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FMCG Sector

FMCG SECTOR: Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, house hold accessories and extends to certain electronic goods. These items are meant for daily of frequent consumption and have a high return. A major portion of the monthly budget of each household is reserved for FMCG products. The volume of money circulated in the economy against FMCG products is very high, as the number of products the consumer use is very high. Competition in the FMCG sector is very high resulting in high pressure on margins.

FMCG companies
maintain intense distribution network. Companies spend a large portion of their budget on maintaining distribution networks. New entrants who wish to bring their products in the national level need to invest huge sums of money on promoting brands. Manufacturing can be outsourced. A recent phenomenon in the sector was entry of multinationals and cheaper imports. Also the market is more pressurized with presence of local players in rural areas and state brands. Secondary Players 1. Colgate-Palmolive (India) Ltd. 2. Godrej Consumers Product Ltd. 3. Nirma Ltd. 4. Tata Tea Ltd. 5. Parle Agro 6. H. J. Heinz Naukri hub analyzes FMCG sector in detail. FMCG Sector • Overview Of FMCG Sector • Scope of FMCG Industry In India • Top Players in FMCG • Career Opportunities • Secondary Players

• •

Indian Consumer Class Recent Developments

Overview Of FMCG Sector
What are FMCGs? WE regularly talk about things like butter, potato chips, toothpastes, razors, household care products, packaged food and beverages, etc. But do we know under which category these things come? They are called FMCGs. FMCG is an acronym for Fast Moving Consumer Goods, which refer to things that we buy from local supermarkets on daily basis, the things that have high turnover and are relatively cheaper.
FMCG Products and Categories - Personal Care, Oral Care, Hair Care, Skin Care, Personal Wash (soaps); - Cosmetics and toiletries, deodorants, perfumes, feminine hygiene, paper products; - Household care fabric wash including laundry soaps and synthetic detergents; household cleaners, such as dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish;

Personal Care Personal care category in India is valued at Rs 54.6 billion. An average Indian spends 8% of his income on personal care products. Personal care mainly consists of Hair Care, Skin Care, Oral Care, Personal Wash (Soaps), Cosmetic and Toiletries, Feminine Hygiene. Till 2002-2003, Personal care products, except those in oral care category, were regarded as luxury items, and attracted a high excise duty of 120%. But the taxation reforms in India after 1991 have lowered the excise duty rates that make these products more affordable. It is divided into two segments:
• • •

The premium segment The popular segment
The premium segment caters mainly to urban high class and upper middle class, and is more brand conscious and less price sensitive. The popular segment caters to mass segments in urban and rural markets; prices here are around 40% of the premium segment prices. Growth With the increase in rural income and improvement in distribution network (i.e. road development projects), the penetration levels are set to increase. Since the consumption level in urban areas is already high in most of the categories, the growth can come only from deeper penetration and higher consumption in rural areas. In the year 2005-06, the sector witnessed growth because of the

increase in consumer demand from urban and rural areas. In addition to demand, prices also went up. Also, with the increase in disposable income, some consumers have moved up in the value chain. The growth for FMCG products in February 2006 was the highest in 5 years, on YoY (year over year) basis. Prospects The proportion of the consuming class to total households will touch 46% by FY07 from 17.4% in FY95, estimated by National Council for Applied Economic Research (NCAER). As the native companies are expanding in international market, the MNC subsidiaries are looking for greater leverage of the parent strengths. Also, big MNCs cannot afford to avoid India because of its potential market. The market size and the major players are: Source:CII Category Market share (In billions) Major Players

Skin Care Personal Wash Hair care Oral care

13 46 28 23

HLL HLL Marico Colgate

In India, the per capita consumption of almost all the products is amongst the lowest in the world. For example, the average consumption of toothpastes is around 320 gms in the world but in India it is 107 gms. In Thailand, Mexico, and USA it is 262 gms, 376 gms, and 518 gms respectively.

Oral care The oral care market can be segmented into:
• • •

Toothpaste - 60% Toothpowder - 23% Toothbrushes - 17%

This Segment is characterized by high entry barriers, a few major players, high advertisement spending, and frequent product variant launches. The major players in this segment are:
• • • •

Colgate-Palmolive Hindustan Lever Ltd. SmithKline Toothpaste Sales Family Platforms


Cosmetic Propositions


Toothpowder market White Toothpowder Red Toothpowder Black Toothpowder

52% 40% 8%

The penetration level of toothpowder/toothpaste in urban areas is three times that of rural areas. Neem tree, salt, ash, and tobacco are some traditional materials that are still popular for cleaning teeth in rural areas. According to a survey, only 15% of toothpaste users brush their teeth twice a day in India. The per-capita consumption is very low in India.
• •

Per capita consumption

in gms 70 300 150

India Europe Thailand

About 50 % of India's population uses toothpastes, 27 % uses toothpowder while 23% in the rural areas are yet to adopt oral care. Mouth freshening washes, dental floss and teeth whitening products are at a primary stage in India. The use of these products is limited to urban areas. To increase the penetration level of oral care products, HLL and Colgate in tandem with Dental Associations have launched nationwide informative commercials on oral health and community dental health programs to inculcate hygienic practices in rural areas. Industry sources expect an increase in penetration level of oral care products to 70% from current level of around 49% because of increase in advertising campaigns and awareness.
• •

Some of the small Indian companies in this segment are:  Anchor  Babool Colgate-Palmolive is the market leader in oral care segment. Colgate and HLL together account for 85% of organized toothpaste market. In toothpowders market, Colgate and Dabur are the major players.

Hair Care
The hair care market in India is valued at $200 million. It has registered a growth of 3.8% over the previous year. The hair care market can be segmented into hair

oils, shampoos, hair colorants & conditioners, and hair gels. Hair colorants & conditioners According to A C Nielsen (the world's leading marketing information company), hair colorants, feminine hygiene, and baby care have accelerated growth in personal care market. Hair colorants are substitutes for hair dye to counter graying hair. Hair colorants indicate strong growth trends with a YoY (year over year) growth of 8 per cent.

Gone are the days when hair conditioners and hair colorants were used occasionally to look beautiful. Today, they have become the way of life. However, hair conditioners in India still face a difficult market due to long established habit of using hair oil and ayurvedic treatments, as they are cheaper for consumers and lack the chemicals of conditioners. The major players in hair colorants category are Godrej, Garnier, L'Oreal, and Lakme. Hair oils The hair oil market is valued at Rs. 6 billions. Hair oiling is a major niche in the hair care segment. Unlike market abroad, India has a large quantity of consumers whose hair care expenditure also includes hair oils. The penetration level of hair oil is around 87%. Around 50% of the population uses hair oil everyday. The growth rate of hair oils in rural India is faster than the growth rate in urban India. The major players in hair shampoo category are HLL, Marico, and Dabur India. Shampoos The shampoo market is valued at Rs 4.5 billions and has the penetration level of only 13% in India. The market is expected to increase due to increased marketing by players, lower duties, and availability of shampoos in affordable sachets. Sachet makes up to 40% of the total shampoo sale. The Indian shampoo market is divided in two parts  Cosmetic  Anti-dandruff This is primarily a middle class product because more than 50% of the population use toilet soaps to wash hair. The penetration level is only 30% in metros. The major players are HLL, and Procter & Gamble. Hair gels Hair gel market segment is at a primary stage and not many local brands are available in India. Hair gels/creams are mainly used for hair grooming by men and is used as a fashion accessory. The market penetration of hair gels/creams is very low, and is limited to a small section of the urban market.

