz, 2001), Howevwer, as mention earlier, Mason and Bequette (1998) suggested
that perceived product performance is more important than actual attribute performance.
Similarly Myers (2003) concluded that brand equity might be influenced by attribute
knowledge more than consumer preference. This may be due to consumer biasness and
prejudice, Consumers’ product evaluations are influenced by memory. The biasness can
27
be reduced by having current information, experience and knowledge (Mason and
Bequette ,1998). Therefore, it’s not surprising that brands that consumers believe offer
superior value are most preferred brands chosen often (Myers, 2003). Brands with higher
higher quality (Mowen & Minor, 1998; Siu & Wong, 2002). Consumers perceive that a
higher price can be attributed to the higher cost of quality control (Siu & Wong, 2002).
Some consumers are highly price sensitive (elastic demand),whereby a high prices may
shift consumers to competitive brands (Mowen & Minor, 1998). Therefore price can have
Dabur India
28
Dabur has 13 ultra-modern manufacturing units in:
Jammu & Kashmir
Uttar Pradesh
Himachal Pradesh
Madhya Pradesh
Rajasthan
Uttaranchal
West Bengal
Silvassa
Nepal
Dabur's Brands
Vatika
Anmol
Hajmola
Dabur Amla
Dabur Chyawanprash
Dabur Lal Dant Manjan
1048.5 1268.7
1148 1369.70
Sales 0 0
4.9 11.1 11.5 5.4
Other Income
109.6 136.1 187.9 243.3
Earnings before Tax
80.0 113.4 165.0 214.4
Profit before Tax
72 101.2 148 189.1
Profit after Tax
2.5 3.5 5.2 3.3***
EPS (Rs)
Exports to
29
United Kingdom
Egypt
Bangladesh
Dubai
Nigeria
Nepal
30
RESEARCH METHODOLOGY
SAMPLE DESIGN
SAMPLE UNIT: - All working people are included both the genders i.e. males and
females irrespective of their education level.
Research design:
The primary research was exploratory in nature. Exploratory research is
appropriate since it helps in identifying the opportunities present in the decision situation
and it also serves as a step towards further research activity. The study aimed at
identifying the functional gap between selection and utilization of FMCG products in
Institutional Markets with specific reference to Hotel Industry and Flight Catering
establishments and hence primary research was most appropriate for meeting the needs of
the objective in view is Exploratory research.
Sampling:
31
Probability sampling method has been used in this study and all catering
establishments had equal chances of being included in the sample size. Under probability
sampling, Simple random sampling technique was undertaken since there was a definite
sampling frame and prior information on the objects or sampling units were available
before the sampling process. Simple random sample was undertaken because the
population from which the sample is to be chosen is homogenous. The data was collected
through questionnaire and the research was designed to employ appropriate statistical
tools.
Product Research
In this year when almost all the stocks have been tumbled heavily on the
Dalal Street, the one sector which completely outperformed the market is FMCG. During
last 52 weeks the SENSEX has lost by around 53%, while BSE FMCG has just lost by
below 10%. Sensex witnessed strong bull market journey with almost 7 fold gains from
3000 in 2003 to 21000 in 2008, the FMCG did not match the Index equivalently but
managed to follow the trend by almost 3.5 times gain for the same period. Now in a bear
market scenario, the FMCG is bucking the trend which is a big sign of relief for
investors. Hence we believe FMCG is strong and defensive sector and one should
consider this sector for his portfolio and allocate some portion for it.
32
SENSEX v/s BSE FMCG INDEX
Growth in rural India, where 50% of FMCG sales come from, has been
quite strong. A lot of money is being spent in rural India through employment
generation schemes, while the loan waiver changes sentiment substantially. The
country has been blessed with good monsoons and good agricultural production.
The food inflation has also helped farmers with rise in income. Hence the purchase
power in rural areas has increased and spending behaviour is also changing. These help
FMCG companies with more revenues, while higher and middle class urban consumers
demand is inelastic for the goods and services that FMCG companies offer, so slowdown
in demand is not expected for FMCG.
33
Favourable Pricing Strategies
With the cost of almost every input ranging from palm oil and milk to
packaging material zooming upwards, FMCG companies had increased the price
smoothly to mange cost escalation. Colgate, for instance, had increased prices by 3-4%
earlier this year while Dabur had upped prices of hair oil, chyawanprash and toothpaste
by 4% and shampoos by 7%. Marico had increased prices of Parachute hair oil by 5-6%
while Hindustan Lever too had upped prices of a few brands by about 1 to 28%.
