CHANGING TRENDS IN FMCG INDUSTRY IN INDIA
By Shubhangi Sood MDU-MBA(Victor)
Under the Guidance and Supervision of PROF: ALOK ANAND
Introduction to FMCG Industry
FMCG Concept and Definition:
The term FMCG (fast moving consumer goods), although popular and frequently used does not have a standard definition and is generally used in India to refer to products of everyday use. Conceptually, however, the term refers to relatively fast moving items that are used directly by the consumer. Thus, a significant gap exists between the general use and the conceptual meaning of the term FMCG.
Further, difficulties crop up when attempts to devise a definition for FMCG. The problem arises because the concept has a retail orientation and distinguishes between consumer products on the basis of how quickly they move at the retailer’s shelves. The moot question therefore, is what industry turnaround threshold should be for the item to qualify as an FMCG. Should the turnaround happen daily, weekly, or monthly? One of the factors on which the turnaround depends is the purchase cycle. However, the purchase cycle for the same product tend to vary across population segments. Many low-income households are forced to buy certain products more frequently because of lack of liquidity and storage space while relatively high-income households buy the same products more infrequently. Similarly, the purchase cycle also tends to vary because of cultural factors. Most Indians, typically, prefer fresh food articles and therefore to buy relatively small quantities more frequently. This is in sharp contrast with what happens in most western countries, where the practice of buying and socking foods for relatively longer period is more prevalent. Thus, should the inventory turnaround threshold be universal, or should it allow for income, cultural and behavioral nuances?
Characteristics of FMCG Products: • • • Individual items are of small value. But all FMCG products put together account
for a significant part of the consumer's budget. The consumer keeps limited inventory of these products and prefers to purchase
them frequently, as and when required. Many of these products are perishable. The consumer spends little time on the purchase decision. Rarely does he/she
look for technical specifications (in contrast to industrial goods). Brand loyalties or recommendations of reliable retailer/dealer drive purchase decisions. • • Trial of a new product i.e. brand switching is often induced by heavy
advertisement, recommendation of the retailer or neighbors/friends. These products cater to necessities, comforts as well as luxuries. They meet the
demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers.
ABOUT THE INDUSTRY IN INDIA
FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge. The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands,
and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands According to a report by the Federation of Indian Chambers of Commerce and Industry (FICCI), several FMCG registered double-digit growth in value terms, for example, shaving cream (20%), deodorant (40%), branded coconut oil (10%), anti-dandruff shampoos (15%), hair dyes (25%) and cleaners and repellents (20%). On the contrary, negative growth of up to 8% was registered in products such as personal healthcare, laundry soaps, dish wash, toilet soap, toothpaste and toothpowder.
Industry Category and Products Household Care
Personal Wash:The market size of personal wash is estimated to be around Rs. 8,300 Cr. The personal wash can be segregated into three segments: Premium, Economy and Popular. The penetration level of soaps is ~92 per cent. It is available in 5 million retail stores, out of which, 75 per cent are in the rural areas. HUL is the leader with market share of ~53 per cent; Godrej occupies second position with market share of ~10 per cent. Detergents:The size of the detergent market is estimated to be Rs. 12,000 Cr. Household care segment is characterized by high degree of competition and high level of penetration. In washing powder HUL is the leader with ~38 per cent of mar-ket share. Other major players are Nirma, Henkel and Proctor & Gamble.
60 per cent. toothbrushes . The penetration level of toothpowder/toothpaste in urban areas is three times that of rural areas. Sachet makes up to 40 per cent of the total shampoo sale. hair colorants & conditioners. Marico is the leader in Hair Oil segment with market share of ~ 33 per cent.23 per cent. 3. Shampoos:The Indian shampoo market is estimated to be around Rs. This segment is dominated by Colgate-Palmolive with market share of ~49 per cent.. and hair gels.Personal Care
Skin Care:The total skin care market is estimated to be around Rs.17 per cent. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent. The skin care market is at a primary stage in India. while HUL occupies second position with market share of ~30 per cent. Again the market is dominated by HUL with around ~47 per cent market share. The penetration level of this segment in India is around 20 per cent. 3. Antidandruff segment constitutes around 15 per cent of the total shampoo market. shampoos. Hair Care:The hair care market in India is estimated at around Rs. Oral Care:The oral care market can be segmented into toothpaste . P&G occupies second position with market share of around ~23 per cent.700 Cr. It has the penetration level of only 13 per cent in India. The total toothpaste market is estimated to be around Rs. 3. In
. The market is further expected to increase due to increased marketing by players and availability of shampoos in affordable sachets. toothpowder . 2. fol-lowed by CavinKare with a market share of ~12 per cent and Godrej with a market share of ~3 per cent. It has low penetration level even in metros.500 Cr.400 Cr.800 Cr. Dabur occu-pies second position at ~17 per cent. The hair care market can be segmented into hair oils.
Colgate and Dabur are the major players. More than 50 per cent of the market share is capture by unorganized players. Coffee :The Indian beverage industry faces over supply in segments like coffee and tea. The major players in this segment are Nestlé. ITC. The oral care market. Tea :The major share of tea market is dominated by unorganized players. more than 50 per cent of the market share is in unpacked or loose form. Godrej. Nestle and Amul slug it out in the powders segment. and others.600 Cr. 4.toothpowders market. This category has 18 major brands aggregating Rs. remains under penetrated in India with penetration level ~50 per cent. es-pecially toothpastes. However. ready to eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury. HUL and Tata Tea.
