FMCG INDUSTRY

Alliance School of
Business
Master of Business Administration
RESEARCH METHODOLOGY

INDUSTRY ANALYSIS REPORT

ON
FMCG SECTOR IN INDIA

Submitted to: Submitted by:

DR. VIDHISHA VYAS GROUP 13
MARKETING SECTION – A
MBA JULY 2014 - 16

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Master of Business Administration

Declaration
This is to declare that the Report titled “Industry Analysis on FMCG Sector in India” has been made
for the partial fulfillment of the Course: Research Methodology in Semester II by Group 13,
Marketing Section ‘A’ MBA July (2014-16) under the guidance of Dr. VIDHISA VYAS

We confirm that this report truly represents our work undertaken as a part of our Course. This work
is not a replication of work done previously by any other person or group. We also confirm that the
contents of the report and the views contain therein have been discussed and deliberated with the
faculty.

Names: Reg. No: Signatures of candidates:

Alex Thomas 14010121315

Ashmita Shrestha 14010121138

Rahul Kumar 14010121091

Sidhartha Shankar Ray 14010121296

Shreyamsh 14010121414

DATE:

ACKNOWLEDGEMENT

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The satisfaction and elation that accompany the successful completion of any task would be
incomplete without the mention of the people who have made it a possibility. It is my great
privilege to express my gratitude and respect to all those who have guided me and inspired
me during the course of the project work.

We are thankful to Alliance University for having given us the opportunity to do this
project. W are grateful to Dr. Madhukhar Angur, Chancellor of Alliance University, Dr.
Pavana Dibbur, Vice Chancellor of Alliance University, Dr. Anubha Singh, Pro Vice-
Chancellor (Academics), Alliance University for providing us the necessary facilities for the
completion of my project.

First and foremost, I would express my sincere gratitude to Prof. Nataraja N.S. Assistant
Professor Alliance School Of Business for providing us information and knowledge in the
subject research methodology.

We would also like to express my sincere thanks to my project guide Dr Vidhisha Vyas
Assistant Professor Alliance School Of Business for his constant guidance and supervision
during the period of my project work and for providing me the necessary facilities for the
completion of my project.

Last but not the least; we would like to thank each and every individual for their help and
support that has largely contributed to the successful completion of the project.

Contents

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EXECUTIVE SUMMARY..................................................................................................................6
CHAPTER 1.........................................................................................................................................8
1.1 INTRODUCTION......................................................................................................................9
1.2 OVERVIEW OF INDUSTRY...................................................................................................9
1.3 SCENARIO OF FMCG IN INDIA.........................................................................................11
1.3.1 HOUSEHOLD CARE.........................................................................................................12
1.3.2 PERSONAL CARE.............................................................................................................13
1.3.3 FOOD AND BEVERAGES................................................................................................13
1.4 ANALYSIS OF FMCG INDUSTRIES...................................................................................16
1.4.1 Reason for choosing these Industries...................................................................................16
1.4.2 ITC Ltd:...............................................................................................................................16
1.4.3 Hindustan Unilever Limited:...............................................................................................17
1.4.4 Dabur India Ltd:...................................................................................................................17
1.4.5 Godrej Consumer Products Limited:...................................................................................17
1.4.6 Procter & Gamble:...............................................................................................................18
CHAPTER 2.......................................................................................................................................22
2.1 LITERATURE REVIEW........................................................................................................23
2.1.1 Brand Equity........................................................................................................................23
2.1.2 Customer Based Brand Equity.............................................................................................24
2.1.3 Dimensions of Customer based Brand Equity.....................................................................24
2.2 ACQUISITION AND MERGERS..........................................................................................25
CHAPTER 3.......................................................................................................................................27
3.1 PEST ANALYSIS OF FMCG INDUSTRY...........................................................................28
3.1.1 POLITICAL.........................................................................................................................28
3.1.2 Economical..........................................................................................................................28
3.1.3 Social...................................................................................................................................29
3.1.4 Technology..........................................................................................................................30
CHAPTER 4.......................................................................................................................................31
4.1 DATA ANALYSIS....................................................................................................................32
4.1.1 Net Sales..............................................................................................................................32
4.1.2 R & D...................................................................................................................................33
4.1.3 Ad Expenditure....................................................................................................................34
4.1.4 Fund Flow............................................................................................................................36
4.1.5 PBITM.................................................................................................................................37
CHAPTER 5.......................................................................................................................................39
5.1 Research Hypothesis................................................................................................................40
CHAPTER 6.......................................................................................................................................46
6.1 Opportunities in the FMCG sector in India...........................................................................47
6.2 Comparison of FMCG industry with different Countries....................................................47
6.2.1 Brazilian FMCG companies................................................................................................47
6.2.2 Chinese FMCG companies..................................................................................................48

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6.2.3 Indian FMCG companies.....................................................................................................49

6.2.4 Market entries overseas for popular first target...................................................................50
6.3 Future outlook of FMCG in India..........................................................................................51
CHAPTER 7.......................................................................................................................................55
CONCLUSION...............................................................................................................................56
Bibliography.......................................................................................................................................57

LIST OF FIGURES

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S.NO. DESCRIPTIONPAGE NO.