Skin Care

The skin care market is valued at $180 million in India. With safe and effective procedures, advancement in medical technology, increase in awareness, the Indian Skin care solutions business is growing very fast. The skin care market can be segregated into toners, cleansers, sunscreens, antiwrinkle creams, dark circle removing creams, astringents, facial creams, moisturizers, fairness creams, day and night creams, etc. Out of these, facial creams, moisturizers, fairness creams, day and night creams, etc. are the most popular products and account for approximately 60% of the skin care segment. The skin care market is at a primary stage in India. The penetration level for both the urban and rural market is low. Many people still prefer to use home made and traditional products to cure the skin problems. However, within a period of five-six years, the use of skin care products has increased significantly in India. With changing life styles, increase in disposable incomes, greater product choice and availability, and influence of satellite television, more people are taking interest in personal grooming. The facial skin care market is booming. Products are competing with one another to take shelf space in the retail stores. Facial skin care products have become an essential part of the beauty market. Like western countries, creams and potions are applied in India also, in an effort to remove the pimples and the acne, fight stress and worry lines, and to remain young. Since the penetration level is still relatively low, growth is expected to be around 25% over the next five years. Some of the major players in this segment are Hindustan Lever (Fair & Lovely, Lakme, Ponds) with a market share of 53%, followed by CavinKare- Fairever with a market share of over12 % and Godrej-Fair Glow with a market share of 3.4 %. The other players that have a presence in the market are Emami (Gold Turmeric and Naturally Fair), Revlon (Fair & Glow).

Personal Wash (Soaps) The personal wash can be segregated into:
• • •

Premium- Lux, Dove Economy- Nirma Bath, Lifebuoy Popular- Nirma, Cinthol

The price of the premium segment products is twice that of economy segment products. The economy and popular segments are 4/5ths of the entire soaps market. The penetration level of toilet soaps is 88.6%. However, the per capita consumption of soap in India is at 460 gms per annum, while in Brazil it is at 1,100 gms per annum.
In India, soaps are available in five million retail stores, out of which, 3.75 million retail stores are in the rural areas. Therefore, availability of these products is not an issue. 70% of India's population resides in the rural areas; hence around 50% of the soaps are sold in the rural markets.

Growth With increase in disposable incomes, growth in rural demand is expected to increase because consumers are moving up towards premium products. However, in the recent past there has not been much change in the volume of premium soaps in proportion to economy soaps, because increase in prices has led some consumers to look for cheaper substitutes. The major players in personal wash (Soap) market are HLL, Nirma and P&G.

Cosmetics and Toiletries
Indian cosmetics and toiletries market is valued at $950 million. The key growth drivers for the cosmetics and toiletries market in India are rapid urbanization, increase in disposable incomes, and changes in people's tastes. Cosmetics The cosmetics market can be segregated into talcum powder, colour cosmetics (lip, eye, face, and nail care products), deodorants, and perfumes. The cosmetics market has been growing at the rate of 15-20% for the last few years. The sector has witnessed growth mainly from medium and low priced category that accounts for 90% of the cosmetic market. Talcum powder is one of the most popular cosmetic products in India. Its market is valued at Rs 3.5 billions and is growing at the rate of 12% per annum. Its penetration level is 45.4% and 25.2% in urban and rural areas respectively. Ponds dominates talcum powder market with a market share of 70%, followed by Johnson & Johnson with a market share of 15%. Colour cosmetics are the fastest growing segment, valued at $60 million. The major products in colour cosmetics market are foundation, compacts, eye makeup, lipsticks, nail enamels, blush-on, etc. Lipsticks and Nail Enamel account for 65% of the Color cosmetic segment. The nail polish segment is valued at Rs. 1.25 billions followed by the lipstick market at Rs 7 millions. All the categories in this segment are growing at around 25-30%. Gone are the days when cosmetics were viewed as expensive and self-indulgent items. Greater access to television, increased advertisement, growing awareness of western world, and greater product choice and availability have resulted in growing demand for cosmetic products in India. However, the penetration level of cosmetics and toiletries product is still very low in India. The per capita expenditure on cosmetic products in India is approximately $0.68 cents compared to $36.65 in other Asian countries. The penetration level of international cosmetics brand in India is also low. International brands account for only 20% of the cosmetics market. This low level of market penetration can be perceived as an opportunity for major players in FMCG sector. Toiletries The toiletries market is quiet developed and it is dominated by large Indian

companies and MNCs. High advertising expenditures, high entry barriers, and a high rate of new product launches characterize this segment. Shower and Bath products have the major share in the toiletries market. The toiletries market can be segregated into: . The premium niche- i.e. High brand conscious. It caters to the urban higher class. . The less price sensitive niche it caters to the middle and lower middle class. These products are not limited to women as their usage is now extended to men also. Men also use body sprays, colognes and other toiletries products. The men's personal care market is valued at $165 millions. Gillette is the largest player in this segment. Other major players in this segment are HLL, Godrej, and J.L. Morison and HLL.

Deodorants and Perfumes
Cosmetics and Toiletries market also include deodorant and antiperspirant category. The fragrance market in India is growing at an annual average rate of 12.17%. Deodorants market in India is valued at Rs 3 million only HLL has launched various products in deodorants category. Fragrance market is valued at Rs 3 billions, out of which 50% is accounted by Alcoholic and Attar perfumes (alcohol free perfumes) each. In Alcoholic perfumes, one-third is represented by unorganized market while rest is mainly imported.

Deodorants and Perfumes are the major product niches with promising prospects. Increase in media exposure (fashion magazines and cable television) has also raised awareness of foreign fragrance brands. With the reduction of tariff on premium fragrances from 30% to 10% in 2005, new brands are encouraged to enter the market. However, black market, fake goods, and the enduring popularity of traditional Indian perfumes, such as attar, hamper sales in India. From The Economist Intelligence Unit Sales Value (US $ m) 2005 Perfumes & Fragrances
Household Cleaners The household cleaning market is valued at around Rs. 400 crores and is estimated to be growing at the rate of 20% per annum. According to AC Nielson (world's leading marketing information provider), the consumer's desire for germ-free, healthy environment is increasing and is driving good sales for household cleaning products.

