FMCG IN INDIAN ECONOMY

Fast Moving Consumer Goods (FMCG) 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. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars. India¶s FMCG sector is the fourth largest sector in the economy and creates employment for more than three million people in downstream activities. Its principal constituents are Household Care, Personal Care and Food & Beverages. The total FMCG market is in excess of Rs. 85,000 Crores. It is currently growing at double digit growth rate and is expected to maintain a high growth rate. FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and unorganized segments. The Rs 85,000-crore Indian FMCG industry is expected to register a healthy growth in the third quarter of 2008-09 despite the economic downturn. The industry is expected to register a 15% growth in Q3 2008-09 as compared to the corresponding period last year. Unlike other sectors, the FMCG industry did not slow down since Q2 2008. The industry is doing pretty well, bucking the trend. As it is meeting the every-day demands of consumers, it will continue to grow. In the last two months, input costs have come down and this will reflect in Q3 and Q4 results. Market share movements indicate that companies such as Marico Ltd and Nestle India Ltd, with domination in their key categories, have improved their market shares and outperformed peers in the FMCG sector. This has been also aided by the lack of competition in the respective categories. Single product leaders such as Colgate Palmolive India Ltd and Britannia Industries Ltd have also witnessed strength in their respective categories, aided by innovations and strong distribution. Strong players in the economy segment like Godrej Consumer Products Ltd in soaps and Dabur in toothpastes have also posted market share improvement, with revived growth in semi-urban and rural markets.

History of FMCG in India In India, companies like ITC, HLL, Colgate, Cadbury and Nestle have been a dominant force in the FMCG sector well supported by relatively less competition and high entry barriers (import duty was high). These companies were, therefore, able to charge a premium for their products. In this context, the margins were also on the higher side. With the gradual opening up of the economy over the last decade, FMCG companies have been forced to fight for a market share. In the process, margins have been compromised, more so in the last six years (FMCG sector witnessed decline in demand).

Current Scenario The growth potential for FMCG companies looks promising over the longterm horizon, as the per-capita consumption of almost all products in the country is amongst the lowest in the world. As per the Consumer Survey by KSATechnopak, of the total consumption expenditure, almost 40% and 8% was accounted by groceries and personal care products respectively. Rapid urbanization, increased literacy and rising per capita income are the key growth drivers for the sector. Around 45% of the population in India is below 20 years of age and the proportion of the young population is expected to increase in the next five years. Aspiration levels in this age group have been fuelled by greater media exposure, unleashing a latent demand with more money and a new mindset. In this backdrop, industry estimates suggest that the industry could triple in value by 2015 (by some estimates, the industry could double in size by 2010). Testing times for the FMCG sector are over and driving rural penetration will be the key going forward. Due to infrastructure constraints (this influences the cost-effectiveness of the supply chain), companies were unable to grow faster. Although companies like HLL and ITC have dedicated initiatives targeted at the rural market, these are still at a relatively nascent stage. The bottlenecks of the conventional distribution system are likely to be removed once organized retailing gains in scale. Currently, organized retailing accounts for just 3% of total retail sales and is likely to touch 10% over the next 3-5 years. In our view, organized retailing results in discounted prices, forced-buying by offering many choices and also opens up new avenues for growth for the FMCG sector. Given the aggressive expansion plans of players like Pantaloon, Trent, Shopper¶s Stop and Shoprite, FMCG sector has a bright future.

India offers a large and growing market of 1 billion people of which 300 million are middle class consumers. India offers a vibrant market of youth and vigor with 54% of population below the age of 25 years. These young people work harder, earn more, spend more and demand more from the market, making India a dynamic and aspirational society. Domestic demand is expected to double over the ten-year period from 1998 to 2007. The number of households with "high income" is expected to increase by 60% in the next four years to 44 million households. India is rated as the fifth most attractive emerging retail market. It has been ranked second in a Global Retail Development Index of 30 developing countries drawn up by A T Kearney. A.T. Kearney has estimated India's total retail market at $202.6 billion, is expected to grow at a compounded 30 per cent over the next five years. The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade, analysts feel. The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. 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. Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products. India is one of the world¶s largest producers for a number of FMCG products but its FMCG exports are languishing at around Rs 1,000 crore only. There is significant potential for increasing exports but there are certain factors inhibiting this. Small-scale sector reservations limit ability to invest in technology and quality up gradation to achieve economies of scale. Moreover, lower volume of higher value added products reduce scope for export to developing countries. The FMCG sector has traditionally grown at a very fast rate and has generally out performed the rest of the industry. Over the last one year, however the rate of growth has slowed down and the sector has recorded sales growth of just five per cent in the last four quarters. The outlook in the short term does not appear to be very positive for the sector. Rural demand is on the decline and the Centre for Monitoring Indian Economy (CMIE) has already downscaled its projection for agriculture growth in the current fiscal. Poor monsoon in some states, too, is unlikely to help matters.

Moreover, the general slowdown in the economy is also likely to have an adverse impact on disposable income and purchasing power as a whole. The growth of imports constitutes another problem area and while so far imports in this sector have been confined to the premium segment, FMCG companies estimate they have already cornered a four to six per cent market share. The high burden of local taxes is another reason attributed for the slowdown in the industry. At the same time, the long term outlook for revenue growth is positive. Give the large market and the requirement for continuous repurchase of these products, FMCG companies should continue to do well in the long run. Moreover, most of the companies are concentrating on cost reduction and supply chain management. This should yield positive results for them.

Industry Category and Products Household Care Personal Wash:The market size of personal wash is estimated to be around Rs. 8,300 Cr. The personal wash can be segregated into three segments: Premium, Economy and Popular. The penetration level of soaps is 92 per cent. It is available in 5 million retail stores, out of which, 75 per cent are in the rural areas. HUL is the leader with market share of ~53 per cent; Godrej occupies second position with market share of 10 per cent. 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.

Detergents:The size of the detergent market is estimated to be Rs. 12,000 Cr. Household care segment is characterized by high degree of competition and high level of penetration. With rapid urbanization, emergence of small pack size and sachets, the demand for the household care products is flourishing. The demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market. In washing powder HUL is the leader with 38 per cent of market share. Other major players are Nirma, Henkel and Proctor & Gamble.

Personal Care Skin Care:The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care market is at a primary stage in India. The penetration level of this segment in India is around 20 per cent. With changing life styles, increase in disposable incomes, greater product choice and availability, people are becoming aware about personal grooming. The major players in this segment are Hindustan Unilever with a market share of 54 per cent, followed by CavinKare with a market share of 12 per cent and Godrej with a market share of 3 per cent.

Hair Care:The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels. Marico is the leader in Hair Oil segment with market share of 33 per cent; Dabur occupies second position at 17 per cent.

Shampoos:The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of the total shampoo sale. It has low penetration level even in metros. Again the market is dominated by HUL with around ~47 per cent market share; P&G occupies second position with market share of around ~23 per cent. Antidandruff segment constitutes around 15 per cent of the total shampoo market. The market is further expected to increase due to increased marketing by players and availability of shampoos in affordable sachets.

Oral Care:The oral care market can be segmented into toothpaste - 60 per cent; toothpowder - 23 per cent; toothbrushes - 17 per cent. The total toothpaste market is estimated to be around Rs. 3,500 Cr. The penetration level of toothpowder/toothpaste in urban areas is three times that of rural areas. This segment is dominated by Colgate-Palmolive with market share of ~49 per cent, while HUL occupies second position with market share of ~30 per cent. In toothpowders market, Colgate and Dabur are the major players. The oral care market, es-pecially toothpastes, remains under penetrated in India with penetration level ~50 per cent.

Food & Beverages Food Segment :The foods category in FMCG is gaining popularity with a swing of launches by HUL, ITC, Godrej, and others. This category has 18 major brands aggregating Rs. 4,600 Cr. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like

softies in ice creams, ready to eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury.

Tea :The major share of tea market is dominated by unorganized players. More than 50 per cent of the market share is capture by unorganized players. Leading branded tea players are HUL and Tata Tea.

Coffee :The Indian beverage industry faces over supply in segments like coffee and tea. However, more than 50 per cent of the market share is in unpacked or loose form. The major players in this segment are Nestlé, HUL and Tata Tea.

Growth Prospect Large Market India has a population of more than 1.150 Billions which is just behind China. According to the estimates, by 2030 India population will be around 1.450 Billion and will surpass China to become the World largest in terms of population. FMCG Industry which is directly related to the population is expected to maintain a robust growth rate.

Spending Pattern An increase is spending pattern has been witnessed in Indian FMCG market. There is an upward trend in urban as well as rural market and also an increase in spending in organized retail sector. An increase in disposable income, of household mainly because of in-crease in nuclear family where both the husband and wife are earning, has leads to growth rate in FMCG goods.

Changing Profile and Mind Set of Consumer People are becoming conscious about health and hygienic. There is a change in the mind set of the Consumer and now looking at ³Money for Value´ rather than ³Value for Money´. We have seen willingness in consumers to move to evolved products/ brands, because of changing

lifestyles, rising disposable income etc. Consumers are switching from economy to premium product even we have witnessed a sharp increase in the sales of packaged water and water purifier. Findings according to a recent survey by A. C. Nielsen shows about 71 per cent of Indian take notice of packaged goods labels containing nutritional information compared to two years ago which was only 59 per cent.

Advantages To The Sector

Governmental Policy Indian Government has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reducing excise duties, automatic foreign in-vestment and food laws resulting in an environment that fosters growth. 100 per cent ex-port oriented units can be set up by government approval and use of foreign brand names is now freely

Central & State Initiatives Recently Government has announced a cut of 4 per cent in excise duty to fight with the slowdown of the Economy. This announcement has a positive impact on the industry. But the benefit from the 4 per cent reduction in excise duty is not likely to be uniform across FMCG categories or players. The changes in excise duty do not impact cigarettes (ITC, Godfrey Phillips), biscuits (Britannia Industries, ITC) or ready-to-eat foods, as these prod-ucts are either subject to specific duty or are exempt from excise. Even players with manu-facturing facilities located mainly in tax-free zones will also not see material excise duty savings. Only large FMCG-makers may be the key ones to bet and gain on excise cut.