Figure 1 Product Segment of FMCG 13

Figure 2 Market Segment of FMCG in India 15-

Figure 3 Growth Pattern of FMCG in India 16

Figure 4 Net Sales 33

Figure 5 R&D of FMCG Companies 35

Figure 6 Ad Expenditure 36

Figure 7 Fund Flow 37

Figure 8 PBITM 38

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TABULAR INDEX

S.NO. DESCRIPTION PAGE

NO.

Table 1: Products offering of FMCG Players 20-21

Table 2: Financial Performance of FMCG companies 22

Table 3 Net sales 33

Table 4 R&D 34

Table 5 Ad Expenditure 35

Table 6 Fund Flow 37

Table 7 PBITM 38

Table 8 Cash Profit Data of FMCG 42

Table 9 ANOVA Test of Cash Profit 42

Table 10 Net Operating profit ratio Data of FMCG 43

Table 11 ANOVA of Net Operating profit ratio Data of FMCG 43

Table 12 Net Profit Margin Ratio Data of FMCG 44

Table 13 ANOVA of Net Profit Margin Ratio 44

Table 14 PBIT Data of FMCG 45

Table 15 ANOVA of PBIT 45

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EXECUTIVE SUMMARY

This report provides an analysis and evaluation of the current and prospective profitability and
financial performance of FMCG Industry mainly in India. We look into the five major FMCG
players in India, namely: HUL, ITC, Dabur, Godrej and P&G. We get an insight into their sales,
product segment, profitability, flexibility, brand loyalty as well as consumer’s awareness. The report
consist of all the acquisition and mergers respective company have done. PEST analysis of the
FMCG industry talks about the basic Political, Social, Economical and Technological of the
respective FMCG industry. PEST analysis helps the respective industry to overcome the future
challenges. The method of data collection is done in terms of the net sail, R$D, Ad expenditure,
Fund flow, and PBITM. We have also analyzed the data with the help of hypothesis testing. As there
are more than two companies, we have taken ANOVA test to compare the profitability of the
respective FMCG Companies in India. We have also compared the FMCG analysis of India with
other BRICS nation. We have also looked in to the future outlook and opportunities of the industry
as a whole

The report draws attention to the facts that getting inside the FMCG Industry is quite easy but
sustaining in the market is the big challenge. In order to obtain sustainability, they need to build a
brand value inside the mind of consumers. Moreover, the result of data analysis shows that different
FMCG companies have different level of profitability as well as brand value. Their net sales,
operating profit and PBIT also differs as per the company and years. ITC is the leading company
among these five FMCG players.

As we know, a business starts with the customers and ends with the customers, company should
focus on the needs and wants of the consumers and try to provide value-added service and products.
They should try to differentiate themselves from their competitors. Differentiating the products in
FMCG industry can only be done by creating the brand value among the consumers.

Recommendations discussed includes:

In order to make their business more profitable and to satisfy their customer as far as possible they
need to carry out different approach towards different products. They should now focus more into the
rural areas. The main reason is because targeting rural areas will be lucrative for them. FMCG
players have already covered urban areas.

Moreover, as the profitability of different FMCG industries varies, they need to focus on promotional
activities in order to increase their sale. Other option is trying to increase their amount of sales in
other countries that is by increasing export.

FMCG players should try to provide products that are different from other companies that will help
to differentiate from others and also help to create a brand value as well as loyalty.

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CHAPTER 1

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1.1 INTRODUCTION

Fast-moving consumer goods (FMCG) are also termed as consumer packaged goods (CPG). The
meaning of this goods can be clearly extracted from the word FMCG itself. These products are sold
in a fast space and the prices of these goods are relatively low. The perfect examples can be non-
durable products such as soft drinks, fast food/processed foods, medicines, cosmetic products and
many more consumable products. Further explaining the term non-durable, it includes all the goods
that should be used within three years and less. Because of this very fact, FMCG has a really short
shelf life that may be because of its demand or may be because of its non- durable nature.

FMCG are sold in a huge quantities but the profit margin is relatively low for the producers as
compared to the retailers. But as the products are sold in large quantities, the aggregate profit will be
enough to sustain the business.

The natures of FMCG are as follows:

 Low price
 Low involvement of buyers
 Repeated purchase
 Large quantities
 Easily Available
 High stock turnover

1.2 OVERVIEW OF INDUSTRY

FMCG companies are one of the most versatile business houses. It stands out as the biggest
industry in the world itself.

 FMCG companies are known for their brand name: Everyone around the global
knows the brand of FMCG, as they will be using it all the time. People recognize these
brands from their trip to supermarket or from the various sources of advisement. In ever
part of the home, you will find various brand of FMCG.

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 FMCG firms are flexible in nature: In FMCG industry there is never a dull moment as
it keeps changing as per the time and environment. The basic reason for its constant
evolution is change in demand of people and creating an urge for consumer to buy that
product. It keeps creating various needs for consumer. Another aspect is that the FMCG
moves really fast from the time they are bought in the store to the time the shelves are
being emptied to the time next stock is refilled.