2006 1,291

2007 2,464

2008 2,696

2009 2,941

2010 3,169


The focus of household cleaner products is to keep disease-free environment. Now-adays consumers are looking forward not only to improving upon Products Covered
• • •

Dish/utensil cleaners Floor cleaners Toilet cleaners

Toilet cleaners The toilet cleaning market is valued at around Rs 40 crores only. The penetration level of toilet cleaners is still very low because it has been estimated that most of the people even in urban areas are still using cheap products like acids, or phenols to clean their toilets. The major share in Toilet Cleaning market is of Harpic from Reckitt Benckisser and its biggest competitor is Sanifresh from Balsara (now Dabur). Dish/Utensil cleaners The dish/utensil cleaning market is valued at around 44 crores. In the dish/utensil-cleaning segment, bars have dominated over 60% of the market, while dish wash powder accounts for 32% only. Research shows that 50% and 80% of urban and rural population respectively are still using substitute products like ash, bricks and other detergents for dish-washing purposes. Floor cleaners The floor cleaners are very less popular in India. Only 3% of Indian households use floor-cleaning products, whereas 97% use phenyl or a combination of bleaching powders, detergents, and acids. The penetration of house cleaning products is still very low. The challenge of players in Household Cleaners market is to enter into the households that are still using cheap products. The opportunity is huge enough as there are millions of households. Major players The major players in Household Cleaning Segment are:
• • • • •

HLL Reckitt & Colman India (RCI) Bayer India Balsara Hygiene Henkel Spic

their eating habits but also to practising healthy living.

Air Fresheners
Air fresheners market in India is at its nascent stage. It is valued at Rs 50 crores only and is growing at an average annual rate of 6.2%. Air fresheners are not considered in the priority list of Indian consumer class. This segment is characterized by low awareness among users, high cost, little competition, and ease of usage. However, its market holds a huge potential due to rapid

urbanization, increase in disposable income, and growing lifestyle of Indian consumer class. The most common air-freshener used in Indian homes is "moth balls". Nowadays, its use is extending to cars also. For example, Ambi Pur (the no. 1 European brand) was launched as air fresheners for cars. The product has quickly gained popularity among car owners.

Products Covered Products covered under air fresheners category are:
• • • • • •

Sprays/Aerosols Electric Air Fresheners Gels & Candles Car Air Fresheners Bathroom Fresheners Domestic Room Fresheners

Major Players The major players in this segment are:
• •

Odonil from Balsara (Now Dabur) Ambi Pur from Godrej Sara Lee

Mosquito Repellents
Overview The Mosquito Repellents market is valued at Rs 1600 crores and is growing at the compounded annual growth rate (CAGR) of 15%. This segment is characterized by low competition and high consumption. As people are aware of the diseases (like yellow fever, dengue hemorrhagic fever, and many forms of encephalitis) caused by mosquitoes, the demand will keep on increasing, which is a positive sign for the manufacturers, entrants as well as the existing players. According to Vikas Hajela, Vice President of Godrej Sara Lee, Mosquito Repellents segment has 54 manufacturers with 72 brands. Products Covered The products covered in this category are
• • • • • • •

Coils & Mats Liquidator Candle Vaporizer Hit Jet Cream

• • • •

Spray Gel Lotion Aerosol Cans

Major Players and their Products The major players and their products in this category are:
• • • • • • •

Good Knight from Godrej Sara Lee Ltd Odomos Cream from Balsara Home Products Limited Autan Lotion from Lever Johnson Pvt Ltd Camlin Limited Maxo from Jyothy Laboratories Mortein from Reckitt Benckiser India Ltd Tortoise from Bayer India Ltd

Furniture Polish
Growth in furniture polish market in India has peaked at around 4% and is expected to remain above 3.6% till 2009. This segment is characterized by low awareness among users, high cost, little competition. However, its market holds a huge potential due to rapid urbanization, increase in disposable income, and growing lifestyle of Indian consumer class. Products Covered

• • • •

Spray Polishes or Aerosols Liquid Polishes Semi-Solid Polishes Furniture Polish Wipes

Major Players
• • •

Reckitt Benckiser PLC Samadhan Combine Tide Industries

Food and Health Beverages
India's Food and Beverage industry is valued at Rs. 3584 billion. India produces above 600 million tonnes of food products every year and is one of the major producers of food in the world. The food and beverage industry registered a growth rate of 8.5% in 2005-06. According to Mckinsey's report, the total beverage consumption will grow at 9% over the next 20 years. Of which, alcoholic beverage and non-alcoholic beverage will see a spurt of 9.6% and 8.8% respectively

Classification of Food and Health Beverages Sector Food and health beverages sector includes branded flour, branded sugarcane, bakery products such as bread, biscuits etc., milk and dairy products, beverages such as tea, coffee, juices, bottled water etc., snack food, chocolates, etc. Growth Prospects With increase in disposable income of consumers, growing awareness among consumers about health products, rapid urbanization, and increasing popularity of convenience foods, food and beverage sector is expected to grow at a high rate. This sector holds a huge potential to grow because of the increase in advertisement spending, awareness campaign about products in urban as well as rural areas, and large scale transformation. Major Players The major players in the "Food and Beverage" Industry is: Heinz, Mars, Marico, Conagra, Pepsi, HLL, Pillsbury, Nestlé, Amul, ITC, Dabur, Britannia, Cadbury, Smith Kline Beecham, The Surya Food and Agro Private Ltd. Challenges in the Food and Beverage sector• • • •

Poor infrastructure Lack of adequate facilities for storage, transportation, and cold chain facilities No common food law (13 laws are enforced by 9 ministries) Food standards are confusing and contradictory

• •

High cost of raw material and packing material and high railway freight put pressures on margins Different rules and regulations and licensing are defined for different commodities

Branded Flour Branded flour market has an yearly business volume of 42 million tonnes and is growing at the rate of 13% per annum. This category comprises of wheat flour milling, rice milling, and pulse milling. Branded flour market holds a huge potential for growth, as the consumption of branded atta is at present as low as 2-3% in urban areas. Products Coverage
• • • •

Ground wheat Flakes of wheat Rice Corn

Major players and their products Branded flour market is highly unorganized is held by only a few major players• • • • • •

Hindustan Lever - Annapurna brand Godrej Pillsbury - Pillsbury Agro Tech - Healthy World Nature Fresh ITC - Aashirvaad Shakti Bhog

Branded Sugar Cane
India is presently a dominant player in the global sugar industry. The sugar industry comprises of organized and unorganized players. The unorganized players usually produce Gur and Khandsari, the less refined forms of sugar. Challenges faced by sugarcane industry      Inadequate availability of cane Devastating droughts Delayed payments to farmers Bad condition of plant and machinery Lack of uniform pricing systems  Uneconomical size

Major Players The major players in Indian sugar industry are:
• • • • •

Balrampur Chini Mills Ltd. Bajaj Hindustan Ltd. Andhra Sugars Ltd. Thiru Arooran Sugars Ltd. Dhampur Sugar Ltd.

Bakery Products
The market for bakery industry is valued at Rs. 69 billion. The two major bakery products, i.e. breads and biscuits hold for about 82 % of the market share. Product coverage
• • • • • •

Bread Biscuits Pastries Cakes Buns Rusk

Bread The bread market has a business volume of 1.5 million tonnes. The bread industry has a production of approximately 27 lakh tonnes. This segment is characterized by high level of fragmentation, and high margin. The major factors for growth in this segment are:
• • •

Brand loyalty Volumes Strong distribution networks

The major challenge faced by the organized bread sector at present is low margins of profit. Hike in the prices of major raw materials like sugar, vegetable oil, milk, and wheat flour has been accounted for the industry's low margins of profit. Major Players The major players in the bread industry that holds about 90% of the market share are:
• •

Britannia Modern Industries Ltd.