Foreign Direct Investment (FDI) Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI). There is a continuous

growth in net FDI Inflow. There is an increase of about 150 per cent in Net Inflow for Vegetable Oils & Vanaspati for the year 2008.

Market Opportunities Vast Rural Market Rural India accounts for more than 700 Million consumers, or 70 per cent of the Indian population and accounts for 50 per cent of the total FMCG market. The working rural population is approximately 400 Millions. And an average citizen in rural India has less then half of the purchasing power as compare to his urban counterpart. Still there is an untapped market and most of the FMCG Companies are taking different steps to capture rural market share. The market for FMCG products in rural India is estimated 52 per cent and is projected to touch ~ 60 per cent within a year. Hindustan Unilever Ltd is the largest player in the industry and has the widest market coverage.

Export - ³Leveraging the Cost Advantage´ Cheap labor and quality product & services have helped India to represent as a cost ad-vantage over other Countries. Even the Government has offered zero import duty on capital goods and raw material for 100% export oriented units. Multi National Companies out-source its product requirements from its Indian company to have a cost advantage. India is the largest producer of livestock, milk, sugarcane, coconut, spices and cashew apart from being the second largest producer of rice, wheat, fruits & vegetables. It adds a cost advantage as well as easily available raw materials.

Sectoral Opportunities Major Key Sectoral opportunities for Indian FMCG Sector are mentioned below:

Dairy Based Products India is the largest milk producer in the world, yet only around 15 per cent of the milk is processed. The organized liquid milk business is in its infancy and also has large long-term

growth potential. Even investment opportunities exist in value-added products like desserts, puddings etc.

Packaged Food Only about 10-12 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for expansion of this industry.

Oral Care The oral care industry, especially toothpastes, remains under penetrated in India with penetration rates around 50 per cent. With rise in per capita incomes and awareness of oral hygiene, the growth potential is huge. Lower price and smaller packs are also likely to drive potential up trading.

Beverages Indian tea market is dominated by unorganized players. More than 50% of the market share is capture by unorganized players highlighting high potential for organized players.

SWOT Analysis

Strengths: ‡ Low operational costs ‡ Presence of established distribution networks in both urban and rural areas ‡ Presence of well-known brands in FMCG sector Weaknesses: ‡ Lower scope of investing in technology and achieving economies of scale, especially in small sectors ‡ Low exports levels ‡ "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: ‡ Untapped rural market ‡ Rising income levels, i.e. increase in purchasing power of consumers ‡ Large domestic market- a population of over one billion. ‡ Export potential ‡ High consumer goods spending Threats: ‡ Removal of import restrictions resulting in replacing of domestic brands ‡ Slowdown in rural demand ‡ Tax and regulatory structure

Pestel Analysis Political (incl. Legal) Environmental regulations and protection Tax policies International Economic Economic growth Interest rates & Social Income distribution Demographics, Population growth rates, Age distribution Labor / social mobility Lifestyle changes Technological Government spending Industry focus on research

monetary policies trade Government

technological effort New inventions and development Rate transfer technological obsolescence Energy use and costs (Changes in) of technology

regulations and restrictions spending Contract enforcement law Unemployment Consumer protection Employment laws Government organization attitude Competition regulation policy Taxation

Work/career and leisure Life cycle and speed of attitudes Entrepreneurial spirit Exchange rates Education

Inflation rates

Fashion, hypes Health consciousness & welfare, safety Living conditions feelings

Information Technology

Political Stability

Stage of the business cycle

on (Changes in) Internet (Changes in) Mobile Technology

Safety regulations

Consumer confidence

Top Ten Players in FMCG Sector 1. Hindustan Unilever Ltd. 2. ITC (Indian Tobacco Company) 3. Nestlé India 4. GCMMF (AMUL) 5. Dabur India 6. Asian Paints (India) 7. Cadbury India 8 Britannia Industries 9. Procter & Gamble Hygiene and Health Care 10. Marico Industries

Hindustan Unilever Limited
In the summer of 1888, visitors to the Kolkata harbour noticed crates full of Sunlight soap bars, embossed with the words "Made in England by Lever Brothers". With it, began an era of marketing branded Fast Moving Consumer Goods (FMCG). Soon after followed Lifebuoy in 1895 and other famous brands like Pears, Lux and Vim. Vanaspati was launched in 1918 and the famous Dalda brand came to the market in 1937. In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HUL in November 1956; HUL offered 10% of its equity to the Indian public, being the first among the foreign subsidiaries to do so. Unilever now holds 52.10% equity in the company. The rest of the shareholding is distributed among about 360,675 individual shareholders and financial institutions. The erstwhile Brooke Bond's presence in India dates back to 1900. By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. The erstwhile Lipton's links with India were forged in 1898. Unilever acquired Lipton in 1972, and in 1977 Lipton Tea (India) Limited was incorporated. Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold through an international acquisition of Chesebrough Pond's USA in 1986. Since the very early years, HUL has vigorously responded to the stimulus of economic growth. The growth process has been accompanied by judicious diversification, always in line with Indian opinions and aspirations. The liberalisation of the Indian economy, started in 1991, clearly marked an inflexion in HUL's and the Group's growth curve. Removal of the regulatory framework allowed the company to explore every single product and opportunity segment, without any constraints on production capacity.

Simultaneously, deregulation permitted alliances, acquisitions and mergers. In one of the most visible and talked about events of India's corporate history, the erstwhile Tata Oil Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In 1996, HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture, Lakme Unilever Limited, to market Lakme's market-leading cosmetics and other appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50% stake in the joint venture to the company. HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in 1994, Kimberly-Clark Lever Ltd, which markets Huggies Diapers and Kotex Sanitary Pads. HUL has also set up a subsidiary in Nepal, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the Himalayan kingdom. The UNL factory manufactures HUL's products like Soaps, Detergents and Personal Products both for the domestic market and exports to India. The 1990s also witnessed a string of crucial mergers, acquisitions and alliances on the Foods and Beverages front. In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in Instant Coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops Icecream business from Cadbury India. As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond. Then in 1994, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the traditional Beverages business. 1994 witnessed BBLIL launching the Wall's range of Frozen Desserts. By the end of the year, the company entered into a strategic alliance with the Kwality Icecream Group families and in 1995 the Milkfood 100% Icecream marketing and distribution rights too were acquired. Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated in the merger of Pond's (India) Limited (PIL) with HUL in 1998. The two companies had significant overlaps in Personal Products, Speciality Chemicals and Exports businesses, besides a common distribution system since 1993 for Personal Products. The two also had a common management pool and a technology base. The amalgamation was done to ensure for the

Group, benefits from scale economies both in domestic and export markets and enable it to fund investments required for aggressively building new categories. In January 2000, in a historic step, the government decided to award 74 per cent equity in Modern Foods to HUL, thereby beginning the divestment of government equity in public sector undertakings (PSU) to private sector partners. HUL's entry into Bread is a strategic extension of the company's wheat business. In 2002, HUL acquired the government's remaining stake in Modern Foods. In 2003, HUL acquired the Cooked Shrimp and Pasteurised Crabmeat business of the Amalgam Group of Companies, a leader in value added Marine Products exports. HUL launched a slew of new business initiatives in the early part of 2000¶s. Project Shakti was started in 2001. It is a rural initiative that targets small villages populated by less than 5000 individuals. It is a unique win-win initiative that catalyses rural affluence even as it benefits business. Currently, there are over 45,000 Shakti entrepreneurs covering over 100,000 villages across 15 states and reaching to over 3 million homes. In 2002, HUL made its foray into Ayurvedic health & beauty centre category with the Ayush product range and Ayush Therapy Centres. Hindustan Unilever Network, Direct to home business was launched in 2003 and this was followed by the launch of µPureit¶ water purifier in 2004. In 2007, the Company name was formally changed to Hindustan Unilever Limited after receiving the approval of share holders during the 74th AGM on 18 May 2007. Brooke Bond and Surf Excel breached the the Rs 1,000 crore sales mark the same year followed by Wheel which crossed the Rs.2,000 crore sales milestone in 2008. In 2007, Hindustan Unilever was rated as the most respected company in India for the past 25 years by Businessworld, one of India¶s leading business magazines.[2] The rating was based on a compilation of the magazines annual survey of India¶s Most Reputed Companies over the past 25 years. HUL is the market leader in Indian consumer products with presence in over 20 consumer categories such as soaps, tea, detergents and shampoos amongst others with over 700 million Indian consumers using its products. It has over 35 brands. Sixteen of HUL¶s brands featured in

the ACNielsen Brand

Equity

list

of

100

Most

Trusted

Brands

Annual

Survey

(2008).[3] According to Brand Equity, HUL has the largest number of brands in the Most Trusted Brands List. It¶s a company that has consistently had the largest number of brands in the Top 50 and in the Top 10 (with 4 brands). Hindustan Unilever's distribution covers over 1 million retails outlets across India directly and its products are available in over 6.3 million outlets in India, i.e., nearly 80% of the retail outlets in India. It has 39 factories in the country. Two out of three Indians use the company¶s products and HUL products have the largest consumer reach being available in over 80 per cent of consumer homes across India.[citation needed] HUL was one of the eight Indian companies to be featured on the Forbes list of World¶s Most Reputed companies in 2007 On 17th October 2008 , HUL completed 75 years of corporate existence in India. Food brands HUL is one of India¶s leading food companies. Our passion for understanding what people want and need from their food - and what they love about it - makes our brands a popular choice

Home care brands HUL has a diverse portfolio of brands offering home care solutions for millions of consumers across India.

Personal care brands Personal care brands, including Axe, Dove, Lux, Pond's, Rexona and Sunsilk, are recognised and love by consumers across India.