Companies with large product portfolios and a presence across price points - Hindustan
Unilever and Dabur - managed to offset margin pressures through shifts in the product
mix. With inflation showing signs of easing, the companies, which have taken price
increases on their products, are likely to benefit in the forthcoming quarters.
During the second quarter the crude price has fell to almost $60 from
record high of $ 147. For raw materials such as palm oil and packaging material, where
prices bear clear linkages to crude oil, it has been big relief for FMCG companies.
Though to match rising cost the companies had increased product pricing, the operating
margin has shrunk by 150-200 bps. However the companies made forward purchases or
built up additional inventories in the latter part of 2007 and in the first quarter of 2008, to
guard against a further rise. Dabur India, for which packaging is a key input, had covered
most of its requirements for the June quarter through forward purchases in the March
quarter itself. Now, after this challenging phase, FMCG makers may have less to worry
about on the raw material front over the next few months, as a range of inputs -
palm oil, packaging plastics and petroleum derivatives have seen a 20-30% price
correction, tracking the meltdown in crude oil prices which will recover the operating
margins.
The government had also supported with decrease in peak import duty for
raw materials and also excise cut in packaging material. The tax holiday at Himachal
Pradesh, Jammu and Kashmir, Uttarakhand will be significant benefit for FMCG
companies, which will also continue to improve bottom lines.
34
Better Product mix
The companies are improving its product mix with changing dynamics of
consumer behaviour. As consumers are becoming health conscious, the manufacturers are
ready to woo them by offering more Ayurvedic and Herbal products. Change in life-style
affluent Indians have also spurred the growth for FMCG products with increasing
‘premiumisation’ of portfolios and categories like anti-aging solutions, hair colors etc.
Besides, the Indian rural regions too are witnessing change in lifestyle, further pushing
up the FMCG sales.
Expansion to continue
Though the news of plant shut down and expansion project getting
delayed of the major Indian companies are getting more space in Indian media, the
FMCG majors are going ahead with expansion plans organically and inorganically.
• Dabur India acquired 72.15% of women’s skin-care company Fem Care Pharma
(FCPL) for Rs 203.7 crores in an all-cash deal. It is also set to start production of
personal care products from its new plant in UAE by December 2008, to meet the
increasing demand for its products.
• After earlier brand acquisitions in Egypt and South Africa the Marico group is
looking at more African acquisition to service new markets across Africa and
other countries in nearby region.
• Emami is planning to set up a manufacturing facility in Africa with an investment
of Rs. 90 crore, expected to be operationalised by 2010, as it looks to strengthen
its hold in the continent.
• Nestle India is also considering more acquisition in the country.
• ITC is to increase its Food Products to tap more market.
35
Market
CMP Net Sales Net Profit P/E 52 week price Debt-
Cap
company Equity
Rs. Cr Rs Cr % Rs. Cr %
Ratio High Low Ratio
Growth Growth
5235 384.95 430.17 18.22 63.50 16.00 20.82 524.90 342.30 0.02
Colgate
4110.9 11.63 265.50
Hind. 52142 236.00 21.08 456.00 26.97 169.00 0.04
1
Unilever
1351.6 1110.3 1880.0 1200.0
13218 22.15 131.76 13.18 26.09 0.02
Nestle 0 7 0 0
3862.6
64914 172.15 18.00 802.72 4.13 20.82 239.40 132.05 0.02
ITC 7
75.10 107.82
Dabur 6497 699.30 14.02 18.12 18.87 133.50 60.15 0.04
India
P/E
Ratio High Low
Debt-
Future Outlook
Indian FMCG sector is fourth largest sector in the economy. Over a period
of time with growth in GDP, change in lifestyle and with established distribution system
across the country this sector is also growing with new market horizons and also seize
sustained growth in coming years. Indian FMCG market experienced 16% growth in FY
07-08 and expected to grow by roughly 20% in FY 08-09.
In the Industry all the major players are growing consistently. The
companies are having almost negligible debt proportion in their balance-sheet. It makes
very safe and strong case for anyone to invest. Among heavyweights HUL has strong
presence in the Indian FMCG market so one can hold the stock or buy at decline. ITC is
still having major part of revenues from cigarette business. Its FMCG business is still in
the investment phase.