Food & Beverages
Food Segment :The foods category in FMCG is gaining popularity with a swing of launches by HUL. The food category has also seen innovations like softies in ice creams.
. Leading branded tea players are HUL and Tata Tea.
1. Of that. among others. More consumers entering the market place (Rural and urban base of pyramid) For these developments to catalyse faster there are two sides of the equation that need to come together demand and supply along with other systemic factors. as opposed to services or essential consumption items like rent and education Rising Urbanization
. Expanding purchase basket resulting in higher penetration of products 2. a further 60% is due to retail spends – goods and products that people consumer. with a continuing and substantial impact on consumer disposable incomes enabling good growth for the FMCG sector. unlike most Asian economies. Increased consumption with higher disposable household family income 3. Over the past few years. The growth rate in 2008-09 was lower (6. Increasing Consumer Income Increase in incomes is largely an outcome of economic growth across sectors. Demand-side Drivers Consistent GDP Growth The Indian economy has been consistently growing over the last few years. has a very high rate of private consumption (61%).India has seen increased economic growth. High Private Consumption The Indian economy.PESTLE Analysis
The current economic trend.7%) compared to previous year. exhibiting modest demand and supply is likely to have a medium-term impact on the demand for FMCG products but promises revival and higher growth in the long term based on the following fundamentals: 1.
With rising urbanization. such as policy change and investments in infrastructure development. Some of the policy changes include: • Automatic investment approval (including foreign technology agreements within specified norms).India has 70% of its population living in rural areas. an additional 75 million consumers will have moved into cities. Average labor cost in India is ~US$ 90/month compared to US$190/month in China. Favorable changes in Government Policies The Indian government has been trying to foster the growth of various categories of FMCG by way of making policy changes. more people will have exposure to modern products and brands and thus shift to branded and packaged goods and products By 2015.300/month in Taiwan. especially for export production • Capital goods freely importable.
Systemic Drivers for Sectoral Growth
Several other factors are also encouraging for FMCG sector growth in the long run. not only buying FMCG products for themselves but also serving as a conduit for information and goods to their families still in rural India Increasing Discretionary Spends Another encouraging factor is the falling spends on basic food items which frees up consumer income for other categories of FMCG products. This trend is noticeable among both urban and rural consumers. including second hand ones
. raw materials and intermediates. US$ 210/month in Thailand and even higher US$1. Low labor cost India has by far the lowest labor cost compared to many emerging countries giving it an edge for establishing manufacturing base for both Domestic and International FMCG brands. up to 100 per cent foreign equity for most of the food processing sector • Quantitative restrictions removed • Five-year tax holiday for new food processing units in fruits and vegetable processing • Customs duties reduced on plant and equipment.
Challenges With the growth drivers in place. An outlay of Rs. The railways are also increasing capacity through increasing tracks. Emergence of Private Labels. lack of uniformity. Infrastructural Bottlenecks .• De-reservation of most FMCG categories from SSI • Many states have also begun competing with each other to offer incentives to different sectors including FMCG. of which over 96% has been completed. Infrastructure Development The government has invested a considerable amount in the Golden quadrilateral project to connect the four corners of the country. Regulatory Constraints 5. 2. major district roads and rural roads. 59.
. 50% of existing highways are being improved and expanded. high octroi & entry tax and changing tax policies. land at concessional rates and subsidies to encourage economic development.000 crores was earmarked for road development projects in the 10th Plan. transportation infrastructure and cost of infrastructure and Pass-offs. improving existing tracks and adding more freight compartments to enable better carrying of goods and products. between the aforementioned projects as well as projects to develop the National highways (Primary system). fiscal incentives.Complicated tax structure. high indirect tax. Tax Structure . 4. in the form of tax holidays. there are many issues and challenges the sector grapples with. power cost. 3. the state highways (secondary system).Agriculture infrastructure. The key challenges faced by FMCG sector players in India are as follows: 1. Price of Inputs.
while Kinley or Aquafina cost Rs. 13. have to pay this extra charge. The taxation rate policies on many FMCG goods differ from state to state and centre to state. apart from causing a genuine grievance to the consumer. Centre has classified many FMCG products under Merit (VAT exempt) list. This opens up possible arbitrage opportunities. which has a bottling plant within the city limits does not. Complicated Tax Structure . Mumbai has octroi of 4-6% on goods produced outside of Mumbai. iii. there are other state taxes such as entry taxes and then centre levies excise duties and service tax.Tax Structure
i. Each state still continues to approach taxation differently. no product cost isexactly the same from one state to the next. v. which leads to an increase in pricing and affords opportunities for arbitrage. just because of the factory location. especially in light of the fact that the sector provides goods meant for daily consumption. China. levies a tax of 10%19 on average. for instance. the average is around 30%. Changing Tax Policies .Tax policies keep changing which makes it difficult to plan for the long term. Thus. For instance. ii.In India.Indirect Tax levels are quite high. For instance.5% iv.Despite VAT states do not implement rates and procedures uniformly. So Bisleri is sold in Mumbai for Rs. sanitary napkins but states levy on the same products high rate of 12.There is a VAT which is to be levied at state level. tooth powder. such as processed foods. whereas in India. High Indirect Tax . Lack of uniformity . which is considered outside the city limits of Mumbai. tax havens were created in J&K some years ago and many
. 12. problems are exacerbated by the complicated tax structure. High Octroi & Entry Tax .There are Octroi and Entry Tax at city and state entry points in a few states. and thus moving goods from one state to another is like moving them from one country into another. a bottle of mineral water produced by Coke or Pepsi which have their plants in Thane. while Parle. As a result.