Water

Pureit is the world¶s most advanced in-home water purifier. Pureit, a breakthrough offering of Hindustan Unilever (HUL), provides complete protection from all water-borne diseases, unmatched convenience and affordability. PRESENT STATUS Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods company, touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal Care Products and Foods & Beverages. They endow the company with a scale of combined volumes of about 4 million tonnes and Trading House by the Government of India. sales of Rs.10,000crore. HUL is also one of the country's largest exporters; it has been recognised as a Golden Super Star The mission that inspires HUL's over 15,000 employees, including over 1,300 managers, is to "add vitality to life." HUL meets everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. It is a mission HUL shares with its parent company, Unilever, which holds 51.55% of the equity. The rest of the shareholding is distributed among 380,000 individual shareholders and financial institutions.

HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall's ± are household names across the country and span many categories - soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinary products. They are manufactured over 40 factories across India. The operations involve over 2,000 suppliers and associates. HUL's distribution network, comprising about 4,000 redistribution stockiest, covering 6.3 million retail outlets reaching the entire urban population ,and about 250 million rural consumer. HUL has traditionally been a company, which incorporates latest technology in all its operations.

The Hindustan Unilever Research Centre (HLRC) was set up in 1958, and now has facilities in Mumbai and Bangalore. HLRC and the Global Technology Centres in India have over 200 highly qualified scientists and technologists, many with post-doctoral experience acquired in the US and Europe. HUL¶S NEW GROWTH STRATEGY After having fought a bitter price battle for market share with its rivals, Hindustan Unilever Ltd (HUL), Indian subsidiary of the Anglo-Dutch consumer goods company Unilever Plc, is now working on a new growth strategy for its laundry business. ³Price cut or hike is not a long-term growth strategy. Pricing, in fact, is now passe,´ insists Sudhanshu Vats, category head, home care. ³Our strategy for growth, now is focused on product innovation, new consumer and retail trends and aggressive marketing and promotions,´ he said. This comes even as Unilever is scouting for a potential buyer for its laundry business in the US. HUL says it is quite upbeat about the segment and says the laundry segment is one of its ³key growth areas.´ ³We have done key innovations across the product portfolio and it is working for us,´ says Vats. ³We successfully migrated from Rin Supreme to Surf Excel and Wheel Smart Srimati²which was rolled out in 2006²is also on the right track.´ HUL¶s market share in the laundry segment grew to around 37.8% in the quarter ended June from 35.5% in the same period last year, according the market research firm ACNielsen. However, this time, the increase was not at the expense of price war with its multinational rival Procter & Gamble Co. P&G also gained 0.5 percentage points, up to a 7.6% share. Nirma Ltd, the Ahmedabad-based manufacturer, however, saw its market share dip by 1.7% percentage points to 13.5%.

Wheel, a value brand that, according to Vats contributes around 50% of HUL¶s laundry segment revenues, increased its market share by 2 percentage points in the same period, with a total share of about 18%. According to ACNielsen, the laundry industry in India was worth Rs7,908 crore in 2006 and rose 8.4% over 2005. HUL doesn¶t report its laundry revenues separately but puts them under the soaps and detergent category. In 2006, HUL¶s soaps and detergents segment contributed around Rs5,596 crore to the company¶s total sales of Rs12,103 crore. ³Laundry has been an attractive segment in the past and is likely to keep growing in the near future. The recent price war between companies led to erosion in their profitability but now, the industry is stabilizing,´ says Unmesh Sharma, an analyst at Macquarie Securities here. According to Vats, the laundry business is witnessing a surge in demand from cities and HUL is focusing on Tier I and II cities to tap that demand.

³Consumers today are buying more clothes,´ says Vats. ³Trends suggest that the usage of detergents has gone up as a result. Also,

with premium quality of clothes, people want to use better and branded products.´ Still, analysts remain cautious. ³Some of HUL¶s recent moves, such as promotional campaigns and advertising, seem right,´ says Macquarie¶s Sharma. ³Still, it is too early to say what result their new strategies will yield.

SWOT ANALYSIS Strength 1. Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods company, touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal Care Products and Foods & Beverages.. 2. Due to its long presence in India ± has deep penetration ± 20 consumer product category, over 15,000 employees, including over 1,300 managers, is to "add vitality to life." 3. The company derives 44.3% of its revenues from soaps and detergents, 26.6% from personal care products, 10.5% from beverages, and the rest from foods, ice creams, exports, and other products. 4. Low cost of production due to economic of scale. That means higher profits and / or more competitioners. Better market penetration. 5. HUL is also one of the country's largest exporters; it has been recognised as a Golden Super Star Trading House by the Government of India. Weakness 1. Continuous threat from other competitors.

Opportunities 1. Increasing per capita national income resulting in higher disposable income. 2. Growing middle class and growing urban population. 3. Increasing gifts cultures. 4. Increasing departmental stores concept ± impulse @ at cash counters. 5. Globalization.

Threats 1. HLL's tea business has declined marginally, reason is that, cost pressure is likely due to rising crude and freight costs.

FIVE P¶S OF MARKETING Product Satisfaction suffices. But delight dazzles the average company will compete for customer by conforming to her expectation consistently. But the winner will surpass them by constantly exceeding her expectation, delivering to her door step additional benefits which she would never have imagined possible. Hindustan Unilever Ltd(HUL) offer such product. The wide variety products offered by the company include: The company¶s popular product¶s include:

y

Bathing soaps: Lux, Lifebuoy, Liril, Hamam, Breeze, Dove, Pears and Rexona

y

Laundry items: Surf Excel, Rin and Wheel

y

Skin care: Fair & Lovely, Pond¶s and Vaseline

y

Hair care: Sunsilk and Clinic

y

Oral care: Pepsodent and Close up

y

Deodorants: Axe and Rexona

y

Colour cosmetics:

Lakme
y

Ayurvedic: Ayush

y

Tea: Brooke Bond and Lipton

y

Coffee: Bru

y

Foods: Kissan, Annapurna and Knorr

y

Ice cream: Kwality Wall¶s .

Pricing Make no mistake. Second P of marketing is not another name for blindly lowering prices and relying on this strategy alone to increase sales dramatically. The strategy used by Hindustan Unilever Ltd(HUL) is for matching the value that customer pays to buy the product with the expectation they have about what the production is worth to them. Hindustan Unilever Ltd(HUL) has launched various products which cater to all customer segments. So every customer segment has different price expectation from the product. Therefore maximizing the returns involves identifying right price level for each segment, and then progressively moving through them.

Physical Distribution ± ³Place´ BRAND ISN¶T THE ONLY ANY MORE. Marketers and finance manager need a new term to evaluate their business: Distribution Equity. It takes much more time and effort to build, but once built, distribution equity is much together to erode. The fundamental axiom of Indian consumer market is this: You can set up a state-of ±the-art manufacturing facility, hire the hottest strategies on the block, swamp prime television with best Ads, but the end of it all, you would be know of selling your products. The cardinal task before the Indian market is managing is to shoe-horn its product on retail shelves. Buyers are paying for distribution equity not brand equity and market shares. Why does the company need distribution equity more anything in India? With technology and competitive pressure slash in it is becoming increasing difficult for marketers to retain a unique product differentiation for ling period. In a product and price parity situation, the brand that sells more is the one that reaches the highest number of customers. India ± The operations involve over 2,000 suppliers and associates. HUL's distribution network, comprising about 4,000 redistribution stockists, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers.television has already primed and population for consumption, and the marketer who can get to the to the consumer ahead of competition will give a hard ± to ± overtake lead. But getting their means managing wildly different terrains-climate, language, value system, life style, transport and communication network. And your brand equity isn¶t going to help when it comes to tackling these issues. Own distribution network consist of clearing and forwarding (C&F) agents & distribution stockiest. This network of distribution can either contact wholesalers and which in turn retailers or the distributors can contact to the retailers directly. Once the stock product reaches retailers, the prospective customers can have access to the product. Hindustan Unilever Ltd(HUL) distributes the product in the manner stated above.

Hindustan Unilever Ltd(HUL) distribution network has expanded. Beside use of improved logistics, Hindustan Unilever Ltd(HUL) is also attempting to improve the distribution quality. To address the issue of product stability, it has installed visi colors at several outlets. This helps in maintaining consumption in summer when sales usually drops due to the fact that the heal effects product quality and thereby off takes. Looking at the low penetration of few products, a distribution expansion would itself being incremental volume. The other reason is arch rival Procter & Gamble Co. reaches more than a million retailers. This increase in distribution is going to be accompanied by reduction in channel costs. Hindustan Unilever Ltd(HUL) marketing costs, at 18% of total costs, is much higher than Procter & Gamble Co. The company is looking to reduce this parity level. At Hindustan Unilever Ltd(HUL), they believe that selling FMCG is it like selling soft drinks. Promotion If an advertisement is to communicate effectively, the receiver must at least half want it to, and be prepared too take step toward the sender. Effective advertising is rarely hectoring or loudly explicit«. It often both attracts and generates arm feelings. More often than not, a successful campaign has a stronger element of the unexpected a quality that good advertising shares with much worthwhile literature. To penetrate into the inner recesses of her memory, communication must first ensure exposure, grab her attention evoke her comprehension, grab her acceptance and then extract retention competing with thousands of other units of communication trying to do the same. Finding showed that the adults felt too conscious to be seen consuming a product actually meant for children. The strategic response address the emotional appeal of the band to the child within the adult. Naturally, that produced just the value vacuum that Hindustan Unilever Ltd(HUL) was looking to fill. Thereafter it was the job of the advertising to communicate customer the wonderful feeling that he could experience by re-discoursing the careful, unself conscious, pleasure ± seeking child within himself ± a graft these feeling onto the Ad campaign like ³hasso to khul k hasso for close up´, ³cream bathing bar for dove soap´ and daag ache hai for surf excel´ have been sure shot winner with the audience.

