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Submitted To: Dr. Manoj Kumar Sharma
Submitted By: Harsimran Singh
Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. These are items which are used daily, and so have a quick rate of consumption, and a high return. FMCG can broadly be categorized into three segments which are: Household items as soaps , Detergents, household accessories, etc, Personal care items as shampoos, toothpaste, shaving products, etc Food and Beverages as snacks, processed foods, tea, coffee, edible oils, soft drinks etc. These items are meant for daily of frequent consumption and have a high return. Following is composition of Indian FMCG sector :
Household Lighting Care 2% 10% Tobacco 15% Food and Beverages 53% Personal Care 20%
With market size above US$ 13.1 billion, FMCG sector is fourth largest contributor in Indian economy. Well characterized by MNCs and recent decisions by ministry of India to raise bar on foreign investment promises a bright future of FMCG industry in India .Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. Foreign investors are lured by huge untapped market potential in India. Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. Ever increasing 45% people in India are under 20 years of age. Per capita disposable income has increased. Indian population, particularly the middle class and the rural segments, are big opportunity for MNCs. Growth is likely to come from users upgrading from unbranded products to braded ones.
Lack of funds.Wide network of sales agents and other force are required for catering their products to the markets. rise in disposable incomes and spreading distribution channel for the rural segment. The promotion strategy includes tying up with top actors and other celebrity brand ambassadors. Biggest challenge for Indian and multinational FMCG companies is to make their product available at right place at right time . The supply chain of products in the FMCG market in India is one of the longest supply chains an industry could really have.Many giants are already there in the market and many new manufacturers are trying to strengthen their position . expertise and innovation. . Strong distribution networks provide significant advantages over the competitors. Marketing and promotion are key parts of brand development. They try to position themselves differently and in a better way than competitors to achieve consumer loyalty and sales growth. Companies are coming up with new ideas and innovative techniques to get the top spot . domestic companies face scarcity of experience.But unlike established companies in developed markets. Distribution Network: Extensive distribution networks are key for any FMCG company. Competition : FMCG sector in India has seen substantial growth in last decade. It‟s important to achieve a high level of penetration in both the urban and rural markets. The living standards are rising in the urban sector and high disposable income a of the rural families has increased the sales volume of various manufacturers of the FMCG products in India. But its likely to face challenges such as Increasing rate of inflation. That‟s why companies these days devote much of their resources to build brands. slow-down in the economy and declining value of rupee against other currencies may reduce margins of many companies. besides going in for high-profile launches at leading retail mall and outlets. While FMCG sector is banking on increasing rate of urbanization.Govt is lifting many trade barriers. work force and latest technologies hinder growth of Indian companies. Branding: Its very important to develop brands in FMCG sector. steadily rising fuel costs.
.10% 3 Year : 12.1. It is launched on full market capitalization method and effective August 23.2 Sales/Output BSE FMCG has base index value of 1000 with base period 01 February.50% The Indian Fast Moving Consumer Goods (FMCG) sector is booming from last several years and given steady returns to its investors despite slowdown in the economy.16 The index is largely driven by ITC and HUL. investors tend to flock defensive sectors like FMCG driving up prices of the companies which seems to be the case with the FMCG sector currently.62 43.7 10. thus helping the index to grow despite weak domestic market. FMCG sector has several multinational players with strong presence in India such as Nestle. 2004.22 45. the index has high dependency on these two companies. Both companies have posted good results. Index Composition Company Name HUL ITC Nestle Market Capitalisation (Rscrores) 99.00% 3 Months: 53. If both these companies are excluded then the index comes out to be overvalued by only 7.00% 114.50% 2 Year : 6. calculation method shifted to free-float market capitalization Return Returns .82% 1 Week 19. a major reason for the overvaluation could be attributed to the current economic scenario.890. Gillette.95.80% 1 Month: 30. Procter and Gamble.40% 1 Year : 0.543.BSE FMCG SECTOR YTD : 6 Months: 20.19 1.518. 1999. Therefore.82%. In times of economic uncertainty. December 2011 and March 2012 quarter results have been pretty good for the top companies.75 Weight 23. etc. as they contribute around 69% to the total index.