Biscuits The biscuit market has a total production volume of 1.1 million tonnes. The growth drivers for the biscuit industry are focused advertising, urban market, and new launches. Major Players The major players in the biscuit segment are:
• • • • • •

Britannia Parle Bakeman ITC Foods Ltd. Surya Food and Agro Pvt. Ltd. HLL

Major Brands The major brands of biscuit are:
• • • • • • • • •

Britannia Parle Bakeman Priya Gold Elite Cremica Dukes Anupam Horlicks

The Indian tea market is valued at Rs. 86 billion. The total production of tea was estimated to be around 878 million kg in 2005 with a growth rate of about 7%. Major Players The major players in the tea industry are:
• • • • • • • •

Hindustan Lever Tata Tea Williamson Magors George Williamson Harrisons Malayalam Mcleod Russel Bishnauth Tea Dhunseri Tea

• •

Warren tea AFT Industries

The other players in this segment are
• • •

Duncans Goodricks Jay Shree

The major share of tea market is dominated by unorganized players. There are about 1000 of tea brands in India, of which 90% of the brands are represented by regional players. Challenges The major challenges faced by the producers are:
• • • •

Changing consumer profiles Lower price realizations Low productivity Threat of imports

Coffee is the second most popular beverage drink in India. Its consumption in India was around 80200 MT in 2005. India produces only 4% of world coffee output, but exports more than 75% of its production of beans. The rise in prices of coffee is likely to continue in 2007 thanks to improving trends in bean prices. Major Players The major players in this segment are:
• • •

Nestlé Brooke Bond (Lever) Tata Tea

Fruit Juices
Household Care Overview India is the second largest market for foods and vegetables in the world. The total production of foods and vegetables is estimated to be around 148.5 million tonnes, out of which fruits account for only 48.5 million tonnes and the rest 100 million tonnes is accounted for by vegetables. However, the fruit juice market has not been fully tapped because of poor infrastructure, poor storage facilities, and

highly unorganized market, chiefly constituted by road side vendors. Consumers still prefer to buy juices from road side vendors even if the juices are unhygienic.

The major growth drivers in fruit juice market are, increase in health consciousness among consumers, increase in disposable incomes, and more sophisticated cocktail culture. Major players and their brands The major players in the fruit juices market are:
• • •

Pepsi with its brand Tropicana Dabur Foods with its brand Real Coca Cola India with its brand Maaza

Milk and Dairy Products
The total production of milk in India is estimated to be around 92 million tonnes and is the largest milk producing country in the world. With increase in milk production, production of dairy products like milk powder, infant milk food, icecream, ghee, curd condensed milk, butter, cheese, and khoa and khoa based sweets is also growing. Growth Drivers The major growth drivers in milk and dairy products market are, increase in health consciousness among consumers, increase in disposable incomes, increasing urbanization, and rise in popularity of consumer foods and standards of living.

Major Brands The major brands in milk and dairy products are:
• • • •

Amul Nestlé Mother Dairy Britannia

Major players in dairy products market The major players in the dairy products market are:
• • • •

National Dairy Development Board (NDDB) SmithKline Beecham Consumer Healthcare Nestlé India Heinz India

Other players include:
• •

Indiana Dairy Specialties Jagatjit Industries Ltd.

Bottled Water
The bottled water market is growing at the rate of 55% per annum and is expected to cross Rs 1000 crores within a few years. This segment is one of the most developed ones in India. Bottled water market has low entry barriers when compared to other businesses. It has been estimated that there are around 200 brands of bottled water in India, of which 80% are local brands.

The major players in bottled water segment with their brands are:
• • • • •

Parle's Bisleri Nestle with its brands Perrier and Pure life Coca Cola with its brand Kinley PepsiCo with its brand Aqua Fina Manikchand

Snack Food
The snack food market in India is valued at Rs. 1530 crore and is one of the largest markets in the world, out of which potato chips holds the major market share of around 85%. Big players like McChain Smiles and NP Foods have also entered into Indian potato snack industry in 2005. Products covered
• • • • •

Potato chips Savory snacks Snack nuts Popcorn French fries

Overview The chocolate market in India has a production volume of 30,800 tonnes. This segment is characterized by high volumes, huge expenses on advertising, low margins, and price sensitivity.

Challenges The major challenges faced by the players in chocolate industry are:
• • • •

Perishable nature of the product Poor distribution network Scarcity of milk Rising prices of milk

Major Players The major players in the chocolate market are:
• •

Cadbury India Ltd. Nestle India Ltd.

They both account for 90% of the market share. Other players are:
• •


Consumer Electronics
Overview The consumer electronics market is valued at $25 billion in 2006 and is growing at a rate of 20% per annum. Products Covered The consumer electronic sector can be segmented into VCD/DVD, home theatre, music players, and color televisions (CTVs), MP3, digital cameras, laptop etc. and white goods, such as, dish washers, air conditioners, water heaters, washing machines, refrigerators, etc. Major Players Before economic liberalization, there were only a few players like Kelvinator, Godrej, Allwyn, and Voltas in the consumer durable market. 90% of the market was captured by these companies alone.

Then, after the liberalization, foreign players like LG, Sony, Samsung, Whirlpool, Daewoo and Aiwa came into the picture. And today, these players control major share of the consumer durable market. Consumer electronics market is projected as shown in the graph

Growth in 2005-06 Consumer Durable/ White Goods Air Conditioner Refrigerator Microwave Ovens Washing Machines Consumer Electronics (Overall) Growth 20-25% 5-10% 25% 5-10% 9%

Growth Drivers Electronic market is growing very fast because rising living standards of individuals, easy access to consumer finance, growing consumerism, increase in disposable income, and large variety of choice as many foreign players are entering in the market. But, sometimes due to the presence of large number of players in the consumer electronics market, over-supply situation arises.

Audio Equipments
The audio equipment market is valued at around Rs.1,650 crore. Products Covered The products covered in audio equipment segment are:
• • • •

Hi-Fi iPod MP3 Player Music Systems & Amplifiers

Two-in-one including Radio Receivers

Major Players The major players in audio equipment market are:
• • • • • • • • •

Philips India Apple Videocon Sony India Aiwa Thompson LG Mirc Electronics Philips India Samsung India

In India, Apple is the market leader in iPod category. Growth Drivers The major growth drivers in the audio equipment category are, increase in disposable income of consumers, changing aspirations, higher affordability, rapid urbanization and growth in per-capita income. Most importantly, the audio player category is strongly accepted and considered as style icon and a gizmo of self expression, entertainment, etc. Growth Prospects Currently there is low awareness among consumers about the audio equipments, for example, iPod is in its nascent stage. People in rural markets and smaller towns are not even aware of the product's existence. However, iPod has started gaining its momentum; two out of every four audio equipments sold are iPods. Secondly, the market penetration is very low. The products are not available in rural areas. Therefore, the growth prospects are good, as the companies are now focusing on untapped market. Also, according to IDC, a premier global market intelligence firm, MP3 players alone will generate revenue of $58 billion and its production figure will touch 50 million units worldwide by 2008. However, in India the sales may not be that large because of increase in personal computers, mobile phones, and internet usage. Recent development in audio equipment sector: Samsung is soon launching two new models in MP3 category
• •

Samsung K5 with slide out speaker T9 (a multi function digital audio player with music, photo, video game and voice recording, and a blue tooth wireless interface)

Now, iPod nano will face competition from Samsung Z5.