It has also launched Pureit, a home water purifier which supplies drinking water without boiling/need of electricity , As well as outdoor and radio ads, ad agency contract has created communication for cinemas and even ATM machines for the brand. All ICICI¶ s ATM a message flashes on the screen as soon as customer insert his ATM card. Something familiar is planned for phone-book as well. In cinemas, Hindustan Unilever(Ltd)has a message on-screen just before the lights are dimmed to give them a chance to get their product There will also be after dinner sampling in restaurants ± to begin with, 30 catteries in Mumbai have been selected. Ad spend in 2000 was about 14% of sales and the management said that plans to maintain as spend at this level in the current year also. Ad since any discussion today would be incomplete without mention µe¶ word, the management plans to tap this new channel of marketing. Beside the company website (i.e. www.unilever.com), that the company has launched, it had also entered into various marketing relationship with other portals, specially targeted during festivals and events such as Valentines day, etc«. It¶s a combination of spiffing up its key brand, researching and improving the newer products that haven¶t taken off, supported with high ad ± spends that Hindustan Unilever(Ltd) hopes will see it emerges stronger after the current slowdown, as well as expand the market. Positioning In the 1970s consumers were ready to pay ³more for more´, and luxury goods flourished. In the 1980s, consumers began to demand ³more for same´, and the discounting era grew strong. Today¶s consumer demanding ³more for less´, and the winner will be that super value marketers«. Some of today¶s most successful companies recognize those customers are more educated and able to recognize true customer value« Positioning is simply concentrating on an idea ± or ± even a word defines that company in the mind of the consumer. It is more efficient to market one successful concept to one large group of people than 50 product or service ideas to 50 separate group« repositioning is a must when customer attitude have changed and product have strayed away from the consumer¶s long standing perception of them«

Hindustan Unilever(Ltd) is an anchor in sea of consumer products. As a variety of competitive claims assails her senses, today customer uses complicated decision making process to assess the alternative before making a purchase. Since Hindustan Unilever(Ltd) is more clearly associated with a particular set of attributes in terms of benefits and prices, the quicker becomes her search process. Positioning of individual product: 1) Lifebuoy is µone of Unilever¶s oldest brands¶ with more than a hundred-year history, as www.unilever.com informs. ³Lifebuoy has become more than just a red bar of soap ± today the brand provides hygiene and health solutions for families 2) Fair & Lovely, a hot-selling ³fairness´ cream, which promises a lighter skin tone for many of India¶s complexion-conscious consumers .

HINDUSTAN UNILEVER¶S MARKET SEGMENTATION Market place for any product is comprised of many different segments of consumers, each with different needs and wants. Markets segmentation can be defined in a number of ways such as:  Demographic variables (e.g. Consumers are groups, gender, material states income etc«)  The lifestyle of consumers (i.e. their interests and activities) the benefits which consumers look for in a product or on the occasions when the product might be consumed.  Hindustan Unilever(Ltd) takes into account all these factors when producing a range of products. It targets different segments within the market, such as the:  Break segment ± products which are normally consume as a snatched break and often with tea and coffee.  Impulse segment ± these products are often purchase on impulse, used these and then. They include product such as close up.  Take home segment ± this describes product that are normally purchased in supermarkets, taken home consumed at a later stage.

ITC
History and Evolution ITC was incorporated on August 24, 1910 under the name Imperial Tobacco Company of India Limited. As the Company's ownership progressively Indianised, the name of the Company was changed from Imperial Tobacco Company of India Limited to India Tobacco Company Limited in 1970 and then toI.T.C. Limited in 1974. In recognition of the Company's multi-business portfolio encompassing a wide range of businesses - Cigarettes & Tobacco, Hotels, Information Technology, Packaging, Paperboards & Specialty Papers, Agri-business, Foods, Lifestyle Retailing, Education & Stationery and Personal Care - the full stops in the Company's name were removed effective September 18, 2001. The Company now stands rechristened 'ITC Limited'. The Company¶s beginnings were humble. A leased office on Radha Bazar Lane, Kolkata, was the centre of the Company's existence. The Company celebrated its 16th birthday on August 24, 1926, by purchasing the plot of land situated at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the sum of Rs 310,000. This decision of the Company was historic in more ways than one. It was to mark the beginning of a long and eventful journey into India's future. The Company's headquarter building, 'Virginia House', which came up on that plot of land two years later, would go on to become one of Kolkata's most venerated landmarks. Though the first six decades of the Company's existence were primarily devoted to the growth and consolidation of the Cigarettes and Leaf Tobacco businesses, the Seventies witnessed the beginnings of a corporate transformation that would usher in momentous changes in the life of the Company. ITC's Packaging & Printing Business was set up in 1925 as a strategic backward integration for ITC's Cigarettes business. It is today India's most sophisticated packaging house.

In 1975 the Company launched its Hotels business with the acquisition of a hotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel Chola'. The objective of ITC's entry into the hotels business was rooted in the concept of creating value for the nation. ITC chose the hotels business for its potential to earn high levels of foreign exchange, create tourism infrastructure and generate large scale direct and indirect employment. Since then ITC's Hotels business has grown to occupy a position of leadership, with over 100 owned and managed properties spread across India. In 1979, ITC entered the Paperboards business by promoting ITC Bhadrachalam Paperboards Limited, which today has become the market leader in India. Bhadrachalam Paperboards amalgamated with the Company effective March 13, 2002 and became a Division of the Company, Bhadrachalam Paperboards Division. In November 2002, this division merged with the Company's Tribeni Tissues Division to form the Paperboards & Specialty Papers Division. ITC's paperboards' technology, productivity, quality and manufacturing processes are comparable to the best in the world. It has also made an immense contribution to the development of Sarapaka, an economically backward area in the state of Andhra Pradesh. It is directly involved in education, environmental protection and community development. In 2004, ITC acquired the paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd (BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to improve customer service with reduced lead time and a wider product range. In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and British joint venture. Since inception, its shares have been held by ITC, British American Tobacco and various independent shareholders in Nepal. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited (Surya Nepal). In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper manufacturing company and a major supplier of tissue paper to the cigarette industry. The merged entity was named the Tribeni Tissues Division (TTD). To harness strategic and operational synergies, TTD was merged with the Bhadrachalam Paperboards Division to form the Paperboards & Specialty Papers Division in November 2002.

Also in 1990, leveraging its agri-sourcing competency, ITC set up the Agri Business Division for export of agri-commodities. The Division is today one of India's largest exporters. ITC's unique and now widely acknowledged e-Choupal initiative began in 2000 with soya farmers in Madhya Pradesh. Now it extends to 10 states covering over 4 million farmers. ITC's first rural mall, christened 'Choupal Saagar' was inaugurated in August 2004 at Sehore. On the rural retail front, 24 'Choupal Saagars' are now operatonal in the 3 states of Madhya Pradesh, Maharashtra and Uttar Pradesh. In 2000, ITC forayed into the Greeting, Gifting and Stationery products business with the launch of Expressions range of greeting cards. A line of premium range of notebooks under brand ³Paperkraft´was launched in 2002. To augment its offering and to reach a wider student population, the popular range of notebooks was launched under brand ³Classmate´ in 2003. ³Classmate´ over the years has grown to become India¶s largest notebook brand and has also increased its portfolio to occupy a greater share of the school bag. Years 2007- 2009 saw the launch of Children Books, Slam Books, Geometry Boxes, Pens and Pencils under the ³Classmate´ brand. In 2008, ITC repositioned the business as the Education and Stationery Products Business and launched India's first environment friendly premium business paper under the ³Paperkraft´ Brand. ³Paperkraft´ offers a diverse portfolio in the premium executive stationery and office consumables segment. Paperkraft entered new categories in the office consumable segment with the launch of Textliners, Permanent Ink Markers and White Board Markers in 2009. ITC also entered the Lifestyle Retailing business with the Wills Sport range of international quality relaxed wear for men and women in 2000. The Wills Lifestyle chain of exclusive stores later expanded its range to include Wills Classic formal wear (2002) and Wills Clublife evening wear (2003). ITC also initiated a foray into the popular segment with its men's wear brand, John Players, in 2002. In 2006, Wills Lifestyle became title partner of the country's most premier fashion event - Wills Lifestyle India Fashion Week - that has gained recognition from buyers and retailers as the single largest B-2-B platform for the Fashion Design industry. To mark the occasion, ITC launched a special 'Celebration Series', taking the event forward to consumers.

In 2000, ITC spun off its information technology business into a wholly owned subsidiary, ITC Infotech India Limited, to more aggressively pursue emerging opportunities in this area. Today ITC Infotech is one of India¶s fastest growing global IT and IT-enabled services companies and has established itself as a key player in offshore outsourcing, providing outsourced IT solutions and services to leading global customers across key focus verticals - Manufacturing, BFSI (Banking, Financial Services & Insurance), CPG&R (Consumer Packaged Goods & Retail), THT (Travel, Hospitality and Transportation) and Media & Entertainment. ITC's foray into the Foods business is an outstanding example of successfully blending multiple internal competencies to create a new driver of business growth. It began in August 2001 with the introduction of'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002, ITC entered the confectionery and staples segments with the (wheat launch flour). of the brands mintwitnessed the o and Candyman confectionery and Aashirvaadatta 2003

introduction of Sunfeast as the Company entered the biscuits segment. ITC's entered the fast growing branded snacks category with Bingo! in 2007. In eight years, the Foods business has grown to a significant size with over 200 differentiated products under six distinctive brands, with an enviable distribution reach, a rapidly growing market share and a solid market standing. In 2002, ITC's philosophy of contributing to enhancing the competitiveness of the entire value chain found yet another expression in the Safety Matches initiative. ITC now markets popular safety matchesbrands like iKno, Mangaldeep, Aim, Aim Mega and Aim Metro. ITC's foray into the marketing of Agarbattis (incense sticks) in 2003 marked the manifestation of its partnership with the cottage sector. ITC's popular agarbattis brands include Spriha and Mangaldeepacross a range of fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur, Sambrani and Nagchampa. ITC introduced Essenza Di Wills, an exclusive range of fine fragrances and bath & body care products for men and women in July 2005. Inizio, the signature range under Essenza Di Wills provides a comprehensive grooming regimen with distinct lines for men (Inizio Homme) and women (Inizio Femme). Continuing with its tradition of bringing world class products to Indian consumers the Company launched 'Fiama Di Wills', a premium range of

Shampoos, Shower Gels and Soaps in September, October and December 2007 respectively. The Company also launched the 'Superia' range of Soaps and Shampoos in the mass-market segment at select markets in October 2007 and Vivel De Wills & Vivelrange of soaps in February and Vivel range of shampoos in June 2008. List of products & brands ITC has a diversified presence in 

Cigarettes: W. D. & H. O. Wills, Gold Flake, Navy Cut, Insignia, India Kings, Classic (Verve, Regular, Mild & Ultra Mild), Silk Cut, Scissors, Capstan,Berkeley, Bristol, Lucky Strike and Flake. 