10% of dairy produce is lost to pilferage.To compound this problem is the poor transportation and roadways infrastructure – many of the villages are extremely poorly connected with means of transportation – either road. recently part of the exemption was withdrawn by the government.Infrastructural Bottlenecks
i. The lack of a cold chain adds to this problem. Cost of Infrastructure . particularly at the
. However. because it means a tremendous amount of farm output actually rots or gets spoiled in transit. Firstly. and results in substantial spoilage of the goods.
Emergence of Private Labels
Apart from the pressure on margins.
. ii. The fear is justified because world over. iv. iii.Power costs in India are very high and they contribute substantially to cost of goods sold. thus leading to a sudden hike in costs. the biggest fear of FMCG players when facing MR is the introduction of private labels or own brands. Thus.companies opened facilities there. it costs nearly 12 days to transport goods from Baddi in Himachal Pradesh to South India.It takes almost Rs.Agriculture infrastructure in India is particularly weak. They are 3-4 times the optimal costs. Transportation Infrastructure . a distance of 3000 km. irrigation and modern farming methods are not widespread and thus agriculture in India is at the mercy of nature. 7. For example. rail or sea – so the amount of time it takes for the harvest to be transported to the FMCG manufacturers is unpredictable. from one season to the next and one year to the next. Along with this problems in land acquisition due to fragmented land holding further delay development of road and rail infrastructure increasing the cost associated. Nearly 8% . Power Costs .8 crores to lay 1km. Agricultural Infrastructure . of road. private labels have served to lower the consumer’s price points. it makes for grossly varying amounts of harvest of critically needed inputs into FMCG manufacture.
beset with red
tape and corruption. attrition happens for as little as Rs.
i. Some products come under the OTC category internationally but come under Schedule H drugs in India. Weights and Measures used under FDA do not conform to those under the Weights and Measures Act followed in India. in terms of display space. State borders cause a lot of delays and it is common for 2-3 days of finished goods inventory out of 20 -30 days’ total stuck on various state borders due to a requirement for multiplicity of permits and licenses. Himachal Pradesh has a reservation of 70% of jobs for people domiciled in Himachal Pradesh. v. It takes 10-12 months to get multiple licenses and to set up a manufacturing unit. There is lack of uniformity in definitions. 50 pm. ii. drugs and cosmetics come under the same set of laws when in fact they need to be treated differently. Since they are few in number. They need to be changed on a more dynamic basis to reflect present realities. and it becomes a problem to maintain the requisite labour force. requiring doctor’s prescription and require to be distributed only in drug licensed stores iv.mass level. Acquiring manufacturing licenses is a long and painful process. there are inevitable conflicts of interest when a retail chain has its own label whose packaging looks like category leaders’ and stocks brands of other manufacturers. Moreover.
. and these do not follow international norms either. iii. promotions etc. The Indian labour laws were drafted in the 1940s and take no note of modern manufacturing methods and strategies. Reservation of jobs for employees creates many problems. For instance. Currently.
Increased focus on farm sector will boost rural incomes. urban India accounts for 66% of total FMCG consumption. fabric care. However. they would be able to generate higher growth in the near future. home and personal care category. In urban areas. Export procedures are cumbersome and lengthy. the demand in urban areas would be the key growth driver over the long term. it is estimated that processed foods. A transport permit has to be sourced for each consignment rather than assigning a blanket permit for a period of time. FMCG companies have immense possibilities for growth. household care and feminine hygiene. hence providing better growth prospects to the FMCG companies. And if the companies are able to change the mindset of the consumers.vi. would help the urban areas maintain their position in terms of consumption. the Indian rural FMCG market is something no one can overlook.
At present. bakery. will keep growing at relatively attractive rates.
With the presence of 12. and hot beverages. including skin care.2% of the world population in the villages of India. and dairy are longterm growth categories in both rural and urban areas. increase in the urban population. with rural India accounting for the remaining 34%. Better infrastructure facilities will improve their supply chain. Within the foods segment. However.e. if they are able to take the consumers to branded products and offer new generation products. i. Also. There is no single-party interface so multiple departments and officers have to be followed up with to get the requisite licenses. rural India accounts for more than 40% consumption in major FMCG categories such as personal care. Because of the low per capita consumption for almost all the products in the country. along with increase in income levels and the availability of new categories.
Rising income levels. especially in small sectors
brands. Lower scope of investing in technology and achieving economies of Low exports levels "Me-tooʺ products. Export potential 5. which illegally mimic the labels of the established
scale. 3. Removal of import restrictions resulting in replacing of domestic brands 2.