Laptop Overview According to IDC India, a premier global market intelligence firm, the laptop market has registered 79% Year-on-Year (YoY) growth during 2006. The laptop sales is growing at much faster rate than projected. India's personal computer market is undergoing a major transition. However, laptop computers cannot completely wipe out desktop computers, because both are designed to meet different needs or different consumer segments. According to a top official of HCL Info Systems, market share of laptops would be 35-40% in the next two years.

Major Players The major players in the laptop category are:
• • • • • •

Hewlett Packard (HP) IBM Toshiba Compaq Dell Computers Sony

Growth Drivers
• •

Indian Laptop market in now in sync with global market. It was in 2005 that sales of laptops surpassed the sales of desktop computers for the first time in India. The Laptop market is growing at a fast rate because of change in work life of consumers. As the need for "anytime anywhere" access to information is increasing, the sales of Laptops are also increasing. Other factors that are responsible for the hike in sales figure are reduction in prices and affordability. Laptops are now sold at approximately half the price at which they were sold two years ago. Laptops prices are now almost at par with the desktop computer prices. The third most important factor is duty free import of Laptops as a personal baggage that has helped a lot in increasing the penetration level of the product among the consumer population. Awareness about laptops has also increased over the years.

Color Televisions (CTVs)
Overview The CTV market is estimated at 6.5 million sets per annum. According to iSuppli corporation (Applied Market intelligence), the market of color television will grow at a compounded annual growth rate (CAGR) of 9%.

Major players The major players in the color television segment are:
• • • •

Sony India Samsung India Videocon Onida

Projected market growth

According to iSuppli corporation (Applied Market intelligence), color television sales will grow at a rate of 9.6%. Projected Sales

Products covered The products covered under the color television segment are:
• • • •

Flat-panel LCD plasma Regular 21-inch CRT (cathode ray tube) or a small set 29-inch flat-screen CRT TVs

Growth Drivers Some of the growth drivers because of which CTV market is growing fast are:
• • • • •

Increased awareness Increase in disposable income Emergence of nuclear families Rising availability Declining prices

Many MNC and domestic companies are now making India as a manufacturing centre because:
• • • • •

Low cost skilled labor Tax free zones i.e. SEZs Qualified workforce Untapped domestic market Excellent supply base for glass and color picture tubes

Barriers to entry Some of the major barriers before the companies who want to make an entry into the market are:
• •

Poor government spending on rural and small town electrification program Poor distribution network

Overview Indian refrigerator market is valued at Rs 4000 crore. Refrigerators hold only 16% of consumer durable market that is valued at around Rs. 20,000-25,000 crore in India. Its market is growing at the rate of 7-8% annually. Major Players Some of the major players in the refrigerator category are:

• • • •

Whirlpool Kelvinator Samsung Siemens

Projected sales for the year 2007-2008

Focus areas in 2007 Keeping summers in mind and with the motive of "Beat the Heat," the refrigerator companies are now focusing on high-end frost free and large capacity i.e. over 230 litres direct cool refrigerators.
• • •

LG will focus on marketing its new model viz. Green Ion Door-Cooling Refrigerators, which emphasizes health-related features and technologies. Samsung is planning to launch 9 new models in both direct cool and frost free categories. Whirlpool is also launching new range called Mastermind in capacity of 220 litres, 250 litres and 280 litres. Whirlpool's new product target is the consumers with requirements of not very big capacities.

Challenges faced by the companies in refrigerator segment Despite the fact that refrigerators have immense utility to housewives and provide a solution to avoid food wastage, the penetration level is still below 20% and its market is growing at a very small pace. This may be because:
• •

People in small towns and rural areas do not consider it as a necessary product and are unaware of its utility value. Non-availability of power.

But the companies are leaving no stone unturned. For example, Whirlpool is involving Ajay and Kajol Devgan as its brand ambassadors to increase the sales figure. LG will soon be featuring Abhishek Bachchan and will run a 360 degree media plan. Companies are investing a lot for in-depth marketing through various promotional activities and advertising campaigns. From The Economist Intelligence Unit Sales Value (US $ m) 2005 Perfumes & Fragrances 2,103 2006 1,291 2007 2,464 2008 2,696 2009 2,941 2010 3,169

Washing Machines
Overview The washing machine market is valued at Rs. 1500 crore and is growing at the rate of 22% this year (2007-08) compared to last year. The fully automatic and semi-automatic sub category is growing at the rate of 40% and 17% respectively. Washing machine sales is cyclical in nature and its sales commences with the onset of monsoon. Major Players Some of the major players in the category of washing machine market are:
• • • • • • •

Whirlpool LG Electronics India Ltd. Videocon Samsung LG is the leader with 27% of market share. Whirlpool has a market share of 17%. Samsung has a market share of 14%.

Products covered
• • • •

Fully automatic machines Semi-automatic machines Front loading washer Top loading washer

Demand Drivers in Consumer Electronics Sector Some of the factors that are responsible for the growth in washing machine segment are: Increase in disposable income, rapid urbanization, increase in nuclear families, increasing number of working women, growth in per capita income, greater variety of choices, increasing consumerism etc.

Washing machine market in the years 2006 and 2007 In 2006, the major players controlled 85% of the market while in 2007, the share of major players in washing machine market has been reduced to 70%, and the rest 30% of the market is controlled by smaller players. In 2006, the sales for washing machines was about 1.8 million units, while in 2007, the total market is going to be a whopping 2.2 million units.

White Goods
White goods are the goods that are painted white or enameled white. These products were previously manufactured with a white enamel finish but are now colored. White goods sector is characterized by emergence of MNCs, exchange offers, discounts, and intense competition. The market share of MNCs in White goods segment is 65%. MNCs mainly target the growing middle class of India. MNCs offer superior technology to the consumers; while the Indian companies compete on the basis of firm grasp in the local market, their well-acknowledged brands, and their hold over wide distribution network. However, the penetration level of the consumer durables is still low in the market. The major factor responsible for low penetration is poor government spending on infrastructure.

Products Covered White goods include household appliances, such as, Water Heater, Refrigerator, Clothes Dryer, Air Conditioner, Dish Washer, Microwave Oven, Washing Machine etc. In the modern period, these products are available in a variety of decorator colors. White goods do not include the entertainment appliances, such as, Televisions, Home cinema, Camcorders, CD, and DVD players. These products are included in the Brown goods category. Major Players The major players in the White goods sector are LG Electronics India Ltd., Samsung India, Whirlpool, and Videocon. Practical skills are needed to maintain White goods and heavy tools are required to repair them, while Brown goods require high technical knowledge, in service area. White goods appliances account for 70% of the energy consumed in homes and their greenhouse gas emisison levels are usually high.