Hotels: ITC Welcomgroup Hotels, Palaces and Resorts is India's second largest hotel chain with over 80 hotels. Based out of Hotels Division Headquarters at the ITC Green Centre in Gurgaon, ITC Welcomgroup is also the exclusive franchisee of The Luxury Collection brand.

In FMCG, ITC has a strong presence in: 

Foods business (Kitchens of India; Ashirvaad; Minto; Sunfeast; Candyman; Bingo brands in Ready to Eat, Staples, Biscuits, Confectionery and Snack Foods); Apparel business (Wills Lifestyle and John Players brands); Personal Care Products business(Fiama di Wills; Vivel; Essenza di Wills; Superia brands of products in perfumes, haircare and skincare) Stationery (Classmate and Paperkraft brands) Safety Matches and Agarbattis [Ship (through ownership of WIMCO); iKno; Mangaldeep; Aim brands] 

 



Other businesses include: 
 

Paperboard, Specialty Paper, Graphic and other Paper; Packaging and Printing for diverse international and Indian clientele. Infotech (through its near-wholly owned subsidiary ITC Infotech India Limited which is a SEI CMM Level 5 company)

Marketing Strategies of ITC
ITC Pricing strategy The pricing of the ITC food division depends upon the Customers¶ demand schedule, the cost function and the competitors¶ price. The pricing of the company is such that it caters to the need of all income groups of people but special provision has been kept for Low and middle income group, and their pricing are competitive with respect to other players like Britannia, Parle and Briskfarm. The company follows the Going rate pricing that is the price of the product depends upon the competitors price. The firm chooses pricing more or less the same as Market leader. ITC Promotional activities A particular budget is allocated for the promotion of the products, the local promotion scheme is decided by the Area Sales Manages, it give its suggestion to the District office and that is forwarded to the Head Quarter in Kolkata. In another promotional scheme for Biscuits a particular number of cases is given freely to the distributors according to the amount of sale they make, this was adrop down promotion i.e. of the number of free cases that a particular distributors gets, off them a certain part is reserved for the retailers and customer if they buy a certain level of biscuit quantity. ITC Distribution Buoyed by a strong distribution network ITC is likely to retain its market share in the cigarettes business; the ban on advertisements is likely to work in favour of ITC thanks to the recall factor. The company's reliable distribution network also ensures superior inventory turnover than its peers

BCG Matrix

Star y y y Agri Business Hotels Paperboards & Packaging

Question mark y FMCG Foods

Cash Cow y Dogs y ITC infotech FMCG Cigarette

The main driver in attracting the consumers is Quality of the product itself with nearly 65% of the people surveyed citing it as the main criterion for choosing the product, followed by past experience of the consumer with the brand (17.6%). Price was third criterion with a percentage of 11.7% of the people surveyed gave importance during buying An effective advertisement will attract more and more customer to buy, helps in the brand and image formation, and informative in telling the USP of the product

The above graph shows the experience of the customer after using the product i.e. whether they were satisfied with the product as a whole. The higher the satisfaction level higher will be the chances that the customer will buy the same brand again and again that leads to the building of the Brand loyalty The Availability of the Product itself determine the effectiveness and the penetration of the distribution channel of that particular brand among the people ITC has been a leader in the tobacco business, but it realize from the up coming trends that remaining with a single business is not a noble thought, moreover the company was threatened of the anti-tobacco campaign. Therefore the company decided to venture into InfoTech with ITC InfoTech, foods via Kitchens of India, greeting cards through Expressions and lifestyle retailing through Wills Sport. Each of these is intended to draw revenues of at least Rs. 250 crore by 2005. ITC was a cash rich company with a liquidity of Rs.8816 million in the cigarette business, even though the company understood the need and usefulness of diversification. The writer in the article is mainly concerned with the way ITC spreads its wings in the lifestyle segments, he writes:´ forty-five stores in 34 cities in just under a year, selling an expensive fashion brand of relaxed-wear. If retail swamp-out and brand salience were the goals, ITC¶s Wills Sport would be on a victory lap already.´ The company has started its retail stores not only in Indian metros but also in the small towns like Ranchi, Jabalpur, Gwalior, Belguam, Ernakulam etc. the article also talks about the strong market campaign done by the company, it also describe how the company has used its brand image to attract the Indian youth. It also tells about the strategy adopted by the company to differentiate itself in this segment, like the company is outsourcing its designs formthe American Design Intelligence Group (ADIG), a San Francisco, US-based garment and retail consultancy. Now it has its own six-member team, even as it continues a tie-up with Science & Designs, an Italian fashion design house ± through which it keeps a watch on hot western labels such as Banana Republic and Armani Exchange.

SWOT Analysis

Strengths: ITC leveraged it traditional businesses to develop new brands for new segments. For example, ITC used its experience of transporting and distributing tobacco products to remote and distant parts of India to the advantage of its FMCG products. ITC master chefs from its hotel chain are often asked to develop new food concepts for its FMCG business. ITC is a diversified company trading in a number of business sectors including cigarettes, hotels, paper, agriculture, packaged foods and confectionary, branded apparel, personal care, greetings cards, Information Technology, safety matches, incense sticks and stationery. Weaknesses: The Company¶s original business was traded in tobacco. ITC stands for Imperial Tobacco Company of India Limited. It is interesting that a business that is now so involved in branding continues to use its original name, despite the negative connection of tobacco with poor health and premature death. To fund its cash guzzling FMCG start-up, the company is still dependent upon its tobacco revenues. Cigarettes account for 47 per cent of the company's turnover, and that in itself is responsible for 80% of its profits. So there is an argument that ITC's move into FMCG (Fast Moving Consumer Goods) is being subsidised by its tobacco operations. Opportunities: Core brands such as Aashirvaad, Mint-o, Bingo! And Sun Feast (and others) can be developed using strategies of market development, product development and marketing penetration. ITC is moving into new and emerging sectors including Information Technology, supporting business solutions. e-Choupal is a community of practice that links rural Indian farmers using the Internet. This is an original and well thought of initiative that could be used in other sectors in many other parts of the world. It is also an ambitious project that has a goal of reaching 10 million farmers in 100,000 villages. Threats: The obvious threat is from competition, both domestic and international. The laws of economics dictate that if competitors see that there is a solid profit to be made in an emerging consumer society that ultimately new products and services will be made available. Western companies will see India as an exciting opportunity for themselves to find new market segments for their own offerings. ITC's opportunities are likely to be opportunities for other companies as well. Therefore the dynamic of competition will alter in the medium-term. Then ITC will need to

decide whether being a diversified conglomerate is the most competitive strategic formation for a secure future

Dabur India
History of Dabur Dabur was incorporated in 1884 in a small Calcutta pharmacy where Dr. S. K. Burman launched his mission of making health care products. With the growing popularity of Dabur products, in 1986 Dr. S. K. Burman set up Dabur¶s first manufacturing plant for mass production and in the early 1900s Dabur ventured into the business of nature based ayurvedic medicines for which standardized drugs were not available in the market. In 1936 Dabur sets up Dabur India Limited and a new manufacturing plant is set up in Faridabad on the outskirts of Delhi. In 1979 one of the largest and best equipped production facility was started near Sahibabad along with the formation of Dabur Research Foundation (DRF) signaling the launch of research operation in the pioneering area of health care. In 1986 Dabur became a public limited company and raised its first public issue in 1994 with the company share issued at a high premium and oversubscribed twenty one times. For better operation and management 3 separate divisions were created in 1996 according to the product mix, namely Health care products division, Family production division and Dabur ayurvedic specialties limited. In 1997 Dabur enters full scale in the nascent processed foods market with the creation of the food division. Project STARS (Strive To Achieve Record Success is initiated to give a jump start to the company and accelerate its growth performance) and in 2000 Dabur established its market leadership status with a turnover of Rs 1000 Crores. In 2005, Dabur acquired Balsara. Dabur crossed $ 2 billion market cap in 2006. Dabur foods merged with Dabur India in 2007. From a small beginning and upholding the values of its founder, Dabur entered the august league of large corporate business. Dabur has also ventured into the specialized health care area of cancer treatment with its oncology formulation plant at Baddi in Himachal Pradesh and extended its global partnerships by entering into joint ventures with Osem of Israel for food and Bongrain of France for cheese and other dairy products. Dabur India Limited is India¶s fourth largest FMCG company. The first Dabur plant was set up in 1896 and research laboratories established in 1919. Dabur became a public limited company

in 1986. In 1998, the Burman family, the original promoters, handed over the day-to-day running of the company to professionals. With effect from 1 April 2005, Balsara Home Products became a subsidiary of Dabur. Apart from Balsara, Dabur has five other subsidiaries ² Dabur Foods, Dabur Nepal, Dabur Egypt, Dabur Oncology and Dabur Pharma. Dabur has been marketing its products in more than 50 countries all over the world. The company has offices and representatives in Europe, America and Africa. Manufacturing facilities are spread across three overseas locations. Dabur India Limited holds its speciality in AYURVEDA. Ayurveda, the ancient Indian system of medicine based on natural and holistic living, derives from two Sanskrit words -Ayu or life, and Veda or knowledge. This Science of Life analyses the human body through a combination of the body, mind and spirit. Originating nearly 5,000 years ago, Ayurvedic texts were researched by Dabur in its quest for natural remedies. Today, its application in modern life has been renewed through the scientific research and validation undertaken at Dabur. Other than ³ ayurvedic specialities ³ Dabur¶s product range also encompasses health care, hair care, oral care, baby care, home care, food segments and digestive products . Some of the wellknown brands include Amla Chyawanprash, Hajmola, Lal Dantmanjan, Nature Care and Pudin Hara. Part of the company¶s success came from its highly active sales network. A significant proportion of Indian population, which would be top one billion before the drawn of the 21st century, still lived in rural regions and in extreme poverty. For much of this population, personal care products remained luxury items. Yet the company recognized the importance of building its brand in this region and as such the company developed a vast sales network and much of this network was based on an army of independent, direct sales agents, who hawked the company¶s products in more than 150000 villages. In 2002 the company prepared to enter a new management era and appointed Mr. Sunil Duggal as the C.E.O of the company. He joined in 1995 as General Manager (Sales & Marketing), and

since then, with his dynamic spirit and leadership abilities he has led the company to achieve new heights and becamer the CEO of the Company, and with his valuable experience steering the company ahead in its growth plans. Dabur India Limited has marked its presence with some very significant achievements and today commands a market leadership status. Their story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to their partners and stakeholders. The results of the policies and initiatives speak for themselves.