. These products narrow the scope of FMCG products in rural and semi-urban market. i. 4. 2. High consumer goods spending
Threats 1. Opportunities 1. Untapped rural market 2. low cost operations .a population of over one billion. Import policies. Presence of well-known brands in FMCG sector Weakness 1. increase in purchasing power of consumers 3.e. Large domestic market. extending to the rural areas.SWOT ANALYSIS Of INDUSTRY
Strengths well established distribution network .
Growth of unorganized markets. 5.
.3. slow down in rural demand . Tax and regulatory structures 4.
2. 6. S. and soft drinks are the three biggest categories in FMCG. Personal care. 4. Coca-Cola (8) and Parle (9). 1. 10. and the balance by Indian companies. According to the study conducted by AC Nielsen. Companies Hindustan Unilever Ltd. The big firms are growing bigger and small-time companies are catching up as well. 62 of the top 100 brands are owned by MNCs. These are figures the soft drink and cigarette companies have always shied away from revealing. 5. Pepsi is at number three followed by Thums Up. 3. they account for 35 of the top 100 brands. followed by Colgate (6). 8. increased literacy levels. Nirma (7). 9. 7. and rising per capita income. Fifteen companies own these 62 brands. Between them. NO. cigarettes. Britannia takes the fifth place. keeping pace with rapid urbanization. and 27 of these are owned by Hindustan Lever. ITC (Indian Tobacco Company) Nestlé India GCMMF (AMUL) Dabur India Asian Paints (India) Cadbury India Britannia Industries Procter & Gamble Hygiene and Health Care Marico Industrie
A brief introduction about major FMCG companies in India
Hindustan Unilever Limited
.The Indian Economy is surging ahead by leaps and bounds.
and also food and Water Purifier available with it. Ayush.
. Brooke bond. It has Home & Personal Care products. It believes in expanding the portfolio. • HUL prioritized opportunities which build upon the existing assets and capabilities. Products of HUL are: Annapurna. Sunlight. Vaseline. This is India's largest FMCG sector company with all type of household products available with it. It is also eco-friendly because it reduces waste in the printing process. It avoided spreading their management thinly.This Company is earlier known as Hindustan Lever Ltd. HUL is taking different steps to reduce the cost and increase the margin. Clinic. Pureit. Bru. Pepsodent. The system has been used to reduce printed packaging costs for Unileverʹs products. Ponds. HUL has largest no of brands in most trusted brands list 16 of HUL's brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008 in an annual survey. Lux.
• Unilever is lowering its expenditure on packaging across its portfolio of food brands as part of a wider cost-cutting drive. Axe. Hamam. Liril. Breeze. Wheel. Rexona. • HUL is more focused on the innovations Example: In 1995 launched KISSAN ANNAPURNA staple foods with the message “staple food including iodized salt” Serving Rural population: In 2000 the 32% of the sales were from rural sector but in 2010 it is more than 50%. Dove. According to Brand Equity. Surfexcel. Pears. Fair & Lovely. Rin. HUL has pared down the colour palette used for print-ing across many products. For example: HUL first made its sales and distribution channel & supply chain management in manufacturing and selling wheat flour and utilized it into the selling breads produced by wheat flour. • • It follows direct communication from the customers.
Focusing on fewer brands.504. Sunsilk falls into to
Engaged in price war with P&G .51cr respectively among India’s top 5 FMCG companies.059. Global CEO Paul Polman is pushing the Indian operations chasing value growth to deliver on the volumes as well
• CPIL and HUL are projected to share a substantial combined market share of nearly80% of India’s toothpaste segment (in 2009). Making premium brands (prestige) attainable for a larger section of consumers (mass).Clinic is a mass market brand. • Has the highest total revenue and net profit of INR21.
. production and consumer decision making process issuing associated with it. Building leadership position in fast-growing markets. targeted at boosting growth and reach POWER BRANDS: Strategy in 2000. MASSTIGE: Strategy in 2005-06. PUMP UP THE VOLUMES: Strategy in 2010.
Strategic Shifts In the past 10 years. HUL has made four shifts in its business strategy.20cr and INR2. 30 of them. and showering marketing attention on them.•
Each category has a different set of supply chain. ONE UNILEVER: Strategy in 2007. • Current operating margin of 14% is lower than its peak operating margin of 18% in 2002.HUL’s stock was downgraded by a majority of brokerage firms in March 2010 as analysts estimated that its detergent segment could be rendered if the detergent price war intensifies. • Its shampoo segment has powerful brand portfolio that accommodates consumers’ needs from different income group .
Dabur’s shampoo segment grew by 7.6% to 28% during April-June 2008 while Dabur’s share increased from 9.the mid-price market while Dove is in the premium segment.3% while HUL’s share with Sunsilk brand fell 50% (45.