FMCG in 2006
The performance of the industry was inconsistent in terms of sales and growth for over 4 years. The investors in the sector were not gainers at par with other booming sectors. After two years of sinking performance of FMCG sector, the year 2005 has witnessed the FMCGs demand growing. Strong growth was seen across various segments in FY06. With the rise in disposable income and the economy in good health, the urban consumers continued with their shopping spree. - Food and health beverages, branded flour, branded sugarcane, bakery products such as bread, biscuits, etc., milk and dairy products, beverages such as tea, coffee, juices, bottled water etc, snack food, chocolates, etc. - Frequently replaced electronic products, such as audio equipments, digital cameras, Laptops, CTVs; other electronic items such as Refrigerator, washing machines, etc. coming under the category of White Goods in FMCG; Sector Outlook FMCG is the fourth largest sector in the Indian Economy with a total market size of Rs. 60,000 crores. FMCG sector generates 5% of total factory employment in the country and is creating employment for three million people, especially in small towns and rural India.

Analysis of FMCG Sector
Strengths: 1. Low operational costs 2. Presence of established distribution networks in both urban and rural areas 3. Presence of well-known brands in FMCG sector Weaknesses: 1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors 2. Low exports levels 3. "Me-too" products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market. Opportunities: 1. Untapped rural market 2. Rising income levels, i.e. increase in purchasing power of consumers 3. Large domestic market- a population of over one billion. 4. Export potential 5. High consumer goods spending Threats: 1. Removal of import restrictions resulting in replacing of domestic brands 2. Slowdown in rural demand Tax and regulatory structure

Scope Of The Sector
The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector in the economy. A well-established distribution network, intense competition between the organized and unorganized segments characterize the sector. FMCG Sector is expected to grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-year period. It has been estimated that FMCG sector will rise from around Rs 56,500 crores in 2005 to Rs 92,100 crores in 2010. Hair care, household care, male grooming, female hygiene, and the chocolates and confectionery categories are estimated to be the fastest growing segments, says an HSBC report. Though the sector witnessed a slower growth in 2002-2004, it has been able to make a fine recovery since then.

For example, Hindustan Levers Limited (HLL) has shown a healthy growth in the last quarter. An estimated double-digit growth over the next few years shows that the good times are likely to continue. Growth Prospects With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. It is expected that the rural income will rise in 2007, boosting purchasing power in the countryside. However, the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas. Indian Competitiveness and Comparison with the World Markets The following factors make India a competitive player in FMCG sector:  Availability of raw materials Because of the diverse agro-climatic conditions in India, there is a large raw material base suitable for food processing industries. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits &vegetables. India

also produces caustic soda and soda ash, which are required for the production of soaps and detergents. The availability of these raw materials gives India the location advantage.  Labor cost comparison

Low cost labor gives India a competitive advantage. India's labor cost is amongst the lowest in the world, after China & Indonesia. Low labor costs give the advantage of low cost of production. Many MNC's have established their plants in India to outsource for domestic and export markets.  Presence across value chain Indian companies have their presence across the value chain of FMCG sector, right from the supply of raw materials to packaged goods in the food-processing sector. This brings India a more cost competitive advantage. For example, Amul supplies milk as well as dairy products like cheese, butter, etc.

Top 10 FMCG Companies
S. NO. 1. 2. 3. 4. Companies Hindustan Unilever Ltd. ITC (Indian Tobacco Company) Nestlé India GCMMF (AMUL)

5. 6. 7. 8 9. 10.

Dabur India Asian Paints (India) Cadbury India Britannia Industries Procter & Gamble Hygiene and Health Care Marico Industries

FMCG As A Career
Industry Background FMCG is one of the most dynamic domains of the business world. A career in this sector encompasses a large number of job roles like market research, pricing and product development, purchasing, advertising and brand awareness. FMCG is a sector where graduates can gain excellent rewards if they work hard. FMCG products are those that move off the shelves in retail outlets very quickly. In the Fast Moving Consumer Goods (FMCG) sector, one needs to be fast in translating the ideas into new products. There is a requirement to create the products that people trust, enjoy and use in their daily lives. Advertising and marketing have a vital role to play in this. Qualifications Required FMCG career structures are fairly slow to progress. One may not get as high a package initialy as in some other sectors like IT, Real Estate, etc. Having once entered the secotor, however, candidates would find any number of opportunities and would see their salary packages rise fast enough.There are plenty of options in FMCG sector if you entere as a graduate, but strong educational qualifications are an advantage. Skills Required FMCG sector requires huge amount of commercial awareness; one must have the skills of a team player. Apart from that, good numerical skills, communication and organisational skills are all essential for a successful career in this industry. Key skills will also depend upon the type of position you want to pursue, i.e. marketing, human resources, finance, etc. Here are seven good reasons why one should pursue one's career in FMCG sector: 1. Job security It is a stable industry. Unlike some other industries, such as automobiles, computers, and airlines, FMCG industry does not suffer from mass layoffs, every time the economy starts to dip. One may drop the idea of buying a car but not the idea of having dinner. This lends FMCG a level of job security unknown in other industries.

2. A high profile industry India has 1.1 billion people and all are consumers. Therefore everyone is affected by FMCG sector. People now are getting more & more health conscious. They are getting concerned about what they are eating. All this has become possible because of the frequent display of various advertisements, such as protests against the genetic modification of foods, the growing problem of obesity, etc. 3. Quick experience Consider an example: One person is working in the sales of cars while the other one is working in the sales of juice. At the end of the month, the person who is working for the sales of cars makes a maximum of 2 or 3 sales, if he is fortunate. On the other hand, the other person sells a large number of products every day. Definitely, the juice seller will get more experienced in less time working in FMCG than any other sector, no matter whether in sales, marketing, operations, accounting, etc. In the end, one will land up learning more and gaining a firm grasp of basic business skills. 4. A wide range of experience One can have a wide range of choices if one desires a career path in FMCG sector. Wide availability of options for working in a large MNC or a small local company ensures that people in FMCG sector have a range of job roles available to them. The "fast moving" part of FMCGs requires people who are flexible. Transfer from sales to marketing or to operations is very common. In fact all three roles can be played at once in smaller firms. One will get to learn a lot, even if one enters this sector for a short duration. 5. An industry that thrives on innovation FMCG sector gives the opportunity to do creative work. There is a constant requirement of innovation in production, advertising, packaging and branding. FMCG offers an opportunity to express your creativity through developing new ideas for products, as brands compete head to head on the shelf. 6. Nationwide opportunities, both urban and rural FMCG sector offers opportunities through its connection to the primary sector in rural and urban areas. The sector is particularly attractive for those interested in working in different parts of the country, as it has a nationwide base, unlike many other sectors confined to particular locations. 7. Offshore opportunities The International offices of most FMCG multinationals regularly recruit staff from our country, either for short projects or for longer stints.