Colgate is the market leader in the oral care segment with consistently
holding significant market share in the segment. Dabur is diversifying in to many
segments with increasingly adding presence in global market as well. Marico is also the
leader in hair care market and aggressively increasing its presence in overseas market
organically and inorganically. P&G is increasing penetration in Indian markets especially
in health care and feminine hygiene. We believe these stocks can outperform in bearish
market scenario. Hence, one should add these stocks in his portfolio, which can give
good returns inlong term.
36
India has always been a country with a big chunk of world population, be
it the 1950’s or the twenty first century. In that sense, the FMCG market potential has
always been very big. However, from the 1950’s to the 80’s investments in the FMCG
industry were very limited due to low purchasing power and the government’s favouring
of the small-scale sector. Hindustan Lever Limited (HLL) was probably the only MNC
company that stuck around and had its manufacturing base in India.
At the time, the focus of the organised players like HLL was largely urbane. There too,
the consumers had limited choices. However, Nirma’s entry changed the whole Indian
FMCG scene. The company focused on the ‘value for money’ plank and made FMCG
products like detergents very affordable even to the lower strata of the society. Nirma
became a great success story and laid the roadmap for others to follow.
MNC’s like HLL, which were sitting pretty till then, woke up to new market realities and
noticed the latent rural potential of India. The government’s relaxation of norms also
encouraged these companies to go out for economies of scale in order to make FMCG
products more affordable. Consequently, today soaps and detergents have almost 90%
penetration in India.
Post liberalisation not only saw higher number of domestic choices, but also imported
products. The lowering of the trade barriers encouraged MNC’s to come and invest in
India to cater to 1bn Indians’ needs. Rising standards of living urban areas coupled with
the purchasing power of rural India saw companies introduce everything from a low-end
detergent to a high-end sanitary napkin. Their strategy has become two-pronged in the
37
last decade. One, invest in expanding the distribution reach far and wide across India to
enable market expansion of FMCG products. Secondly, upgrade existing consumers to
value added premium products and increase usage of existing product ranges.
So you could see all companies be it HLL, Godrej Consumer, Marico, Henkel, Reckitt
Benckiser and Colgate, trying to outdo each other in getting to the rural consumer first.
Each of them has seen a significant expansion in the retail reach in mid-sized towns and
villages. Some who could not do it on their own, have piggy backed on other FMCG
major’s distribution network (P&G-Marico). Consequently, companies that have taken to
rural India like chalk to cheese have seen their sales and profits expanding. For example,
currently 50% of all HLL sales come from rural India, and consequently, it is one the
biggest beneficiaries of this (see table).
There are others, like Nestle, which have till date catered mostly to urban India but have
still seen good growth in the last decade. The company’s focus in the last decade has
largely been on value added products for the upper strata of society. However, in the last
couple of years, even these companies have looked to reach consumers at the slightly
lower end.
One of the biggest changes to hit the FMCG industry was the ‘sachet’ bug.
In the last 3 years, detergent companies, shampoo companies, hair oil companies, biscuit
companies, chocolate companies and a host of others, have introduced products in
38
smaller package sizes, at lower price points. This is the single big innovation to reach
new users and expand market share for value added products in urban India, and for
general FMCG products like detergents, soaps and oral care in rural India.
What does all this mean for the future of FMCG industry in India?
Undoubtedly, all this is good for the consumers, who can now choose a variety of
products, from a number of companies, at different price points. But for the players who
cater to the Indian consumer, the future brings a lot more competition. In this
environment, only the innovators will survive. Focus will be the key to profitability (ala
HLL). From an investor’s point of view, Indian FMCG companies do offer long-term
growth opportunities given the low penetration and usage in most product categories. To
choose the best investment opportunities look at the shapers (i.e. innovators) that have
been constantly proactive to market needs and have built strong, efficient and intelligent
distribution channels. Management vision to growth is the key, as consumers going
forward are likely to become even more sophisticated in their demand.
39
DATA ANALYSIS
Before analysis can be performed, raw data must be transformed into the
right format. First, it must be edited so that errors can be corrected or omitted. The data
must then be coded; this procedure converts the edited raw data into numbers or symbols.