EBITDA margin for ITC in FY11 was 37.5%. The outperformers among these companies are HUL and ITC with strong revenue Rs 199.598 mn respectively in FY11.066 MN and Rs 50. However. FMCG sector attracted many investors and gave strong returns to them. The EBITA margin across the sector has remained in the range of ~15% to ~26. .700 MN in FY11. SENSEX was volatile and gave negative returns of approx. top performer among other sector In last 15 months.e. during slowdown in the economy.390 mn and Rs 221. In 2011. The returns table (above) portraits that it registered lower drop in 2008 i. performance of BSE FMCG index in 2010 was outstanding on back of fiscal stimulus but got hit again in 2011 due to European debt crisis and domestic reasons.FMCG sector is performing well due to strong characteristics and dependence on consumption in domestic market. FMCG. 25% at end of year whereas. high interest rates and rising inflation Peers Comparison The peer table comprise of some listed FMCG companies in India.5%. FMCG is the only sector which gave strong returns of 9% in 2011. The performance of FMCG sector was laggard in 2009 when economy was recovering and major sectors started performing well contributing to growth in SENSEX. However. The companies HUL and ITC registered PAT of Rs 23. The other sector indices gave negative returns in the range of 2% to 38% due to slowdown in the economy.
Paperboards. cakes and dairy products The biscuit industry is the largest processed foods segment in India with size exceeding Rs. rusk .• Hindustan Unilever‟s product . which are popular throughout the country. powerful brands (most of its brands are market leaders and straddle price segments) and high-quality management.Pureit (a water purifier) has received the UNESCO Water Digest Water . Forbes has also named ITC among Asia's' Fab 50' and the World's Most Reputable Companies. detergents. Britannia Industries Limited is based in Kolkata. bread. Branded Apparel.Company is rapidly gaining market share even in its nascent businesses of Packaged. It is the leading cigarette manufacturer based out of Kolkata with a 67% share of the market by volume and 83% by value . HUL. HUL is taking different steps to reduce the cost and increase the margin. Hindustan Unilever Ltd. ice cream and water purifiers The key strengths of the company are an extensive distribution network (its products are available in over 6mn outlets). a 51% subsidiary of Unilever Plc. Foods & Confectionery. Britannia has enhanced its premium cream portfolio with a launch of several differentiated products including Bourbon Cappuccino.3 Players in FMCG sector Britannia Industries Ltd. Estimated market share for Britannia is 38%. Hotels. Pure Magic Praline and a new range of creamy flavors for Treat.ITC is one of the eight Indian companies to figure in Forbes A-List for 2004. featuring 400 of "the world's best big companies".500crs. Company has products range of biscuits. is the largest Indian FMCG company (excluding cigarettes) based out of Mumbai It has a portfolio of over 50 brands across categories such as soaps. Indian Tobacco Company (ITC) ITC is an outstanding market leader in its traditional businesses of Cigarettes.11. foods.1. Company is most famous for its Britannia and tiger biscuits. Packaging and Agri-Exports. Personal Care and Stationery ITC's Agri-Business is one of India's largest exporters of agricultural products .