Indian Consumer Class
India has a population of over 1 billion and 4 climatic zones . Several religious and personal beliefs, 15 official languages, different social customs and food habits characterize Indian consumer class. Besides , India is also different in culture if compared with other Asian countries. Therefore, India has high distinctiveness in demand and the companies in India can get lot of market opportunities for various

classes of consumers. Consumer goods marketers experience that dealing with India is like dealing with many small markets at the same time. Indian consumer goods market is expected to reach $400 billion by 2010. India has the youngest population amongst the major countries. There are a lot of young people in India in different income categories.

Consumer goods marketers are often faced with a dilemma regarding the choice of appropriate market segment. In India they do not have to face this dilemma largely because rapid urbanization, increase in demand, presence of large number of young population, any number of opportunities are available . The bottom line is that Indian market is changing rapidly and is showing unprecedented consumer business opportunity . As the restrictions on foreign investments were relaxed in 1991, Multi-National Companies have been entering India since then. Market Size in $ million Market Share in % Indian Companies 1992 Breakfast cereals Wafers, potato chips Washing Machines TV 2 6 40 630 2004 25 35 570 3,030 100 100 98 97 MNCs Indian Companies MNCs

1992 0 0 2 3 52 37 51 49

2004 48 63 49 51

1992 $=30 rupees 2004 $=45 rupees Source: Center for Monitoring Indian Economy (CMIE) Indian consumer class can be classified according to the following criteria: 1. Income 2. Socio-Economic status 3. Age demographics 4. Geographical dispersion

Income Based Classification

India has a population of 1.095 billion people, comprising of 1/6th of the world population. India's population can be divided into 5 groups on the basis of annual household income. These groups are: 1. Higher income 2. Upper middle income 3. Middle middle income 4. Lower middle income 5. Lower income The income classification does not represent a real scenario for an international business because the purchasing power of currencies differs significantly. The real purchasing power of Indian rupee is higher than the international exchange value.

In addition to that, income classification is not an effective tool to ascertain consumption and ownership trends in the economy. Consumer Classification According to National Council of Applied Economic Research (NCAER) there are 5 consumer classes that differ in their ownership patterns and consumption behavior across various segments of goods. Consumer Classes The Rich The Consuming Class The Climbers The Aspirants The Destitute Total Source: NCAER The 5 classes of consumer households (consumer classification) show the economic development across the country based on consumption trends. Annual Income in Rs. Rs. 215,000 and more Rs 45- 215,000 Rs. 22-45,000 Rs. 16-22,000 Below Rs. 16,000 1996 1.2 32.5 54.1 44 33 164.8 2001 2.0 54.6 71.6 28.1 23.4 180.7 2007 6.2 90.9 74.1 15.3 12.8 199.2 Change 416% 179% 37% -65% -61% 21%

Socio-Economic Classification
In addition to income classification and consumer classification, Indian households can also be segmented according to the occupation and education levels of the chief earner of the household (the person who contributes most to the household expenses). This is called as Socio-Economic Classification (SEC), which is mainly used by market planners to target market before launching their new products. SEC is made to understand the purchase behavior and the consumption pattern of the

households. The urban area is segregated into: A1, A2, B1, B2, C, D, E1, E2.

Socio-Economic Classification Occupation Education Less 5-9 yrs than 4 School Some Illiterate of Graduate yrs in certificate college school school Skilled Unskilled Shop owner Petty trader Employer ofAbove 10 persons Below 10 persons None Clerk Supervisor Professional Senior executive Junior executive B1 C D D D D B1 C B1 B2 C D D D B1 C A2 B2 B2 D C D B1 C A2 B1 B1 C C B2 B1 B2 A1 A2 A2 B2 B2 B1 A2 B1 A1 A1 A1 B1 B1 A2 A1 A2 A1 A1 A1 B1 A2 A1 A1 A2 E2 E2 D E2 E1 E2 D D D E1 C D C D B2 C C D B2 C B2 D A2 B2 Postgraduate B2 D A2 B2

Source: Indian readership survey (IRS) Sections A & B refer to High-class- constitutes over a quarter of urban population Sec C refers to Middle-class-- constitutes 21% of the urban population Sections D & E refer to Low-class-- constitutes over half the urban population To understand the table, consider an example: A trader whose monthly household income (MHI) is more than that of a person in section A cannot be included in this SEC because his educational qualification or occupation do not qualify him for inclusion. Sec C constitutes households whose Chief Wage Earners are employed as :

Skilled workers Petty traders Clerk/Supervisor Shop owners

33% 12% 37% 18%

3/4th of them have studied till 10th or 12th class while the remaining 1/4th have studied till 9th class. Less than half of the Chief Wage Earners of households belonging to sections D & E are unskilled workers. Petty Traders are 18%, while Skilled Workers are about 28%. More than 80% of the population of upper strata consumers is living in the top 7 cities. Those top 7 cities are Mumbai, Kolkata, Delhi, Chennai, Ahmedabad, Bangalore, and Hyderabad. With increase in economic prosperity, this population (upper strata consumers) is growing at 10 percent annually. The rural area is segregated in to: R1, R2, R3, R4.

Education of chief wage earner Professional degree Graduation/ PG College SSC/HSC Class 4-Class 9 Up to class 4 Self-learning Illiterate

Type of House Pucca R1 R1 R1 R2 R3 R3 R3 R4 Semi-pucca R2 R2 R2 R3 R3 R3 R4 R4 Kuchcha R3 R3 R3 R3 R4 R4 R4 R4

Age Demographics
India is a very young nation, if compared with some advanced and developed countries. Nearly two- thirds of its population is below the age of 35, and nearly 50 % is below 25. Marketers explain that the boom in the consumption level and leisure related expenditure is because of this young population. It will have a significant impact over the consumer goods market. In addition to that, it is expected that this will generate trade opportunities and continuous investment in the economy. There is huge potential for further consumption of goods and services

due to the increased level of disposable income. The expenditure on essential goods and services has a higher share in developing countries as compared with that of developed countries. Age distribution if Indian population (In Millions) Year/ Age Below 4 yrs 5-14 yrs 15-19 yrs 20-34 yrs 35-54 yrs 55 & above Total 2006 113.5 221.2 122.4 279.1 239.2 118.7 1094.1 2001 108.5 239.1 109.0 246.8 207.3 101.7 1012.4 1996 119.5 233.2 90.7 224 178.1 88.7 934.2

Consumption Trends Food Essentials Essential Services (water, power, rent, and fuels) Clothing Footwear Medicare Transport & Communication Recreation, Education, and Culture Home Goods 45.68% 10.1% 4.9% 0.63% 4.25% 14.51% Less than 4% 3.25%

Geographical Dispersion of Market Potential
There is large difference in economic prosperity levels among several states in India, linked to the wealth creation from trade, industrial, and agricultural development. There are poor districts in many states, classified according to their market potential. India has 500 districts, out of which 150 districts (category A) and next 150 districts (category B) account for 78% and 15% of the national market potential respectively. Remaining 200 districts (category C) are backward and account for only 7% of national market potential. Category C districts have 40% of the geographical share.