A codebook is created to document how the data was coded. Finally, the data is tabulated
to count the number of samples falling into various categories. Simple tabulations count
the occurrences of each variable independently of the other variables. Cross tabulations,
also known as contingency tables or cross tabs, treats two or more variables
simultaneously. However, since the variables are in a two-dimensional table, cross
tabbing more than two variables is difficult to visualize since more than two dimensions
would be required. Cross tabulation can be performed for nominal and ordinal variables.
40
from one subgroup to another. A third variable can be introduced to uncover a
relationship that initially was not evident.
Conjoint Analysis
The conjoint analysis is a powerful technique for determining consumer preferences for
product attributes.
Hypothesis Testing
Type II error: occurs when one accepts the null hypothesis when in fact the null
hypothesis is false.
41
Because their names are not very descriptive, these types of errors
sometimes are confused. Some people jokingly define a Type III error to occur when one
confuses Type I and Type II. To illustrate the difference, it is useful to consider a trial by
jury in which the null hypothesis is that the defendant is innocent. If the jury convicts a
truly innocent defendant, a Type I error has occurred. If, on the other hand, the jury
declares a truly guilty defendant to be innocent, a Type II error has occurred.
42
A company's sales revenue comes from Product A (50%), Product B
(30%), and Product C (20%). The firm wants to know whether recent fluctuations in
these proportions are random or whether they represent a real shift in sales.
c2 = å ( Oi - Ei )2 / Ei
where
To use the output of the chi-square function, one uses a chi-square table.
To do so, one needs to know the number of degrees of freedom (df). For chi-square
applied to cross-tabulated data, the number of degrees of freedom is equal to
ANOVA
43
Another test of significance is the Analysis of Variance (ANOVA) test.
The primary purpose of ANOVA is to test for differences between multiple means.
Whereas the t-test can be used to compare two means, ANOVA is needed to compare
three or more means. If multiple t-tests were applied, the probability of a TYPE I error
(rejecting a true null hypothesis) increases as the number of comparisons increases.
Describe the variation by breaking it into three parts - the total variation, the
portion that is within groups, and the portion that is between groups (or among
groups for more than two groups). The total variation (SStotal) is the sum of the
squares of the differences between each value and the grand mean of all the
values in all the groups. The in-group variation (SSwithin) is the sum of the
squares of the differences in each element's value and the group mean. The
variation between group means (SSbetween) is the total variation minus the in-
group variation (SStotal - SSwithin).
Measure the difference between each group's mean and the grand mean.
This F-test assumes that the group variances are approximately equal and
that the observations are independent. It also assumes normally distributed data; however,
since this is a test on means the Central Limit Theorem holds as long as the sample size is
not too small.
44
ANOVA is efficient for analyzing data using relatively few observations
and can be used with categorical variables. Note that regression can perform a similar
analysis to that of ANOVA.
Discriminate Analysis
Determine the discriminant function coefficients that result in the highest ratio of
between-group variation to within-group variation.
45
Discriminant analysis analyzes the dependency relationship, whereas factor
analysis and cluster analysis address the interdependency among variables.
Factor Analysis
The factor loading can be defined as the correlations between the factors
and their underlying variables. A factor loading matrix is a key output of the factor
analysis. An example matrix is shown below.
Each cell in the matrix represents correlation between the variable and the
factor associated with that cell. The square of this correlation represents the proportion of
the variation in the variable explained by the factor. The sum of the squares of the factor
loadings in each column is called an eigenvalue. An eigenvalue represents the amount of
variance in the original variables that is associated with that factor. The communality is
the amount of the variable variance explained by common factors.
46
criteria for determining the number of factors include the Scree plot criteria and the
percentage of variance criteria.
Cluster Analysis
Market segmentation usually is based not on one factor but on multiple factors. Initially,
each variable represents its own cluster. The challenge is to find a way to combine
variables so that relatively homogenous clusters can be formed. Such clusters should be
internally homogenous and externally heterogeneous. Cluster analysis is one way to
accomplish this goal. Rather than being a statistical test, it is more of a collection of
algorithms for grouping objects, or in the case of marketing research, grouping people.
Cluster analysis is useful in the exploratory phase of research when there are no a-priori
hypotheses.
Formulate the problem, collecting data and choosing the variables to analyze.
Choose a distance measure. The most common is the Euclidean distance. Other
possibilities include the squared Euclidean distance, city-block (Manhattan)
distance, Chebychev distance, power distance, and percent disagreement.