Dabur has acquired 72. The CHD division has been merged with CCD to leverage the company‟s distribution networks. and baby and skin care products. Other categories in which Nestle has products are baby foods. Dabur India Ltd Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status. Milkybar. sauces. and wellness platform. Asavs and branded ethical.Milkmaid. and instant coffee.A. Nestle International is reinvesting and expanding in India and Nestle India will have all the financial resources to expand and grow from the parent company. in terms of Product portfolio. The consumer health division (CHD) includes over‐the‐counter (OTC) products. It enjoys advantage over competitors due to products on nutrition. Nestle India is a 62. Dabur Foods Ltd produces fruit juices. It has 17 ultra-modern manufacturing units spread around the globe and its products marketed in over 60 countries. of Switzerland. a leading player in the women‟s skin care products market. Milo. health. based on ayurveda. Pureit received the award for outstanding contribution in the field of water in India.8% subsidiary of its parent Nestlé S. oral care. and classic products. Nestle India Nestle is India‟s third largest consumer goods company after HUL and ITC. digestives and candies. Dabur is one of India‟s most trusted names and the world‟s largest Ayurvedic and Natural Health Care Company and is the second largest FMCG company in India. The product is available across 21 Indian states and has reached more than 1 million homes in India giving them access to microbiologically safe drinking water. health supplements. The Consumer care division (CCD) offers a wide range of products in hair care. Bar-One. Kit Kat. instant noodles. .Award 2008-2009 in the category of best domestic non-electric water purifier. Maggi. cooking pastes.15 per cent of Fem Care Pharma Ltd (FCPL). Dabur has three divisions in India apart from its international operations : First. Famous brand names of nestle are Nescafé. and items for institutional food purchases.
South Africa. . as they became business partners. immigrants from England and Ireland. Godrej Consumer brands. respectively. Proctor and Gamble India William Procter. when 80 employees worked for P&G. Company has an aggressive plan to expand the business to other countries. Ezee. 1. Godrej Consumer Products Godrej Consumer Products (GCPL) is a leader among India's Fast Moving Consumer Goods (FMCG) companies. Godrej Kesh Kala oil and Nupur hair dyes in the lower end and Renew and Colour soft in the higher segment and give stiff competition to foreign brands in the hair colour segment. established proctor & Gamble on October 31. a candle maker. Godrej No. By1859. are household names across the country. Protekt and Snuggy. Kinky is among one of the largest brand into hair segment with product portfolio. Major brands include Godrej Hair Dye (liquid and powder). Godrej Consumer second largest player in soaps and largest in hair color. Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky Group Limited. Hit. and James Gamble. Jet. with leading Household and Personal Care Products. a soap maker. along with increased profit. sales reached 1million dollar. The company supplied soaps and candles to the Union Army during the American Civil War. which include Good knight.1837. Expert. The company is planning to launch the rest 13 product in India. Cinthol. among others. The Company has currently 21 product categories out of which only 8 product have presence in India. The military contracts won introduced soldiers from all over the country to P&Gs products. Fairglow. It is one of the largest marketers of toilet soaps in the country and are also leaders in hair colours and household insecticides. The company expects to see a growth in other categories.
and 1 out of 3 Indians uses a Marico product. glucose powder etc. noodles. GlaxoSmithKline Consumer Healthcare GSK Consumer Healthcare Ltd. is the largest oral-care company in India. is one of the largest players in the Indian malted food drinks (MFD) industry. it derives over 96% revenue from this category. SS Oral Hygiene Products has become a wholly owned subsidiary of the Colgate. Hyderabad. Colgate has also driven inorganic growth through acquisitions. Ltd.000 employees worldwide. 51% owned by Colgate USA. snacks. Supported by a wide distribution network. an Indian group company of GSK plc UK (which holds 43% in GSK). Colgate-Palmolive India Ltd Every day millions of people around the world trust Colgate-Palmolive to help care for themselves and the ones they love. from home care to pet nutrition. Marico Industries Ltd Marico is one of India's leading Consumer Products & Services companies in the global beauty and wellness space.000 retail outlets. Rajamundry (Andhra Pradesh) and Sonepat (Haryana) and has a strong marketing and distribution network in India with direct coverage of over 700. Professional Oral Care Products Pvt. Company has growing presence in categories such as biscuits.. Colgate Palmolive (India) Ltd. namely Hindustan Ciba-Geigy Ltd. . From oral care to personal care. Colgate-Palmolive makes the products that make you smile. sports drinks. It is a global leader in the pharmaceutical industry with over 100. The company's 51% stake is owned by the foreign promoters (colgate-palmolive group).. around 26% by individuals and around 21% by institutional investors. has acquired the remaining 25 per cent share capital from the local shareholders at an aggregate price of Rs 77.70 lakh. which is currently holding 75 per cent of the share capital of SS Oral Hygiene Products Private Ltd. Headquartered in the UK it has manufacturing facilities in Nabha (Punjab). but is seeing increasing competition from domestic players. Consequently. Marico is present in more than 25 countries across Asia and the African continent. CC Health Care Products Pvt. Advanced Oral Care Products and SS Oral Hygiene Prod Colgate Palmolive is a market leader in the toothpaste segment with a market share of 50% in India. Ltd.