Brands CONSUMER HEALTH DIVISION (CHD)
Health supplement Dabur Chyawanprash Dabur baby olive Glucose D oil Pudin hara Dabur ghunti janma Pudin hara G Shilajit Sat isabgol Hajmola Candy F Nature care Baby care Dabur lal tail Digestives Hajmola Mast Masala Natural cures Shilajit fold

Anardana

Ring Ring

Hajmola Candy

Itch care

Dabur Honey

Back-Aid

Shankha Pusphi

Dabur balm

Sarbyna strong

CONSUMER CARE DIVISION (CCD) Hair care oil - Amla hair oil Skin care - Gulabari Hair care shampoo Oral care

- Anmol silky black - Dabur red gel shampoo

- Amla lite hair oil

- Vatika fairness face pack Vatika conditioning shampoo

-

Dabur

red

henna toothpaste

- Vatika hair oil

Anmol sarson shampoo

Dabur

lal

- Vatika anti-dandruff dant manjan

amla

- Dabur binaca - Amla Hair Oil - Anmol natural shine toothbrush shampoo - Amla Lite Hair Oil

- Vatika Hair Oil

-Anmol Amla

Sarson

Marketing Mix
PRODUCT

The product is the physical good or service offered to the consumer. The product is the most visible element of the marketing mix. When a firm introduces a number of products over time gradually, its offerings become many. That is, the firm becomes a multi product firm. Similarly, Dr. S. K. Burman started a small pharmacy in Calcutta in 1884 where he launched his mission of providing health care products. Which was later made a full fledged company Dabur (Dr. S. K. Burman) India Limited started with only few ayurvedic medicines. But now it has a bigger portfolio of products of variety of brands like hair care, health care, baby care & other different types of Home & Personal care products along with food and digestive products. Further the company can increase the depth of an item in the line by adding new variants. For example Dabur has added different flavours like orange and lime to its Glucon D. Dabur¶s diverse product range is today manufactured in 9 manufacturing facilities within India and 5 other worldwide. Dabur's Ayurvedic Specialities Division has over 260 medicines for treating a range of ailments and body conditions-from common cold to chronic paralysis. Over the past two years, Dabur¶s product portfolio has been systematically overhauled through re-launches and brand extensions, even as fresh forays have been made into new categories such as hair, skin care and home care. Recently two new products, disinfectant cleaner and kitchen cleaner under µDazzl¶ brand. All these launches of new kinds of products will help the company to capture the potential market arising from the growing needs of the fast expanding market, especially the aspiring and affluent Indian household categories.
PRICE

Price is normally expressed in monetary terms. It is worth of a product or service in monetary terms. Price is the value which a buyer passes on to the seller in lieu of the product or service provided. Price is a crucial determinant of the fact whether the exchange between the buyer and seller should materialize or not. While pricing the products three main factors should be kept in mind -:

1. Cost 2. Competition 3. consumer demand

The three main factors affecting the pricing strategies have been discussed below -:

I.

COST

One of the most important factor to take care while pricing is the cost costs set the floor for pricing decisions. There are two types of cost variable cost and fixed cost. It is important that the price should recover all costs including a fair return for undertaking the marketing effort and risk. II. COMPETITION

Competition is another important consideration while pricing. When a firm does not face any competition it can enjoy complete freedom in fixing its price. But when there are competitors selling the same or similar products, the pricing freedom is considerably reduced. Its price must fall in line with the competitors. Similarly Dabur India Limited also has many competitors. But Dabur¶s top selected competitors are:1. Hindustan Unilever Limited 2. Proctor and Gamble 3. Pepsi co. 4. Colgate Palmolive 5. Godrej Industries 6. Marico Ltd. etc.

III.

CONSUMER DEMAND

Dabur learned that the majority of Indian population tends to go towards the Indianised natural and herbal products thus they made it their USP. Dabur is efficiently leading the market with this product range, providing the customers with special products easily.

Pricing Strategies of Dabur
Dabur has stepped up the pace of new product launches and is investing ad spend and marketing. The entire product portfolio is also tweaked to include premium offerings such as more variants under almost every category, like Dabur Vatika Hair Oil is available in 3 different versions . Dabur is today seen as far more proactive in the market. Dabur is now an external oriented company. Across the whole organization the company have one definition of winning, and that means not just growing, but growing completely. Over the last two years, Dabur has maintained its operating margins through judicious price hikes across products and reduction in pack sizes. As, Dabur had different sub-categories it came out with variable pricing to reach each and every target segment E.g. : One- litre bottle of Cooler (juice) was priced at Rs.50 , Selective Price Reduction to increase Demand, Introduction of Smaller packs at Rs.5, Came out with Rs.1 sachet of Vatika Shampoo to increase market share, Cutting Price to stand out against competition. PLACE Place in the context of marketing mix refers to a set of decisions that need to be taken in order to make the products available to the customers for purchase and consumption. Making the products available to the customers require development of channels of distribution and physical distribution of products. Place - Dabur constantly kept on increasing its geographic spread to increase its sales revenues y y y y Entered the South Indian Market Expanding in theInternational Market Presence in over 50 countries Subsidiaries established in Nepal, Nigeria, Bangladesh and Pakistan

y

Focus areas : Asia Pacific, Afghanistan, Russia and other CIS countries

Channels of distribution Channels of distribution refers to the path taken by the goods in their movement to the customers. For instance, the toothpaste we use is manufactured in the factory of a company Dabur. But before it reaches us it passes through the hands of many middlemen who help it come to you in right time, at right place and in right quantity. Dabur¶s distribution network is recognised as one of its key strengths. Its focus is not only to enable easy access to our brands, but also to touch consumers with a three-way convergence - of product availability, brand communication, and higher levels of brand experience. Here first the products are manufactured and from Manufacturing plants the packed goods are supplied to Clearing And Forwarding Agents(C&FA) and from here the goods are then further supplied to number of Stockiest or Distributors, from here goods reaches to large number of Retailers and it is the duty of Stockiest to take orders from retailers and then supply the goods to them, this work is generally done by stockiest salesman through ready stock or by taking orders first and then placing the order. From here the goods finally reaches to Customers. Customer purchases the product from retailers.
PROMOTION

Once the product has been manufactured, priced rightly and is distributed, the next task of the marketer is to inform potential customer about the product and persuade them to buy the same. The promotion element of marketing mix is concerned with activities that are undertaken to communicate with both customers and participants in the channel of distribution such that sales goals are realized. There are different promotional activities like-: Advertising, Sales promotion, trade promotion, personal selling etc. but one of the most convenient and effective one that most of the industries uses is the Advertising and Sales Promotion. Promotions : y y Different brands have its own marketing and advertising team Different brands had different promotions

y

Utilized the popularity of Indian films in the domestic and global markets to promote its brands

y y

Undertook the most advertising campaign with Mr. Bachchan endorsing Dabur brands Signed cricketer Virendar Sehwag and his wife for selected Oral, Hair and Healthcare product

y

Adopted the INTEGRATED MARKETING COMMUNICATION programme in 2003 to increase its market share

y y y y y

Targeted the Institutional market which included hotels and airlines Partnered with Institutional clients to provide value added services Held various contests Training sessions and workshops for food and beverage professionals Tie-up with Discovery Channel

Advertising Advertising is a form of communication that typically attempts to persuade potential customers to purchase or to consume more of a particular brand of product or service. Many advertisements are designed to generate increased consumption of those products and services through the creation and reinforcement of "brand image" and "brand loyalty". For these purposes, advertisements sometimes embed their persuasive message with factual information. Every major medium is used to deliver these messages, including television, radio, cinema, magazines, newspapers, video games, the Internet and billboards. Advertising is often placed by an advertising agency on behalf of a company or other organization. Dabur has created the huge brand image and a vast product following by associating meganames like Amitabh Bachchan, Rani Mukhurjee, Vivek Oberoi, Mandira Bedi etc. Dabur invested Rs. 150 crore just on the advertising of Real ³Fruit Juice´ and ³Real Active´. So far the company has been successful in this mission as the people now know the brand and ask for its products by name.