Competes with P&G in the detergent segment.5%.3% to 10% and CPIL’s share grew from 47.7% to 49. in which this segment accounts for 10-12% of the company’s earnings before income tax. During AprilJune 2009. • Detergent price war with its rival P&G will erode profit margins. • Calcutta High Court passed an interim order that restrains HUL’s television commercial that directly compares the performance of its Rin with P&G’s Tide
.4% in value terms). This product was also rated as the 12th Most Trusted Brand in India by ACNielsen ORG-MARG in 2003. • HUL’s INR1cr challenge advertising campaign aims to promote Rin’s superior value to its consumers
• Its Fair & Lovely brand is the leader in India’s whitening cream segment and serves 250mn consumers across 30 countries. • Small players like Dabur is chipping away HUL’s market share in the oral care. soaps segment. • Issued bonus debentures with face value of INR6 (with annual interest rate of 9% payable annually). • HUL’s share in the toothpaste segment fell from 29. hair care.
the $2. which funds American diplomatic and development efforts abroad. Proctor & Gamble is a leading member of the U. and Wal-Mart. (P&G. the next company on the Nielsen list.S.62 billion spent by P&G is almost twice as much as that spent by General Motors. Ohio that manufactures a wide range of consumer goods. Global Leadership Coalition. Microsoft.-based coalition of over 400 major companies and NGOs that advocates for a larger International Affairs Budget. a British citizen who immigrated to the United States. Clean Prell Crest
. advertising than any other company. P&G was named 2008 Advertiser of the Year by Cannes International Advertising Festival.Procter & Gamble Hygiene & Health Care Limited (P&G)
Procter & Gamble was founded in 1837 by William Procter. surpassed only by Apple. a Washington D.S. Exxon Mobil. in 2007 P&G spent more on U.C. According to the Nielsen Company. Procter & Gamble Co. It is 6th in Fortune's Most Admired Companies 2010 list P&G is credited with many business innovations including brand management and the soap opera. As of mid 2010. NYSE: PG ) is a Fortune 500 American multinational corporation headquartered in Downtown Cincinnati. P&G is the 6th most profitable corporation in the world. and the 5th largest corporation in the United States by market capitalization.
Major products of P&G Coconut-based cleaning and food products Purico Star Perla Sunshine Camay Mayon PMC Victor Ola Agro Fresco Health care
Laundry and personal cleansing products Tide DariCreme Primex Safeguard Ariel Gain Bonus Daz Lava Mr. The company first sold candles.
Clean Downy Alldays Pringles
Zest Moncler Ivory Laundry. personal care and hair care Secret Safeguard Ascend Ariel Old Spice Zest Clairol Nice n Easy Wella Camay
STRATEGIES OF P&G Consumer Understanding No company in the world has invested more in consumer and market research than P&G. More than half of all product innovation coming from P&G today includes at least one major component from an external partner. we multiply our internal innovation capability with a global network of innovation partners outside P&G. Innovation P&G is the innovation leader in this industry. P&G invest more than $350 million a year in consumer understanding. than our major competitors. on average. In addition. This results in insights that tell us where the innovation opportunities are and how to serve and communicate with consumers.Vicks Fibresure Thermacare Pepto Bismol Hair care and laundry categories Pampers Whisper Rejoice Tide Max Factor Vidal Sassoon Ivory Pantene Dishwashing. fabric care and food categories Joy Mr. We interact with more than five million consumers each year in nearly 60 countries around the world. We continually strengthen our innovation capability and pipeline by investing two times more. The IRI New Product Pacesetter Report ranks
. Virtually all the organic sales growth delivered in the past nine years has come from new brands and new or improved product innovation.
P&G has had 114 top 25 Pacesetters—more than our six largest competitors combined.
. brands most important to retailers. It has built the strongest portfolio of brands in the industry with 22 billion-dollar brands and 20 half-billion-dollar brands.the best-selling new products in our industry in the U. and best practices as it is by size and scope. more economically and more sustainably.S. and 10 of the top 25. These scale benefits enable us to deliver consistently superior consumer and shareholder value.
• The Company has 21 product categories out of which only 8 product have presence in India. The company is planning to launch the rest 13 product in India. Eleven of the billion-dollar brands are the #1 global market share leaders of their categories. Go-to-Market Capabilities It has established industry-leading go-to-market capabilities. In the last year alone. common systems and processes. P&G had five of the top 10 new product launches in the U. Over the past 14 years.S. The majority of the balances are #2. P&G is consistently ranked by leading retailers in industry surveys as a preferred supplier and as the industry leader in a wide range of capabilities including clearest company strategy. strong business fundamentals and innovative marketing programs Scale Over the decades. Brand-Building P&G is the brand-building leader of this industry. P&G’s scale advantage is driven as much by knowledge-sharing. P&G follows Connect + Develop strategy which enables to bring innovations to life faster. we have also established significant scale advantages as a total company and in individual categories. countries and retail channels. The company expects to see a growth in other categories. every year.
Crest. the quality control of all the products has deteriorated. Russia. Pantene.• The company has an aggressive plan to set up 20 new factories across the World out of which 19 is expected to come in emerging markets and most of them would be seen in Brazil. Iams. Pampers. Inadequate quality control: With large number of product profile.4 % of Net outside Sales in research and development (R&D). Research and development: P&G invests 3 . India. This amount easily exceeds their leading competitors. Always hygiene pads. Pringle's and Tide.