South Africa. India. finding them is not easy. the Middle East. 8. 67 per cent of total market i.e. 1. Singapore. and skin care segments . Dehradun (UP) and Daman Marico is present in more than 25 countries across Asia and the African continent.000 villages are spread over 3. Pondicherry. Following is share price of few FMCG players Company Name HUL ITC Nestlé India Dabur Colgate-Palm.71 billion has been in rural areas with 627. but business in rural India is showing average annual growth of about 11per cent per annum over the last decade. Egypt.3 145.The company operates in India.Marico has evolved into one of the leading Indian FMCG companies from a coconut oil manufacturer over the past few years. Jalgaon (Maharashtra).05 320.2 million sq km. Malaysia.85 . SAARC countries. It has positioned itself on the beauty and wellness platform and caters to the hair care. Its manufacturing facilities are located at Goa. Current value at 26th April 201 478. health care.15 4700.Saswad(Maharashtra).60 1390. and Vietnam and is headquartered in Mumbai.1 billion and is expected to grow annually 13-15%.4 Structure of Industry TOTAL MARKET SIZE The Indian FMCG industry size above 13. Kanjikode (Kerala).
Each brand has a specific characteristic. be it packaging. The effectiveness of the particular brand may be attributed to continuous usage and heavy advertising. This is the characteristic of Monopolistic Competition. but because of product differentiation. It is closer in spirit to a perfectly competitive market. selling differentiated but close substitute products‟. because of differentiation a firm will not lose all customers when it increases its price... While this may be arguable to some extent in the case of cigarettes where Oligopolistic competition is said to be prevailing still our earlier statement holds true for most other products in FMCG sector.NATURE OF COMPETITION In FMCG many sellers sell many products . Both are soaps for personal care but the brands are different. look etc. So in FMCG sector the form of competition prevalent is mainly Monopolistic. This shows that each brand is highly differentiated in the minds of the consumers.e. the firm has some freedom to fix the price i. This is the reason that each brand is sold individually in the market. Monopolistic competition is found in the industry where there are a large number of sellers. firms have some control over price.each product differentiated from each other. fragrance. . though the composition remains the same. Take the example of Liril and Cinthol. Under monopolistic competition. Monopolistic competition is said to be the combination of perfect competition as well as monopoly because it has the features of both perfect competition and monopoly.For example many sellers sell tooth pastes each differently positioned in market.