Recent Developments in Fast Moving Consumer Goods (FMCG) Sector
FMCG sector is no doubt registering an up trend in growth. According to CNBC, FMCG sector growth story will continue because of the positive budget. Nevertheless, there are some barriers to the growth of the sector. Indirect taxes constitute no less than 35% of the total cost of consumer products - the highest in Asia. Last year, Finance Minister proposed to introduce an integrated Goods and Service Tax by April 2010.This is an exceptionally good move because the growth of consumption, production, and employment is directly proportionate to reduction in indirect taxes.

Budget 2007-2008 for FMCG Sector
• • • • • •

Reduction of duty on edible oil will have a positive impact on Marico. Full exemption of excise duty on biscuits priced at 50 rupees or less per kg is positive for ITC, Britannia, and Parle. Reduction of custom duty on food processing machinery and their parts from 7.5% to 5%. Reduction of excise duty on food mixes from 16% or 8% to nil is positive for ITC. Development of rural infrastructure is in focus, which is beneficial for FMCG companies because it is a big market for FMCGs. Better infrastructure will improve the supply chain. Exemption of free samples and displays from the purview of FBT will be beneficial for FMCG companies because they spend huge amount of money on advertising and brand building. HLL, Dabur, ITC, and Marico will be amongst the most benefited companies. Reliance Retail to Enter the Packaged Tea Market Emami Set to Invest Rs 220 Crore for Expansion in FMCG Sector Godrej Targeting FMCG Acquisitions in China, Indonesia, and Brazil FMCG Sector on a Buying Spree

Reliance Retail to Enter the Packaged Tea Market
After its successful foray into retail market, Reliance Retail is now planning to enter into the packaged tea market. Reliance is planning to roll out its own brand packet tea with the name, Reliance Select. Initial talks between Reliance and Goodricke group were aimed at making a deal to procure some of the exquisite blends for the Reliance brand. Reliance is planning to procure CTC tea from Goodricke Group which is currently produced in Dooars. Reliance Retails has also procured some tea from B K Birla Group Company and Jay Shree Tea & Industries to initiate test marketing for packaged tea in selected stores. The company is now planning to expand its own label of packaged tea to more than 150 Reliance Retail stores.

According to one of the officials of Jay Shree Tea, the company has already supplied some tea for Reliance Retail stores. Jay Shree tea has four gardens in Darjeeling, three in upper Assam, two in Dooars, three in Cachar, and two in South India. Reliance Retail's plan to enter into packaged tea market comes with the fact that tea is one of the fastest growing segments in Indian market and is growing at an annual rate of 3.3 %. The packaged tea market is estimated to be about 360 million kg. Some of the major players in the tea market are:
• •

Hindustan Unilever Ltd. (market leader with 24% share) Tata tea, the second largest player in packaged tea market

Other players include:
• •

Duncans Industries Wagh Bakri Group

Emami Set to Invest Rs 220 Crore for Expansion in FMCG Sector
Emami Group - the Group's principal activities are to develop and manufacture personal, beauty and health care products - declared recently that they would invest Rs 220 crore for expansion in FMCG sector. The expansion plans include:
• •

Acquisition in personal and health care space Enhancement in product portfolio through venturing into new categories

At present the products that the company offers are:
• • • •

Boro Plus Himani Navratna Oil Himani Fast Relief Sona Chandi Chyawanprash

The celebrities with whom the company has signed its contract are:
• • • • •

Amitabh Bachchan Shahrukh Khan Sunny Deol Kareena kapoor Saurav Ganguly

Emami is estimating over Rs. 500 crore of revenue in the next 3-4 years by entering into various new segments like baby care, hair care, and also expanding in the segment of men's grooming. Emami has also renewed its contract with Amitabh Bachchan for another 3 years. According to Aditya V Agarwal, Director, Emami Group of Companies, Rs 100 crore is already kept aside for acquisition in personal and health care segment. The company is continuously looking out for opportunities to launch brands in new segments. Emami will soon launch 18 new products in hair care, baby care, and men's grooming category. The company spends Rs 120 crore every year on brand investments such as advertising campaigns, sales promotions, etc. of which Rs. 40 crore is spent on new launches. The Emami products that are expected to be launched in the next five months are:
• • •

Hair pack Hair Dye Shampoo

Godrej Targeting FMCG Acquisitions in China, Indonesia, and Brazil
Godrej is currently $1.7 billion group and is eyeing acquisition in China, Indonesia and Brazil. Godrej is targeting at least two acquisitions each in these countries for its Fast Moving consumer business. Adi Godrej, Chairman, Godrej group told that the Group is aiming 25% growth every year, of which 5% is estimated to come through acquisitions. The Group has also acquired UK's Keyline, South Africa's Rapidol and home-grown Nutrine recently. The group's priority will be

The Chairman said that the Group is aiming at more acquisitions in South Africa and one
or two in Europe. Besides organic growth there can be domestic buyouts as well. However, there are not many opportunities for domestic acquisition. The Group aims more at overseas rather than domestic acquisitions. The Group's strategy is not either-or; rather it's looking out for both organic and inorganic modes of growth. Since FMCG is more an opportunity-based business rather than a capitalintensive one, it does not require huge capital. The Group's FMCG business grew by 30% last year and is aiming at least two acquisitions per year to increase the growth rate. acquisitions in personal and household care segment in the overseas market.

FMCG Sector on a Buying Spree
The Indian FMCG industry is valued at Rs. 69,000 crore. To attain a maximum growth, many FMCG companies have fixed various major buy out deals in both domestic as well as international market. As an example, Tata Tea, the largest tea manufacturing company in India and the second largest tea company in the world and its promoter Tata Sons have jointly acquired a 30% stake in Energy brands Inc (Energy Brands was founded in 1996 and is a subsidiary of Coca-Cola.) for Rs. 3148 crore in August 2006. This acquisition was the third largest global acquisition after Videocon and Tata Steel by an Indian company. Also in the year 2006, Tata Coffee Ltd. Acquired Eight O' Clock coffee company (EOC), USA from Gryphon Investors worth Rs 1015 crore.
In another example, Marico Ltd.-a leading Indian group in Consumer Products and Services, acquired Hindustan Lever Ltd's brand Nihar for Rs 227 crore in 2006. In the year 2006, Marico had acquired two Egyptian color and hair care brand by the name of Hairmode and fiancée. In domestic market Godrej Beverages & foods Ltd. (GBFL) has acquired Nutrine, a confectionary brand. These acquisitions have played a major role to push the growth in the sector. Also the FMCG majors hiked the prices and that move proved to be good for them. Another factor that is driving the growth up is increase in advertising budgets, and investing heavily behind brands. In essence, the major factors that have propelled the growth of FMCG Sector are:
• • •

Major acquisitions Pricing power Effective marketing and advertising strategy.

Major FMCG companies are now planning to enter new categories with fresh marketing objectives and are also gearing up for more acquisition in domestic and international markets that will certainly give a spur to the growth in FMCG sector.

Corporate Social Responsibility FMCG companies have now started taking Corporate Social Responsibility seriously. For instance, to encounter domestic violence, Ponds has tied up with the United Nations Development Fund(UNDF) for Women. Surf Excel is funding the education of children. Most brands link themselves with the social causes, thereby linking consumers with the brands and gaining goodwill in the market. will be amongst the most benefited companies.

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