Determine the number of clusters. They should be well separated and ideally they
should be distinct enough to give them descriptive names such as professionals,
buffs, etc.
47
Profile the clusters.
PRIMARY DATA:
Primary data was collected through a self administrated questionnaire. This questionnaire
aims to gather information related to various Branded Electronic Home Appliances.
SECONDARY DATA:
Secondary data was collected through magazines, research papers, internet etc.
RESEARCH INTRUMENTS
QUESTIONNAIRE DESIGN:
48
DATA ANALYSES FOR PREFERENCE FOR TOOTHPASTE IN RURAL
MARKET:-
In the initial years, the rural consumers preferred tooth powers, datoons etc.
but from the last decade, the preference of rural consumers towards toothpaste has been
changed. A huge number of toothpastes of different companies are sell in rural market.
Colgate, Pepsodent are the most popular toothpaste brands in rural market. The rural
consumers preference towards the different toothpaste brands are given in following pie
chart.
10%
10%
35% PEPSODENT
COLGATE
CLOSE UP
15%
BABOOL
OTHERS
30%
49
DATA ANALYSIS FOR THE PREFERENCE FOR SOAP IN RURAL MARKET:-
On the basis of their choice, I has get the following data given in following
table:-
60
50
50
PECENTAGE
40 LUX
30 LIFEBOY
30
REXONA
20 OTHERS
12
8
10
0
LUX LIFEBOY REXONA OTHERS
BRANDS
As per given in the above table, the 90% of the soap market is
coverd by the products of Hindustan Uniliver.50% of rural consumers prefers HUL’s
Lux, where as 30% goes towards HUL’s Lifeboy third position is also acquired by a HUL
product where 15% of the market captured by Rexona. 8% of rural consumers prefers
some other soap brands.
CONCLUSION:-
In this analysis , I fonnd that a vast majority of rural consumers prefers
Lux as their more faithful brand.
50
DATA ANALYSIS FOR PREFERENCE FOR SHAMPOO IN RURAL MARKET:-
45 42
40 36
35
PERCENTAGE
30 CLINIC PLUS
25 SUNSILK
20 16 CHICK
15 OTHERS
10 6
5
0
CLINIC PLUS SUNSILK CHICK OTHERS
PRODUCTS
51
DEMAND OF SHAMPOO IN SACHE CATAGORY
35 32
PERCENTAGE
28
30
25
18
20
15 12 10
10 HEADS &SHOULDERS
5
0 PANTENE
SUNSILK
S
LK
E
S
ER
U
N
ER
SI
PL
CLINIC PLUS
TE
LD
TH
N
IC
U
SU
PA
OTHERS
O
O
N
H
LI
&S
C
S
D
EA
H
. BRANDS
CONCLUSION:-
This analysis shows that a vast majority of rural consumers prefers HUL’s
clinic plus and Sunsilk in high and medium size sample. But on the other hand, in sachet
sample there is different story. More than 50% of the rural consumers prefers the brands
of P&G (Heads & Shoulders and Pantene).
52
DATA ANALYSIS OF CONSUMERS PREFERNCE TOWARDS DETERGENTS
D EM AN D OF D E TER GEN TS
45 42
40
34
35 W HEE L
30 G HA RI
PERCENTAGE
25
TID E
20
13 S U R F E XE L
15
10 6 5 O TH E R S
5
0
W HE EL G HA RI TID E S U R F O TH E R S
E XE L
BRANDS
53
DEMAND OF DITERGENTS IN SACHE
10%
12% TIDE
43% SURF EXEL
ARIAL
OTHERS
35%
As per given in above table , the consumers preference towards detergents are as
follows:-
54
CONCLUSION:-
As given in the above table, lump sum the half of the detergent market is
covered by HUL and P&G products. Nirma which was the initiator of introduction of
detergent in rural market, is currently out of the market. this condition shows that the
rural consumers are also want to quality products, only price is a factor in front of them.
100
90
80
70
60
IN (%) 50 VIM
40
30 OTHERS
20 NO CLEANER
10
0
VIM OTHERS NO
CLEANER
BRANDS
55
As per given in the table, vim is the leading brand in the utensil cleaner
segment. 85% of the rural market is covered by vim , 10% consumers prefers other
brands where as 5% consumer are those who does not uses any utensil cleaner.
As per fairness cream is concern, there is not more brands are in the
competition. Only few brands of HUL and emami captures the market.a brief description
is given in the following table.