Sales promotion ³An activity designed to boost the sales of a product or service. It may include an advertising campaign, increased PR activity, a free-sample campaign, offering free gifts or trading stamps, arranging demonstrations or exhibitions, setting up competitions with attractive prizes, temporary price reductions, door-to-door calling, telemarketing, personal letters on other methods´. In marketing, sales promotion is one of the four aspects of promotion. (The other three parts of the promotional mix are advertising, personal selling, and publicity/public relations.) Sales promotions are non-personal promotional efforts that are designed to have an immediate impact on sales. Sales promotion involves short-term incentives to encourage buyers to purchase a product. It's aim is to encourage immediate purchase of a product. If used too often however, sales promotion can create a situation where consumers will not buy unless there is a bonus offer. This will result in loss of profit for the company. More than any other element of the promotional mix, sales promotion is about ³action´. It is about stimulating customers to buy a product. It is not designed to be informative ± a role which advertising is much better suited to. Sales promotion can be directed at:‡ The ultimate consumer (a ³pull strategy´ encouraging purchase) ‡ The distribution channel (a ³push strategy´ encouraging the channels to stock the product). This is usually known as ³selling into the trade´

SALES PROMOTIONAL TOOLS OF DABUR FOODS y y y Price promotions Coupons Gift with purchase

y y y y y y y y y y y y y y y y y y y y y y

Competitions and prizes Money refunds Point-of-sale displays Free samples Contest /demos Festival Sales Retailer coupons Multi-packs Special price for twos Allowances for additional shelf space Merchandising Sales contest Incentives Awards & prizes Premium gifts Sales Meetings Samples/product sampling Trade Fairs & exhibitions Contests & Sweepstakes Exchange Offers/buyback Refund / Rebate Price / Bonus Packs

Positioning
Dabur through its diversified brands has tapped various target segments like the : y y y y y Youth Health Conscious People School Children Mothers Existing Old age group

SWOT analysis Strengths: y y y y y Century Old Company Established Brand Ayurvedic/ herbal Product line Leader in Herbal Digestives where the product has 90% of the market share Innovativeness in Promotions

Weakness: Profitability is uneven across product line Opportunities: y y y y y y Extend Vatika brand to new categories like Skin Care and body wash segments Launch several OTC brands Southern India Market Exploring new geographical areas- local as well global Oral Care Segment Launching new Products like Hair oils, Herbal and Gel Toothpastes etc

Threats: y y y Competition in the FMCG sector from well established names Other fields of medicine- Allopathic and Homeopathic Markets where Herbal products are not recognized

NESTLE INDIA Nestlé India is a subsidiary of Nestlé S.A. of Switzerland. With six factories and a large number of co-packers, Nestlé India is a vibrant Company that provides consumers in India with products of global standards and is committed to long-term sustainable growth and shareholder satisfaction. The Company insists on honesty, integrity and fairness in all aspects of its business and expects the same in its relationships. This has earned it the trust and respect of every strata of society that it comes in contact with and is acknowledged amongst India's 'Most Respected Companies' and amongst the 'Top Wealth Creators of India'. Nestlé¶s relationship with India dates back to 1912, when it began trading as The Nestlé AngloSwiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market.

Brief History After India¶s independence in 1947, the economic policies of the Indian Government emphazised the need for local production. Nestlé responded to India¶s aspirations by forming a company in India and set up its first factory in1961 at Moga, Punjab, where the Government wanted Nestlé to develop the milk economy. Progress in Moga required the introduction of Nestlé¶s Agricultural Services to educate, advise and help the farmer in a variety of aspects. From increasing the milk yield of their cows through improved dairy farming methods, to irrigation, scientific crop management practices and helping with the procurement of bank loans. Nestlé set up milk collection centres that would not only ensure prompt collection and pay fair prices, but also instil amongst the community, a confidence in the dairy business. Progress involved the creation of prosperity on an on-going and sustainable basis that has resulted in not just the transformation of Moga into a prosperous and vibrant milk district today, but a thriving hub of industrial activity, as well. For more on Nestlé Agricultural Services, Nestlé has been a partner in India's growth for over nine decades now and has built a very special relationship of trust and commitment with the people of India. The Company's activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods.

The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings. The culture of innovation and renovation within the Company and access to the Nestlé Group's proprietary technology/Brands expertise and the extensive centralized Research and Development facilities gives it a distinct advantage in these efforts. It helps the Company to create value that can be sustained over the long term by offering consumers a wide variety of high quality, safe food products at affordable prices. Nestlé India is a responsible organization and facilitates initiatives that help to improve the quality of life in the communities where it operates. Beginning with its first investment in Moga in 1961, Nestlé¶s regular and substantial investments established that it was here to stay. In 1967, Nestlé set up its next factory at Choladi (Tamil Nadu) as a pilot plant to process the tea grown in the area into soluble tea. The Nanjangud factory (Karnataka), became operational in 1989, the Samalkha factory (Haryana), in 1993 and in 1995 and 1997, Nestlé commissioned two factories in Goa at Ponda and Bicholim respectively. Nestlé India is now putting up the 7th factory at Pant Nagar in Uttaranchal Products Product Category Brands Milk Products NESTLÉ EVERYDAY Dairy Whitener NESTLÉ EVERYDAY Ghee NESTLÉ Curds NESTLÉ CEREMEAL NESTLÉ Jeera Raita NESTLÉ Fresh 'n' Natural Dahi NESTLÉ Fruit 'N Dahi NESTLÉ Milk NESTLÉ Slim Milk Beverages NESCAFÉ CLASSIC NESCAFÉ SUNRISE NESTLÉ MILO

NESCAFÉ 3 in 1 NESCAFÉ Koolerz Prepared Dishes MAGGI 2-MINUTE Noodles Chocolates & Confectionaries MAGGI Healthy Soups MAGGI Dal Atta Noodles MAGGI MAGIC Cubes NESTLÉ Milk Chocolate NESTLÉ KIT KAT NESTLÉ MUNCH NESTLÉ MILKYBAR NESTLÉ MILKYBAR CHOO NESTLÉ BAR-ONE POLO NESTLÉ Eclairs NESTLÉ ACTI-V POLO Powermint

SWOT analysis Nestle India Limited is the Indian arm of Nestle SA, which holds a 51% stake in the company. It is one of the leading branded processed food companies in the country with a large market share in products like instant coffee, weaning foods, instant foods, milk products, etc. It also has a significant share in the chocolates and other semi-processed foods market. Nestlé's leading brands include Cerelac, Nestum, Nescafe, Maggie, Kitkat, Munch and Milkmaid. To strengthen its presence, it has been the company's endeavor to launch new products at a brisk pace and has been quite successful in its launches. Strength : Parent support - Nestle India has a strong support from its parent company, which is the world¶s largest processed food and beverage company, with a presence in almost every country. The company has access to the parent¶s hugely successful global folio of products and brands. Brand strength - In India, Nestle has some very strong brands like Nescafe, Maggi and Cerelac. These brands are almost generic to their product categories. Product innovation - The company has been continuously introducing new products for its Indian patrons on a frequent basis, thus expanding its product offerings. Weakness: Exports ± The company¶s exports stood at Rs 2,571 m at the end of 2003 (11% of revenues) and continue to grow at a decent pace. But a major portion of this comprises of Coffee (around 67% of the exports were that of Nescafe instant to Russia). This constitutes a big chunk of the total exports to a single location. Historically, Russia has been a very volatile market for Nestle, and its overall performance takes a hit often due to this factor. Supply chain - The company has a complex supply chain management and the main issue for Nestle India is traceability. The food industry requires high standards of hygiene, quality of edible inputs and personnel. The fragmented nature of the Indian market place complicates things more. Opportunities: Expansion - The company has the potential to expand to smaller towns and other geographies. Existing markets are not fully tapped and the company can increase presence by penetrating further. With India's demographic profile changing in favour of the consuming class, the per capita consumption of most FMCG products is likely to grow. Nestle will have the

inherent advantage of this trend. Product offerings - The company has the option to expand its product folio by introducing more brands which its parents are famed for like breakfast cereals, Smarties Chocolates, Carnation, etc. Global hub - Since manufacturing of some products is cheaper in India than in other South East Asian countries, Nestle India could become an export hub for the parent in certain product categories. Threat: Competition - The company faces immense competition from the organised as well as the unorganised sectors. Off late, to liberalise its trade and investment policies to enable the country to better function in the globalised economy, the Indian Government has reduced the import duty of food segments thus intensifying the battle. Changing consumer trends - Trend of increased consumer spends on consumer durables resulting in lower spending on FMCG products. In the past 2-3 years, the performance of the FMCG sector has been lackluster, despite the economy growing at a decent pace. Although, off late the situation has been improving, the dependence on monsoon is very high. Sectoral woes - Rising prices of raw materials and fuels, and inturn, increasing packaging and manufacturing costs. But the companies¶ may not be able to pass on the full burden of these onto the customers.

Other Domestic players Britannia India Ltd (BIL) Britannia India Ltd was incorporated in 1918 as Britannia Biscuit Co Ltd and currently the Groupe Danone (GD) of France (a global major in the food processing business) and the Nusli Wadia Group hold a 45.3 per cent equity stake in BIL through AIBH Ltd (a 50:50 joint venture). BIL is a dominant player in the Indian biscuit industry, with major brands such as Tiger glucose, Mariegold, Fifty-Fifty, Good Day, Pure Magic, Bourbon etc. The company holds a 40 per cent market share in the overall organised biscuit market and has a capacity of 300,000 tonne per annum. Currently, the bakery product business accounts for 99.1 per cent of BIL's turnover. The company reported net sales of US$ 280 million in 2002-03. Britannia Industries Ltd (BIL) plans to increase its manufacturing capacity through outsourced contract manufacturing and a greenfield plant in Uttaranchal to expand its share in the domestic biscuit and confectionery market. Marico Marico is a leading Indian Group incorporated in 1990 and operating in consumer products, aesthetics services and global ayurvedic businesses. The company also markets food products and distributes third party products. Marico owns well-known brands such as Parachute, Saffola, Sweekar, Shanti Amla, Hair & Care, Revive, Mediker, Oil of Malabar and the Sil range of processed foods. It has six factories, and sub-contract facilities for production. In 2003-04, the company reported a turnover of US$ 200 million. The overseas sales franchise of Marico's branded FMCG products is one of the largest amongst Indian companies. It is also the largest Indian FMCG company in Bangladesh. The company plans to capture growth through constant realignment of portfolio along higher margin lines and focus on volume growth, consolidation of market shares, strengthening flagship brands and new product offerings (2-3 new product launches are expected in 2004-05). It also plans to expand its international business to Pakistan.

Nirma Limited Nirma Ltd, promoted by Karsanbhai Patel, is a homegrown FMCG major with a presence in the detergent and soap markets. It was incorporated in 1980 as a private company and was listed in fiscal 1994. Associate companies' Nirma Detergents, Shiva Soaps and Detergents, Nirma Soaps and Detergents and Nilnita Chemicals were merged with Nirma in 1996-1997. The company has also set up a wholly owned subsidiary Nirma Consumer Care Ltd, which is the sole marketing licensee of the Nirma brand in India. Nirma also makes alfa olefin, fatty acid and glycerine. Nirma is one of the most successful brands in the rural markets with extremely low priced offerings. Nirma has plants located in Gujarat, Madhya Pradesh and Uttar Pradesh. Its new LAB plant is located in Baroda and the soda ash complex is located in Gujarat. Nirma has strong distributor strength of 400 and a retail reach of over 1 million outlets. The company reported gross sales of US$ 561 million in 2003-04. It plans to continue to target the mid and mass segments for future growth.