expenditure policy. Service tax of 12. the government deals with fiscal policy while the central bank is responsible for monetary policy. to increase allocation to the ministry of rural development by 46 per cent was significant. These are the main policy approaches used by economic managers to steer the broad aspects of the economy. flour.2.3 % on transport of essential food items like tea. . jaggery. decreasing interest rates.1 Current Fiscal Policy Fiscal policy deals with the taxation and expenditure decisions of the government. Monetary policy. investment or disinvestment strategies and debt or surplus management. transparent and easy tax structure . This will put more money in the hands of rural consumers. If demand is low the government will increase supply of money by reducing taxes. deals with the supply of money in the economy and the rate of interest. Fiscal policy is an important constituent of the overall economic framework of a country and is therefore intimately linked with its general economic policy strategy (Supriyo De . Decision of govt. which will eventually create demand by increasing consumption and vice-versa. A third of FMCG sales today come from rural areas. tax policy. But much awaited Goods and Services Tax (value-added tax (VAT) on goods and services) was supposed to boost up economic unification of India. government has tried to increase consumption by reducing taxes. salt and edible oil has been removed. reduce the tax burden for consumer and implement a simple. In most modern economies.But has been deferred again in the absence of agreement among State Governments and lack of required amendments. Fiscal policy controls the supply of money in economy. sugar. Consumers are already struggling with high inflation rates and any increase in duties would have added to worries. This will reduce transportation cost in these segments. In Union budget 2013. These include. Moreover companies will benefit from no increase in excise and customs duty this year.2012). coffee. Fiscal policy is composed of several parts. Economic Environment 2. Though Union Budget 2013 offered minor benefits to the FMCG industry in form of tax reductions etc but its impact is likely to be offset by high fuel costs and food inflation that has been hovering in double-digits.
An efficient organization must be aware of the changing economic condition across the country and global and should employ a suitable strategy to stay in the market. Government has allowed 51% FDI in multi brand and 100% in single brand retail. There has been increase in unemployment and low consumer spending power. This further pressurizes the FMCG companies to reduce the prices for the products and services. Ever since 1991 liberalization has made huge impact on FMCG sector. This leads to consumers not opting to buy expensive products or services. . 2. Organizations will have to review this economic ride and have to respond accordingly. FDI is now allowed in FMCG sector. Companies such as starbuks have put joint venture with India players. Policy focus is on – Deregulating Indian industry Allowing the industry freedom and flexibility in responding to market forces and providing a policy regime that facilitates and fosters growth of Indian industry. consumer and stakeholder behavior. This not only helps Indian companies and provides huge variety of products for customers.2. A successful organization will respond according changing economic conditions. Industrial policy has helped FMCG sector to grow in India.2 Economic slowdown Current slowdown in global economic scenario affected almost every industry across the world. So basically Industrial policy ahs been such that it supports growth of FMCG sector in India.3 Industrial policy Objectives of the Industrial Policy of the Government are – to maintain a sustained growth in productivity to enhance gainful employment to achieve optimal utilisation of human resources to attain international competitiveness and to transform India into a major partner and player in the global arena. Delicensing helped the easy growth.
2 Religion & Cast system Religion and cast system don‟t have much impact on FMCG sector. This simply shows the great potentiality rural India has to bring the much needed volumes and help the FMCG companies to bank upon the volume driven growth.3 Joint Family System Joint family system has impact on FMCG sector to some extent. 2.000 villages in rural areas. For example Maggi comes in family packs. Where they show family having coke together at dinner.1 Large Population India is 2nd largest country in term of population. Now days in family husband and wives are working . Many other such products come in packages which are oriented to families. In advertising we can c more and more small family system oriented advertisements . .So focus is shifting to such lifestyles in advertisements and type of products as well .4 Lifestyle Changes Lifestyle changes have impacted highly on FMCG sector.For example advertisement of coke.2. Social Environment 2. Over 70% India‟s one billion plus population lives in around 627. Its important that products are not promoted for one segment of society only and moreover advertisements etc don‟t hurt believes of any segment. 2. But still we can say that companies are careful about any products or marketing campaigns. 2. Two areas where it has major impact are packaging and advertisements. The rural Indian population is large and its growth rate is also high. Companies take care of packaging to be family system oriented.
More junk food is consumed now days. Print medium becomes ineffective and to the extent irrelevant in the rural areas since its reach is poor and so is the level of literacy. Also counterfeiting product with look-alike name and symbol cut the revenue of the producer of genuine product. . Radio and television.For example milk and water comes in branded bottles.5 Literacy The literacy rate is low in the rural areas as compared to the urban areas. Today people are attracted to such products. 2. The dependence should be more on electronic media – cinema. While access to the television advertisement is very expensive so radio and cinema appears fairly easy. This again leads to problems of the communication for the promotion purpose.