. Leading market position: P&G is the world's largest consumer products · Mass appeal products at premium price: Some mass appeal products like Pringles are priced very high as compared to its competitor’s products. Charmin. Weaknesses: Non-profitable products: Running products which may not be profitable but still had to do it because of keeping up with the market presence strategy. Few such products are Crest as toothpaste. The total sales of these thirteen ‘billion dollar brands’ taken together. Dawn dishwashing bar. Strong brands: P&G has 13 Billion-Dollar Sales Brands such as: Always. Folgers. Strength Diversification: Product diversification with about 300 products. among consumer products companies. would make a Fortune 100 company in itself. and China (BRIC) nations. • Whisper which is one of the company’s power brands has recorded 50 per cent market share in urban India. Ariel. Bounty. Wide distribution network: P&G markets its products in 160 countries with manufacturing capacities in 40 countries. Downy/Lenor.
This provides P&G with an opportunity to enhance its market share as well as expand its presence in other categories. Large no of competitors are entering FMCG secot Threat Small players like Dabur is chipping away p&g market share in the oral care. flavored or unflavored water from their home water filter. hair care. The company currently competes in only about 10 of its top 25 categories in most developing countries. P&G could leverage its position in the bottled water segment to capitalize on the growing demand for packaged and flavored water. P&G because of its huge R&D base and Connect + Develop program is well placed to come up with new and innovative products that may suit the customer needs. P&G is the global leader in all its 5 broad business segments. Opportunity: Developing markets: The economies of China and India are growing at a very fast pace.
Godrej Consumer Products Limited (Godrej)
. · Changing consumer preference: With the consumer preferences and choices.company. soaps segment.
• Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky Group Limited. After the transaction. Jan. South Africa. the Joint Venture which owns the ‘Snuggy’ brand of baby diapers will become a 100 per cent subsidiary of GCPL.• The Board of Directors of Godrej Consumer Products Limited (GCPL) has approved the acquisition of 50 per cent stake of its joint venture partner SCA Hygiene Products’ stake in Godrej SCA Hygiene Limited. Kinky is among one of the largest brand into hair segment with product portfolio.
CHANGING TRENDS IN FMCG INDUSTRY
Recent trends seen:
Food Inflation As a result of the 2010 food price crisis.9%.95% in the week to December 5. 2009.0% of their consumer spending on food in 2010. where share of expenditure on food accounts for a large proportion of total consumer spending. food inflation hiked 19. Health Food People are becoming conscious about health and hygienic. high food inflation could restrict consumers’ demand and pricing flexibility for FMCG while lowering consumers’ purchasing power that diverts purchases away from certain FMCG. According to Chart 3. We have seen willingness in consumers to move to evolved products/ brands. vegetables and other food products jumped 17. In addition. international food prices reached its peak in 2010 but fell drastically a year later. Inevitably.56% in the week to January 23 over the previous year. Consumers are switching from economy to premium product even we have witnessed a sharp increase in the sales of packaged water and water
. rising disposable income etc. due to speculation that the Indian central bank may hike interest rates after instructing banks to raise more cash reserves. An index that measures wholesales prices of lentils. There is a change in the mind set of the Consumer and now looking at “Money for Value” rather than “Value for Money”. rice. Developing countries were largely affected by the hike in food prices. 34. India and China each spent 41. In 2010. indicating the most significant increase since December 1998.9% and 33. the nation’s food prices inflated for a second week. developing countries such as Indonesia. because of changing lifestyles.
) to specialized products (such as skin whitening cream.
personal care segment
The key trend in the personal care segmentis moving away from health products towards beauty products.415 tonnes in 2007 before contracting 6.454 tonnes a year later. prices were brought down from INR91 to INR82 for a 500gm pack.18% to 1. With rising disposable income from USD2. With the lower priced version of Tide introduced by P&G.Godrej Hershey Foods & Beverages Ltd (GHFBL) has plans to introduce several brands from its international portfolio into the Indian branded health food sector.067. the detergent segment remains a key market for HUL. With P&G’s new urgency in this segment. anti-ageing products.472 tonnes in 1999 to 1. As for Surf Excel Blue. this segment saw high level of penetration.purifier. namely Rin and Surf where HUL cut the price for Rin from INR70 to INR50 per pack. sun block lotions and etc. Hindustan Unilever Ltd’s (HUL) health food brand .). Meanwhile. in which it is projected to grow at a CAGR of 2% from 2005 to 2010. Procter & Gamble (P&G) and HUL were engaged in a price war.
. 2012: estimated 191mn) between the age group 25-44 years will definitely boost this market segment. HUL retaliated by slashing prices by 10-30% for its detergent products.720 in 2008 to an estimated USD3. shampoos. Detergent production in India expanded 66. hence consumers are switching demand from basic products (such as soaps.92% from 639. Household Care As a result of rapid urbanisation and emergence of small packs and sachets.Kissan Amaze is being marketed on a trial basis in three southern states in India. In 2010.482 in 2012 as well as growing female population (2008: 178mn. hair oils and etc. FMCG companies forayed into India’s growing branded health food sector. joint venture partnership between Godrej Food & Beverages Ltd and Hershey Company . Contributing close to one-fourth (in FY2009) of its total sales. the company promoted Tide Natural with smart advertising as well as through volume discounts.001.