70 65
60
PERCENTAGE
The HUL’s Fair & Lovely is most popular brand in the rural market
most of the consumers specially female consumers uses this brand. Approx 65% of rural
consumers uses Fair & Lovely as their best trusted brand. Second position is also
occupied by HUL’s product (Ponds) which is preferred by 23% of consumers, 10%
consumers prefers Vicco and 2% uses some other brands.
56
RURAL CONSUMERS PREFERENCE TOWARDS SAVING CREAM:-
Generally in the rural areas the consumers prefers barbers for the purpose
of saving or other relevant purpose. But in the semi-urban areas and some of the rural
areas, consumers are started to depend on their own saving kit. So what from the few
years, the demand of different savin creams of different companies has been increased.
A brief analysis of different brands of different companies is given in
following table:-
45 42
40
35 30 PALMOLIVE
PERCENTAGE
30
25 VJHON
20 16
15 12 OLD SPICE
10 OTHERS
5
0
PALMOLIVE VJHON OLD SPICE OTHERS
BRANDS
CONCLUSION:-
57
The analysis of consumer preference toward saving cream shows that
such a vast area of market covered by Palmolive and Vjohn.
D E MAN D OF B IS C U IT B R AN D S
70 62
60
50 P A RLE -G
PERCENTAGE
40 S UNF E A S T
30 23 B RITA NNIA
20 O THE RS
10
10 5
0
P A RLE -G S UNF E A S T B RITA NNIA O THE RS
BRANDS
Parle-G is very old and most trusted biscuit brand for the rural
consumers. From many years , consumers prefers it due to it’s low price, good taste, and
availability. At the present time, it captures approx 62% of total rural market share. From
the few years ITC’s Sun feast creats a good demand among the rural consumers. 23% of
rural consumers prefers sunfeast and also it’s demand is increasing due to it’s taste and
58
good publicity and distribution. Consumers prefer 10% Britaania brands and 5%
consumers prefers other brands.
In the segment market, generally consumers had prefer local tea , but
from the few years they starts to use some brands of the different tea companies because
of the avaibility of tea in small sachets. The following table provides a brief details about
the different tea brands popular in the rural market.
10%
11% 32%
TAZA
TATA TEA
DOUBLE DIMOND
TAJ MAHAL
21% OTHERS
26%
59
10% consumers are among those who prefers some other tea
nrands.
CONCLUSION:-
As per given in the above table taza and tata tea are the leading tea brands
in the rural market.
The rural consumer preferences towards different hair oil brands are given
in the following table:-
DEMAND
5%
18%
31%
HERBAL OILS
DABUR AMLA
PARASUIT
BAJAJ ALMOND
21% OTHERS
25%
60
of rural consumers. 18% consumers prefers Bajaj Almond and 5% prefers some other
hair oil brands.
SWOT ANALYSIS
61
Strengths:
We are able to respond very quickly as we have no red tape, no need for higher
management approval, etc.
We are able to give really good customer care, as the current small amount of
work means we have plenty of time to devote to customers
Our lead consultant has strong reputation within the market
We can change direction quickly if we find that our marketing isnot working
We have small overheads, so can offer good value to customers
Weaknesses:
Our company has no market presence or reputation
We have a small staff with a shallow skills base in many areas
We are vulnerable to vital staff being sick, leaving, etc.
Our cash flow will be unreliable in the early stages
Opportunities:
Our business sector is expanding, with many future opportunitiesfor success
Our local council wants to encourage local businesses with work where possible
Our competitors may be slow to adopt new technologies
Threats:
Will developments in technology change this market beyond our ability to adapt?
A small change in focus of a large competitor might wipe out anymarket position
we achieve
62
The consultancy might therefore decide to specialize in rapid response, good
value services to local businesses. Marketing would be in selected local
publications, to get the greatest possible market presence for a set advertising
budget. The consultancy should keep up-to-date with changes in technology
where possible.