. These markets can be expanded to include value-added ingredients like packaged cheese sauce and dehydrated cheese powders. protects India against impure. Commodities like dry milk. Transportation and infrastructure facilities are improving not only in urban but also in the rural area which will help in distribution network. Singapore. South East Asia. Investments can also be made in Indian dairy industries to manufacture and package dairy food (through contract or local collaboration) for export to Middle East. Korea. and fraudulently labeled foods. The PFA standards and regulations apply equally to domestic and imported products and cover various aspects of food processing and distribution. ghee and certain cheese varieties that are utilised as ingredients in foreign countries can also be exported. Political Culture Political factors have a great influence on the organization and industry and it is the duty of the organizations to comply with it. condensed milk. Export of pre-prepared meals with Indian vegetables for large Asian ethnic population settled in developed countries is a very big opportunity for India. which is presently being catered to by USA and EU. 3. 3. Indonesia. This will allow the SMEs to invest more and will increase the number of new entrants.3. The government has implemented certain restriction in the import policies. unsafe. It is necessary for the organizations to comply with the legislations implemented non conformance of which may lead to serious implications on the organization. However tax exemptions in sales and excise duty are provided for the small scale industries.2 Food Laws and Regulations Prevention of Food Adulteration Act Prevention of Food Adulteration Act (PFA) of 1954 and the PFA Rules of 1955. Malaysia. Large export potential also exists in the soya products industry.1 Export potential India has a locational advantage that can be exploited to use it as a sourcing base for FMCG exports. Thailand and Hong Kong. can be sourced from India due to its lower freight cost.
and premises. All such processing units are required to obtain a license under the FPO. tea. measure or number). marking and labeling standards for milk and milk products. and includes quality control. Standards specified in the order also apply to imported products. which constitute the bulk of the Indian diet. and synthetic syrups. Fruit Products Order The fruit and vegetable processing sector is regulated by the Fruit Products Order. which is administered by the Department of Food Processing Industries. packing. All imported products must adhere to the rules specified in the Act and its regulations.These include food color. All weights or measures must be recorded in metric units and certain commodities can only be packed in specified quantities (weight. preservatives. 1955 (FPO). machinery. Food and Public Distribution under the Standards of Weights and Measures Act. and periodic must meet the FPO standards. butter. vinegar. biscuits. Milk and Milk Products Order The production. 1976 and related rules and notifications. The PFA focuses primarily on the establishment of regulatory standards for primary food products. and regulation of sales. Weights and measures Standards for weights and measures are administered by the Ministry of Consumer Affairs. 1992. coffee. and wheat and rice flour. sweetened aerated water. certification. Further details are available from the Ministry of Health and Family Welfare. bread. pesticide residues. milk powder. vegetable oils. The order sets sanitary requirements for dairies. including those covering labeling and marketing requirements. packaging and labeling. The FPO contains specifications and quality control requirements regarding the production and marketing of processed fruits and vegetables. The Department of Animal Husbandry. Bureau of Indian Standards (BIS) . Dairying and Fisheries at the Ministry of Agriculture is the regulatory authority. These include baby and weaning food. distribution and supply of milk products is controlled by the Milk and Milk Products Order.