000 VER credits for developing a new soap-making process called Plough Share Mixer. because increase in prices has led some consumers to look for cheaper substitutes. With such initiatives. growth in rural demand is expected to increase because consumers are moving up towards premium products. which eliminates the need for steam altogether Ready to Eat Becasue of changing lifestyles. Ready to Eat a) Con Flakes/ Oats b) Pastas c) Biscuits
. Outsourcing Outsourcing the manufacturing or processing of certain range of products to small vendors is gaining importance among FMCG players. However. HUL was awarded 52. the companies can focus on front-end marketing initiatives more effectively Reducing carbon footprint Of the energy used in PepsiCo India’s beverage business. busy jobs etc marketers are coming up with Jet Age consumer products.Sales of whitening cream outpaced those of Coca-Cola and tea in India as most Indians consider having fair-complexions an asset. in the recent past there has not been much change in the volume of premium soaps in proportion to economy soaps. respectively. Dabur has 30 per cent of its steam generation fired by renewable resources. 38 per cent comes from renewable resources. Hindustan Unilever Limited and ITC have earned Voluntary Emission Reduction (VER) and Certified Emission Reduction (CER) credits for their work. With increase in disposable incomes.
. Here is the list: Dish Wash: Powder to Bar to Liquid Shaving: Creams to Foams/ Gels Repellents: Coils to Aerosols/ Body Creams/ Gels Air Freshners: Sprays to Electric Toilet Cleaner: Acid to Harpic to In-Cistern
With rapid urbanization. The days of Tortoise Mosquito repellent coils are gone. I have picked up some examples.d) Noodles e) Pizzas f) Burgers Ready to Drink a) Energy Drinks b) Non-Cola Drinks (Juices) Ready to Cook a) Cut Vegetables b) Soups c) Paranthas/ Rotis d) Snacks
Evolved Product Forms: 20 years back consumers had limited choices to pick from. The demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market. emergence of small pack size and
sachets. the demand for the household care products is flourishing. were we have seen a change in the product forms. This is the age of aerosols with value added functionality.
The above figure shows that on 56% of the respondents are loyal to their brands of detergent/soap.Data Analysis CONSUMERS
Particulars Yes No product? Respondents 28 22 1. Do you buy same brand for any specific
30 25 20 15 10 5 0 Series1
Interpretation: The objective behind the formation of this question is to know the level of brand loyalty of the consumers towards the brands available in the market. FMCG are such a market where the level of loyalty remains low and this is because of many reasons.
and increase in economic growth.e. Also the buying behavior of consumer has
. monthly income of consumer is increase. How often do you carry out your main grocery shopping i.excluding short visits for top-up groceries?
respondent 25 20 15 10 5 0 23 12 4 Route 4 More than once a week Weekly 6 1 Monthly Less than once a month
Interpretation: With increase in urbanization. therefore there is increase in disposable income. thus consumer are ready to spend more .particular
Route More than once a week Weekly Fortnightly Monthly Less than once a month
4 4 12 6 23 1
there is increase in consumer buying FMCG products weekly. Over a period of time it has been seen that in urban area. If we look at the graph it shows price as the most influencing factors in the purchase decision while quality is also an important for purchase decision
4. It mainly contains the factors like.
3. Do you consider promotional scheme while purchasing any product? Particular Yes No Response
50 40 30 20 10 0 Yes No 11 39 Response
Response 39 11
.changed over time. fortnightly. quality which players an important role in the purchase decision of the soaps and detergents both. While Buying a product which factor influences the most Particular Brand Price
Response 35 30 25 20 15 10 5 0 29 21 Response
Response 21 29
Interpretation: The objective behind this question is to know the effect of influencing factors in the purchase decision of the soaps and detergent powders.
Here as the graph shows that 39 out of 50 consumers are looking for such schemes before they make purchase. 5.Interpretation:
Answer of this question will give idea about the effect of promotional schemes in the purchase decisions. Such types of schemes always attract more and more consumers towards particular brand. Simultaneously it gives idea about the factors which consumers look most in the product before they make final decision. Which promotional Schemes attract you the most?
Particular Coupon Priceoff Freebies Scratch Card Luckydraw Bundling Extraquantity
Response 50 40 30 20 10 0
Co up on
8 42 12 6 5 15 22
42 12 15 5
g ra qu an tit y Ex t
Lu ck yd ra w
eb ie s
Pr ice of f
Sc ra tc h
Bu nd lin
Which sought of pasta/ buiscuit would you prefer
Response 28 26 24 22 20 Normal Multigrain 23 27
The above stated question clearly indicate the increasing percentage of consumer towards healthy food product over normal food product.
.With more income in their hands consumer are moving toward healthy food product. The results show that price off and extra quantity is the two main offers/schemes which consumers have came across at the time of purchase. It will help the manufacturers and marketers too how too launch their new products in the market with which schemes 6.Interpretation:
The above stated question
Particular Normal Multigrain
Response 27 23
clearly states the awareness of promotional schemes offered in the market by the marketers to attract more and more consumers.
7. I can forsee that we are here to see further segments in different categories. Muscle b) Power Cleaner (Rust): Easy Off Bang 8. Do you buy:§ § Particular Response Different variety of product for each family member. What is the frequency to buy Ready to Eat products:Particular Response regularly 12 Irregularly 38
Response 40 30 20 10 0 regularly Irregularly 12 38
Response 30 25 20 15 10 5 0 28 22
§ Different variety of product for each family member.