A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified as
strengths (S) or weaknesses (W), and those external to the firm can be classified as
opportunities (O) or threats (T). Such an analysis of the strategic environment is referred
to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's resources
and capabilities to the competitive environment in which it operates. As such, it is
instrumental in strategy formulation and selection. The following diagram shows how a
SWOT analysis fits into an environmental scan:
SWOT Matrix
Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for
developing a competitive advantage. Examples of such strengths include:
patents
strong brand names
63
good reputation among customers
cost advantages from proprietary know-how
exclusive access to high grade natural resources
favorable access to distribution networks
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the
following may be considered weaknesses:
lack of patent protection
a weak brand name
poor reputation among customers
high cost structure
lack of access to the best natural resources
lack of access to key distribution channels
In some cases, a weakness may be the flip side of a strength. Take the case
in which a firm has a large amount of manufacturing capacity. While this capacity may
be considered a strength that competitors do not share, it also may be a considered a
weakness if the large investment in manufacturing capacity prevents the firm from
reacting quickly to changes in the strategic environment.
Opportunities
The external environmental analysis may reveal certain new opportunities for profit and
growth. Some examples of such opportunities include:
an unfulfilled customer need
arrival of new technologies
loosening of regulations
removal of international trade barriers
64
Threats
Changes in the external environmental also may present threats to the firm. Some
examples of such threats include:
shifts in consumer tastes away from the firm's products
emergence of substitute products
new regulations
increased trade barriers
To develop strategies that take into account the SWOT profile, a matrix of
these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is
shown below:
S-O strategies pursue opportunities that are a good fit to the company's strengths.
S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability
to external threats.
65
W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it
highly susceptible to external threats.
Limitations
66
CONCLUSION:
As I has analyzed the various data based on questionnaire, a fact has came
into light that HUL’s products are the most known and popular Brand in context of home
FMCG products in rural market followed by DABUR, ITC and P&G. Because of huge
product line, cheaper cost, brand loyalty, good publicity and advertisement, the rural
consumers generally prefers the products of HUL in all segments.
Except it, people firstly prefer for good quality and comparatively low prices products.
67
SUGGESTIONS
The rural market is very large in compare to the urban market as well as it
is more challenging market. The consumer wants those products which are long lasting,
good, easy to use and cheaper. The income level of rural consumers is not as high as the
income level of urban consumers that’s why they want low price goods. It is one of the
reason that the sell of sachet is much larger in the rural area in all segments.
68
BIBLIOGRAPHY
.
• Arthur A Thompson, Jr. A J Strickland III, Strategic Management, Thirteenth Edition:
New
Delhi, Tata McGrawhill publishing Company Limited, 2003) Chapter-4, Page 121.
• Balmer, J.M.T. (1998), "Corporate identity and the advent of corporate marketing",
Journal of
Marketing Management, Vol. 14 pp.936-96.
• Chernatony, L., McDonald, M. (1998), Creating Powerful Brands in Consumer, Service
and
Industrial Markets, Butterworth-Heinemann, Oxford.,
• Chopra.S and Meindl, Supply Chain Management; Strategy, Planning and Operation,
Pearson Education Asia, New Delhi, 2001.
• Clemons, E.K. (1999) Marketing Operation and the Boundary of the Firm, Harvard
Business
School Press, 219–42.
• Donald R Cooper, Pamela S Schindler, Business research methods (Sixth edition,
New
Delhi, Tata McGrawhill publishing company limited, 2002) Chapter-18, Page 577.
• Durkin, M., Bennett, H. (1999), "Employee commitment in retail industry:
identifying and
exploring hidden dangers", International Journal of Brand Marketing, Vol. 17 No.3, pp.124-
34.
• J Paul Peter, Jerry C Olson, Consumer Behavior and Marketing Strategy ( Mc
Grawhill,
69
International edition, 1999 ), Section 1, page 17.
• Jain P.C, Monika Bhatt, Consumer behavior in Indian Context (S Chand and
company
limited, First Edition, 2003, New Delhi 110055), Chapter1, page 1-6, Chapter2, Page
7-19.
Chapter 13, page 113-140.
http://www.itcportal.com
http://www.google.co.in/
http://www.blonnet.com
http://www.just-food.com
http://www.thehindubusinessline.com
http://www.imcri.org
http://www.scribd.com
Appendix
QUESTIONAIRE: -------
NAME:-
OCCUPATION:-
TOTAL INCOME: - A) BELOW 6000 p.m
B) 6000 TO 12000
C) MORE THAN 12000
ADDRESS:-
70
DIST.:-
STATE;-
PHONE NO.:-
71
11) WHICH BISCUIT YOU PREFER?
A) PARLE-G__ B) SUNFIST__ C)BRITANNIA__ D) OTHERS__
72