In addition. milk powder and condensed milk. a large number of exportable commodities have been notified for compulsory pre-shipment inspection. fruit products and fish and fishery products from compulsory pre-shipment inspections.3 Consumer Protection Act. organizations may be recognized as agencies for inspection and /or quality control. Manufacturers complying with standards laid down by the BIS can obtain and "ISI" mark that can be exhibited on product packages. BIS has identified certain items like food colours/additives. The approval depends on the availability of Foreign Exchange Resources. and containers for packing. standards for most of processed foods. hygienic conditions under which products are manufactured and packaging and labelling requirements.The activities of BIS are two fold the formulation of Indian standards in the processed foods sector and the implementation of standards through promotion and through voluntary and third party certification systems. Import of Capital Goods Import of capital goods is automatically allowed if it is financed through Foreign Equity. the government has exempted agriculture and food products. BIS has on record. approval is needed from the Secretariat of Industrial Approvals. Under the Act. The quality control and inspection of various export products is administered through a network of more than fifty offices located around major production centres and ports of shipment. . 1986: The Act provides for constitution of District Forum/State/National Commission for settlement of disputes between the seller/service provider and the consumer. provided that the exporter has a firm letter from the overseas buyer stating that the overseas buyer does not require pre-shipment inspection from official Indian inspection agencies.4 Import and Export regulations Export (Quality Control and Inspection) Act. for compulsory certification. Recently. 1963 The Export Inspection Council is responsible for the operation of this Act. Alternatively. 3. 3. In general. vanaspati. these standards cover raw materials permitted and their quality parameters.
as well as trade secrets and related rights. copyrights and trademarks. in the domestic market. are usually collectively called “intellectual property (IP)”. Patents are necessary to protect innovation. Patents and other intellectual property are important to enjoying market success but do not confer it. skincare.Import of Second Hand Capital Goods Import of Second hand goods is allowed subject to the following conditions: Minimum Residual life of 5 years The equipment should not be more than 7 years old. . Godrej group has filed for 15 patents in haircare. A certificate from the Chartered Engineers of the country of origin certifying the age and the Residual life is to be produced. It hopes to follow this up with three more patents in coming times. fatty acids. Patents. Import will be allowed only for actual users. 3.4 Patents The fast-moving consumer goods (FMCG) sector is covered under patent laws . Otherwise companies won‟t try to innovate new products if they know others can easily copy it.
A rural consumer is brand loyal and understands symbols better. The advancement enhances the sales by enabling the manufactures to produce better products with attractive packaging and better communication. Advertisements touching the emotions of the rural folks. Ten years back. 4. Television has been a major effective communication system for rural mass and. Organizations reduced costs with effective IT technologies and increased the rate of information transactions. Organizations began to adopt e-business to improve brand communication and market. companies should identify themselves with their advertisements.1 IT Penetration in Rural India Today there are over 15 million villagers in India who are aware of the Internet and over 300. more effective and faster are the key elements that all manufacturers in this sector push for. it is argued. This also makes it easy to sell look –alike. With advancement in communication technology and rising social media network it enables the organizations to communicate better to the customers by improved marketing campaigns. especially with reference to FMCG products. stronger. increasing productivity and longer shelf life of food products. opening in every corner of the country . as a result. history was created with Public Call Office phone booths (essentially manually operated payphone facilities). . could drive a quantum jump in sales. The rural audience has matured enough to understand the communication developed for the urban markets.4. Technological Factors Advancement in technology boost the production with enhancement in quality of products and services rendered to the customers. 4. Better. As the electronic ethos and IT culture moves into rural India. Technological advancement makes the supply chain and transactions along the chain simple.000 villagers have used it. Web connectivity through various types of communication hubs will surely impact the currency of information exchange. Technology is playing a key and huge part in the FMCG sector by developing the new packaging. the possibilities of change are becoming visible.2 Advertising Media An important tool to reach out consumers is through effective communication. as it drives sales.
with the help of artificial intelligence tailor-made to FMCG needs. .3 Research and development Talking about R&D. Talking about vending machines. Even the school and college campuses these days are equipped with machines.4. FMCG companies today use various data modeling and simulation tools to minimize product prototype costs that make lives of laboratory scientists easier.