Same product for whole family.
companies are not leaving any opportunity to micro segment the market. 28 Same product for whole family. Here are some examples: Age a) Junior Horlicks b) Junior Chyawanprash c) Pepsodent Barbie for Kids/ Colgate Strawberry Sex a) Women’s Horlicks b) Male fairness cream Specialized Household Cleaners a) Kitchen Cleaner: Mr.
busy jobs etc marketers are coming up with Jet Age consumer products.Interpretation:
Although the number of respondent having ready to eat product is low. Consumer is more oriented towards quality. but.
9. Does age anxiety effect your buying behaviour?
. Does product packaging influence your buying behavior? Particular Yes No
Response 40 30 20 10 0 Yes No 16 34
Response 16 34
Packaging is the not influencing factors in the purchase decision. Becasue of changing lifestyles.
Here are some examples:Age:Junior Horlicks. “No” respondent mainly include teenagers. Pepsodent Barbie for Kids/ Colgate Strawberry. Sex a) Women’s Horlicks b) Male fairness cream
11.consumer while purchasing a personal product become more conciousness of such factors. Junior Chyawanprash.Particular Yes No
Response 34 16
Response 40 30 20 10 0 Yes No 16 34
The above graph shows that age anxiety plays a crucial role in buying decion. companies are not leaving any opportunity to micro segment the market. Does celebrity endorsement effect the buying decision of product? Particular Yes No
Rs o s epne 4 0 3 0 2 0 1 0 0 Ys e N o 1 5 3 5
Response 15 35
During inflation(price hike). It has been seen that TV as the best media to market the product which will cover majority of the viewer ship. On the second place it shows news papers as the media to promote the product in the market. 12. it is the quality of product that
Response 38 12
The above graph clearly shows that even during inflation .Interpretation:
This question gives stress on the media habit of the people and through which the product should be launch or they think it would be better than other Medias. matters. brand loyalty effect the mind of consumer the most. rather than going for a cheaper substitute. Just to give you an
. you go for Particular Sachet of same branded product Cheaper substitute
Response 40 30 20 10 0 Sachet of same branded product Cheaper substitute 12 38
In media large number of consumer says that
celebrity endorsement doesn’t effect their buying decision. this shows quality. companies have come with lower quantity SKUs and make consumers switch from higher to lower SKUs and not from premium to popular brands (like Dove to Lux International).price hike consumer would go for sachet of same branded product.
37 people are ready to switch over to another brand if they find better promotional schemes which suits their budget means more qyt + less cost + quality. quality and other factors influence consumers to switch over too other brands.example. Combination of all these schemes will run better in the market.
. 46 to Rs. FMCG spend now comprises a smaller share of consumer’s wallet
13. 50. more satisfaction. 40. people shift to sachets of their brands. During the time of inflation. they have launched a new SKU of 400gms for Rs. If you get an attractive promotional offer in the product other than of your choice will you switch over? Particular Yes No
Response 40 30 20 10 0 Yes No 13 37
Response 37 13
It shows the level of brand loyalty among the consumers. The result clearly shows that out of 50. Henkel instead of increasing the price of their Henkwl detergent from Rs. Sales numbers of FMCG companies are quite robust. when reason were ask for the same it shows that extra quantity with less or same price.
Companies are also moving towards carbon blueprint.Particulars Yes No
Respondents 47 3
14.As more consumer are oriented towards green products. carbon free products.
. Do you prefer to buy a product which is more eco friendly?
Response 50 40 30 20 10 0 Yes No 3 47
It shows the level of aware of awareness among consumer toward environment.
Simultaneously it gives idea about the factors which consumers look most in the product before they make final decision Price off and extra quantity is the two main offers/schemes which consumers have came across at the time of purchase People are not much aware of the schemes which continue in the market it may be because of the present stock of the product at their place. 1+1 or 2+1 or other free schemes are more demanded and more aware schemes in the market. Consumer remember that name of the product by the company name and also from the past performance of that company Consumer remembers that name of the product by the company name and also from the past performance of that company Customers are looking for any type of the promotions on the product before them going to purchase. Extra quantity with less or same price. Quality as the most influencing factors in the purchase decision while price is also an important for purchase decision. quality and other factors influence consumers to switch over too other brands. more satisfaction.
• • •
• • • •
. Schemes always attract more and more consumers towards particular brand.Findings of the report:
• • • FMCG are such a market where the level of loyalty remains low and this is because of many reasons. People are more quality and price oriented. • • People are ready to switch over to another brand if they find better promotional schemes which suits their budget means more qyt + less cost + quality.
All the respondents could not fill their questionnaire on their own due to language problem and also problem of time and lack of positive behavior. which is not very large.
. • Respondent may give biased answer due to some lack of information about other brands. my sample size is only 50. product bundling and extra quantity are more demanded by the consumers over others schemes
Limitations of the study
• • • I considered only Preet Vihar region only because of limited time duration. • Findings of the study are based on the assumption that the respondents have given correct information.•
Price off. Due to this.
hul.2nd edition. Pearson education
.in_files Ø http://www.Kothari.New Age International(p)ltd.
C.co.pg-india_files Ø http://www. “Marketing Management”.R.
Ø http://www.publishers.blogspot. “Research Methodology methods & techniques”.godrej_files Ø http://fmcgmarketers. 11th edition.Bibliography
Ø Philip Kotler.