Foreign players Cadbury India Ltd (CIL) Cadbury Indian Ltd is a 93.5 per cent subsidiary of Cadbury Schweppes Plc, UK, a global major in the chocolate and sugar confectionery industry. CIL was set up as a trading concern in 1947 and subsequently began its operations with the small scale processing of imported chocolates and food drinks. CIL is currently the largest player in the chocolate industry in India with a 70 per cent market share. The company is also a key player in the malted foods, cocoa powder, drinking chocolate, malt extract food and sugar confectionery segment. The company had also entered the soft drinks market with brands like 'Canada Dry' and 'Crush', which were subsequently sold to Coca Cola in 1999. Established brands include Dairy Milk, Perk, Crackle, 5 Star, Éclairs, Gems, Fructus, Bournvita etc. The company reported net sales of US$ 160 million in 2003. The company plans to increase the number of retail outlets for future growth and market expansion. Cargill Cargill Inc is one of the world's leading agri-business companies with a strong presence in processing and merchandising, industrial production and financial services. Its products and geographic diversity (over 40 product lines with a direct presence in over 65 countries and business activities in about 130 countries) as well as its vast communication and transportation network help optimize commodity movements and provide competitive advantage. Cargill India was incorporated in April 1996 as a 100 per cent subsidiary of Cargill Inc of the US. It is engaged in trading in soyabean meals, wheat, edible oils, fertilisers and other agricultural commodities besides marketing branded packaged foods. It has also set up its own anchorage facilities at Rosy near Jamnagar in Gujarat for efficient handling of its import and export consignments. Coca Cola Coca-Cola started its India operations in 1993. The Coca-Cola system in India comprises 27 wholly company-owned bottling operations and another 17 franchisee-owned bottling operations. A network of 29 contract-packers also manufacture a range of products for the company. Leading Indian brands Thums Up, Limca, Maaza, Citra and Gold Spot exist in the Company's international family of brands along with Coca-Cola, Diet Coke, Kinley, Sprite and

Fanta, plus the Schweppes product range. During the past decade, the Coca-Cola system has invested more than US$ 1 billion in India. In 2003, Coca-Cola India pledged to invest a further US$ 100 million in its operations. Colgate-Palmolive India Colgate Palmolive India is a 51 per cent subsidiary of Colgate Palmolive Company, USA. It is the market leader in the Indian oral care market, with a 51 per cent market share in the toothpaste segment, 48 per cent market share in the toothpowder market and a 30 per cent share in the toothbrush market. The company also has a presence in the premium toilet soap segment and in shaving products, which are sold under the Palmolive brand. Other well known consumer brands include Charmis skin cream and Axion dish wash. The company reported sales of US$ 226 million in 2003-04. The company's strategy is to focus on growing volumes by improving penetration through aggressive campaigning and consumer promotions. The company plans to launch new products in oral and personal care segments and is prepared to continue spending on advertising and marketing to gain market share. Margin gains are being targeted through efficient supply chain management and bringing down cost of operations.

H J Heinz Co A US$ 8.4 billion American foods major, H J Heinz Co comprises 4,000 strong brand buffet in infant food, sauces and condiments. The company was the first to commence manufacturing and bottling of tomato ketchup in 1876. In India, Heinz has a presence through its 100 per cent subsidiary Heinz India Pvt Ltd. Heinz acquired the consumer products division of pharmaceutical major Glaxo in 1994. Heinz's product range in India consists of Complan milk beverage, health drink Glucon-D, infant food Farex and Nycil prickly heat powder, besides the Heinz ketchup range. PepsiCo PepsiCo is a world leader in convenient foods and beverages, with revenues of about US$ 27 billion. PepsiCo brands are available in nearly 200 markets across the world. The company has an extremely positive outlook for India. "Outside North America two of our largest and fastest

growing businesses are in India and China, which include more than a third of the world's population". (Pepsico's annual report). PepsiCo entered India in 1989 and is concentrating on three focus areas - soft drink concentrate, snack foods and vegetable and food processing. PepsiCo's success is the result of superior products, high standards of performance and distinctive competitive strategies. Procter & Gamble Hygiene and Health Care Limited Richardson Hindustan Limited (RHL), manufacturer of the Vicks range of products, was rechristened 'Procter & Gamble India' in October 1985, following its affiliation to the 'Procter & Gamble Company', USA. Procter & Gamble Hygiene and Health Care Limited (PGHHCL) acquired its current name in 1998, reflecting the two key segments of its business. P&G, USA has a 65 per cent stake in PGHHCL. The parent also has a 100 per cent subsidiary, Procter & Gamble Home Products (PGHP). The overall portfolio of the company includes healthcare; feminine-care; hair care and fabric care businesses. PGHH operates in just two business segments ± Vicks range of cough & cold remedies and Whisper range of feminine hygiene. The detergent and shampoo business has been relocated globally to Vietnam. The company imports and markets most of the products from South East Asian countries and China, while manufacturing, marketing and export of Vicks and sanitary napkins has been retained in India. The company reported sales of US$ 91 million in 2002-03. The parent company has announced its plan to explore further external collaborations in India to meet its global innovation and knowledge needs.

Market opportunities For investment
Measuring the opportunity: Domestic FMCG Market to treble According to estimates based on China's current per capita consumption, the Indian FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. The dominance of Indian markets by unbranded products, change in eating habits and the increased affordability of the growing Indian population presents an opportunity to makers of branded products, who can convert consumers to branded products. The investment potential in rural markets The Indian rural market with its vast size and demand base offers a huge opportunity for investment. 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. With population in the rural areas set to rise to 153 million households by 2009-10 and with higher saturation infrom increased rural and small own penetration. Technological advances such as the internet and e-commerce will aid in better logistics and distribution in these areas. Already Indian corporate such as HLL and ITC have identified the opportunity and have initiated projects such as 'Project Shakti' and 'e-Choupal' to first, expand rural income, and then, to penetrate this market. In the the urban markets, future growth in the FMCG sector will come

Export potential India has a locational advantage that can be exploited to use it as a sourcing base for FMCG exports. Export of pre-prepared meals with Indian vegetables for large Asian ethnic population settled in developed countries is a very big opportunity for India. South East Asia, which is presently being catered to by USA and EU, can be sourced from India due to its lower freight cost. 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, Singapore, Malaysia,

Indonesia, Korea, Thailand and Hong Kong. Commodities like dry milk, condensed milk, ghee and certain cheese varieties that are utilised as ingredients in foreign countries can also be exported. These markets can be expanded to include value-added ingredients like packaged cheese sauce and dehydrated cheese powders. Large export potential also exists in the soya products industry. Sectoral opportunities According to the Ministry of Food Processing, with 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment to raise food processing levels by 8-10 per cent. In the personal care segment, the lower penetration rates also presents an untapped potential. Key sectoral opportunities are mentioned below: ‡ Staple: branded and unbranded: While the expenditure on mass-based, high volume, low margin basic foods such as wheat, wheat flour and homogenised milk is expected to increase substantially with the rise in population, there is also a market for branded staples is also expected to emerge. Investment in branded staples is likely to rise with the popularity of branded rice and flour among urban population. ‡ Dairy based products: India is the largest milk producer in the world, yet only 15 per cent of the milk is processed. The US$ 2.4 billion organised dairy industry requires huge investment for conversion and growth. Investment opportunities exist in value-added products like desserts, puddings etc. The organised liquid milk business is in its infancy and also has large long-term growth potential. ‡ Packaged food: Only about 8-10 per cent of output is processed and consumed in packaged form, thus highlighting the huge potential for expansion of this industry. Currently, the semi processed and ready to eat packaged food segment has a size of over US$ 70 billion and is growing at 15 per cent per annum. Growth of dual income households, where both spouses are earning, has given rise to demand for instant foods, especially in urban areas. Increased health consciousness and abundant production of quality soyabean also indicates a growing demand for soya food segment.

‡ Personal care and hygiene: The oral care industry, especially toothpastes, remains under penetrated in India with penetration rates below 45 per cent. With rise in per capita incomes and awareness of oral hygiene, the growth potential is huge. Lower price and smaller packs are also likely to drive potential uptrading. In the personal care segment, according to forecasts made by the Centre for Industrial and Economic Research (CIER), detergent demand is likely to rise to 4,180, 000 metric tonnes by 2011-12 with an annual growth rate of 7 per cent between 2006 and 2012. The demand for toilet soap is expected to grow at an annual rate of 4 per cent between 2006-12 to 870,000 metric tonnes by 2011-12. Rapid urbanisation is expected to propel the demand for cosmetics to 100,000 metric tonnes by 2011-12, with an annual growth rate of 10 per cent. ‡ Beverages: The US$ 2 billion Indian tea market has been growing at 1.5 to 2 per cent annually and is likely to see a further rise as Indian consumers convert from loose tea to branded tea products. In the aerated drinks segment, the per capita consumption of soft drinks in India is 6 bottles compared to Pakistan's 17 bottles, Sri Lanka's 21, Thailand's 73, the Philippines 173 and Mexico's 605. The demand for soft drink in India is expected to grow at an annual rate of 10 per cent per annum between 2006-12 with demand at 805 million cases by 2011-12. Per capita coffee consumption in India is being promoted by the coffee chains and by the emergence of instant cold coffee. According to CIER, demand for coffee is expected to rise to 535,000 metric tonnes by 2012, with an annual growth rate of 5 per cent between 2006-12. ‡ Edible oil: The demand for edible oil in India, according to CIER, is expected to rise to 21 million tonnes by 2011-12 with an annual growth rate of 7 per cent per annum. ‡ Confectionary: The explosion of the young age population in India will trigger a spurt in confectionary products. In the long run the industry is slated to grow at 8 to 10 per cent annually to 870,000 metric tonnes by 2011-12.

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