Labour Costs in different countries 7000 6000 5000 4000 3000 2000 1000 0 Malaysia China Nepal Srilanka Pakistan India Source: IMF World economic Outlook Database. Following is comparison of operational costs in various countries.5 5.1 SWOT Analysis Strengths Low operational costs Biggest strength of FMCG sector in India is that operational costs in India are very low. Companies can setup their manufacturing units in India and develop products which can be exported to foreign countries. Oct 2010 . Many company these days are out sourcing their operations to India.
It would enable easier launch of new products.2 Weaknesses lack of patent protection India still lacks in stringent patent laws in FMCG sectors. Distribution networks The typical chain for a grocer store FMCG product is: Manufacturing plant -> Company Ware House -> Regional Ware House -> Regional Stockist -> Super Stockist -> Stockist -> Distributor -> Retailer Main Godown -> C&F Agents/Super Stockists -> Distributors as per the territories -> Wholesalers/Retailers Indian companies have penetrated till rural sectors. This is one of the reason foreign investors like to join hands with existing players rather than build a new network from scratch. Improved supply chains will cut layers of distribution 5. FDI FDI will provide a high visibility for FMCG brands in competitive markets. Every now and then companies sue someone for copying their products Piracy Many local players illegally mimic the labels of the established brands. Distribution channels reach 100s of millions of people. There are no stringent regulations to catch such acts and punish them. . too.
internet and advertising mediums have provided huge opportunities to FMCG companies. Arrival of new technologies Many new technologies such as e-commerce. customer database management . catchups and many other snacks. Rural markets are extremely price-sensitive. One reason for that is many of Indian products are rejected because of quality standards. People like to try new products.3 Opportunities Evolving Categories Categories of products are evolving . This is good news for FMCG sector. Income levels have increased sharply in last few years. Vast Rural Market Rural markets are vital for survival since the urban markets were getting saturated. 5. Economic status Many consumers with rising economic status are shifting from basic „need‟ to „want‟ based products. Some successful products are Maggi . Low exports levels Indian firms have been unable to increase fmcg exports to large extent. . efficient production technologies. While an average citizen in rural India has less than half of the purchasing power as compared to his urban counterpart. 50% of total FMCG market is Indian population. And rural market accounts for 70% of total Indian population. Loosening of regulations In recent years government is loosening many regulation such as Taxes. Import export restrictions etc.
coconut. wheat. Even the Government has offered zero import duty on capital goods and raw material for 100% export oriented units. fruits & vegetables. spices and cashew apart from being the second largest producer of rice. It adds a cost advantage as well as easily available raw materials. More and more MNCs are outsourcing their product requirements to India to take advantage of low costs. India is the largest producer of livestock. milk.3 As we can see from the table above Rural India has a large consuming class with 41 per cent of India‟s middle-class and 58 per cent of the total disposable income . Export – Cost advantage India has advantage over other countries due to cheap labor and low costs of production.So there is an untapped market and most of the FMCG Companies are taking different steps to capture rural market share.Particulars Population 2001-02 ( million household) Population 2009-10 (million household) Per cent distribution (2009-10) Market (towns/villages) Universe of outlets (million) Source: Statistical Outline of India . NCAER Urban 53 59 28 3768 1 Rural 135 153 72 627000 13. . sugarcane.
Tax and regulatory structure Tax and regulatory structure in India is very complex.4 Threats Removal of import restrictions Removal of import restriction are resulting in replacing of domestic brands. . Large domestic market with more population of median age 25 Age below 25 China 19% Others 31% France 1% Thailand 1% Congo 1% Iran 1% Turkey 1% Germany Egypt 1% 1% Ethiopia Vietnam Philippines 1% Japan Russia Nigeria Bangladesh 1% 2% 2% 2% 2% 2% India 17% US 5% Mexico 2% Pakistan 3% Indonasia 4% 5. This adds to threats to growth for FMCG sector.
Inflation As shown in chart inflation is growing concern for Indian market. Rural demand is cyclical Rural demand is cyclical. It depends on monsoon as well. Inflation leads to high prices and low supply of money. So companies can‟t entirely rely on rural sector demand. .
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