 FMCG companies put efforts in employee and customer retention: Sustainability is

determined by the loyalty of the customer and its employee. FMCG focuses to retain its
customer in order to go strong and to earn profit. Moreover, it also focuses on keeping its
employee merry as satisfied employee equals to satisfied customer.
 FMCG firms are resistant to the recession: No matter how much fluctuation is in the
economy, FMCG firms are least affected. Consumers need to buy FMCG products, as
these are the basic necessity and essential commodities for them.

 FMCG industries focus on two “B “, Bigger and Better: This industry is getting bigger
as many brands are entering in the market and giving absolute competition. Moreover,
FMCG companies always focus on innovative ideas and technology to provide better
products to the customers.

 FMCG ultimate objective is to deliver what the consumers want: This industry has
been satisfying the everyday needs and wants of customer. It keeps the ends of the
customer in first place and tries its level best to deliver and fulfil their expectation and
necessity.

In context of the world, the top 10 FMCG companies (2014) are as follows:

 Nestle S.A.
 The Procter & Gamble Company
 Anheuser-Busch InBev
 Philip Morris International Inc.
 Coca-Cola Company
 Pepsico Inc.
 Unilever

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 British American Tobacco

 L'oreal 
 Mondelez International, Inc

1.3 SCENARIO OF FMCG IN INDIA

India is one of the countries that cover large population of the world and more over; the GDP of
India is expected to increase in the nearby future. Because of this very factor, India has been in the
limelight for many FMCG companies. However, from 1950’s to the 80’s there were little
investments in the FMCG industries because the purchasing power of the people in India were really
low and moreover, the government of India was also in support of small scale sectors. The only
company that was able to sustain in this environment was Hindustan Unilever Limited, previously
known as Hindustan Lever Limited. This MNC Company had its manufacturing base in India.

HUL had been the main player till then. It was carrying out their business in a urbane manner.
Consumers however were limited to few choices but the entry of Nirma detergent powder bought a
change in the FMCG industry as a whole. This company focused on “value for money” approach and
made detergent affordable to low segment of people, which drastically changed the lifestyle of
Indian people. This opened the gate to many FMCG companies in India.

FMCG was no longer viewed as luxury products that were just targeted for the elite class of people.
It was regarded more as a day-to-day necessity for the masses in affordable price.

There were many global FMCG in the country for many decades but in the last ten years, many
domestic FMCG companies have entered the market such as Godrej, Dabur, Nirma, Emami,
CavinKare and more.

In the current scenario, FMCG sector is one of the important contributor to the India’s GDP and
more over it is the fourth largest sector of the economy in India. The most used products from the list
are toilet soaps, toothpaste, detergents, and shampoos, shaving goods, shoe polish, packaged food
items and household products. In this market about 2 trillion is covered by rural India in terms of its
revenue.

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The major FMCG market Industry in India mainly comprises of;

Household
Care

FMCG Personal
Care

Food and
Beverages

Figure 6: Product Segment

1.3.1 HOUSEHOLD CARE

The demand for household care in India has been growing rapidly. In the past five years, there has
been a annual growth rate of 10% to 11%. In the urban area, consumer prefers washing powder and
detergents to bars, as there is increase use of washing machines and purchasing power and aggressive
advertising as well. While in the rural areas, consumers are still using bars. Incase of detergents,
small and unorganized player’s holds majority of share. Vim bars, of HUL lead the market by
pleasing its customer. It provides superior product and performance and constantly comes with new
offering such as Anti-Germ Bar and Monthly Tub Pack. Vim liquid dish wash is one of the hit
products among many other dishwashing brands. Domex, again of HUL,on the other hand is the
leading FMCG product in the toiletries categories.

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1.3.2 PERSONAL CARE

In India, personal care products are estimated to be USD 4 billion (25144 crore) p.a. The key
products include hair care, skin care, colour cosmetics, bath/shower products and fragrances.
Different segments have different trends. Bar soaps dominates the largest segment of this products
and second largest is the hair care products. Bar soaps is being growing at 5% per annum over the
last five years where as in the case of hair care products, its 9-10% per annum during the same
period.
 In the case of hair care, coconut oil holds 72% share in the India’s hair oil market.
 The skin care market is in the initial stage in India. People are becoming more aware of it as
there is change in lifestyle, rise in income, more choices and ease in availability.
 Oral care, which is also the important part of personal care, can be segmented into toothpaste,
toothpowder and toothbrushes that holds 60%, 23% and 17% of market share respectively.

1.3.3 FOOD AND BEVERAGES

In India, food and Beverages come in fifth in terms of production, growth, consumption and export.
The packaged food segment is estimated to grow at 9% annually to become a 6-lakh crore industry
by the end of 2030. Ready to drink tea and coffee segment is estimated to be 2200 crore in the next
three years. The total soft drink that includes both carbonated beverages and juices segment is
expected to touch USD 1 billion. Coca cola and Pepsi are the leaders in the Indian soft drink market.

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The following figure shows us the market segment of people in India in different category of
FMCG products.

Market Segment of FMCG

Baby Care 2%
Fabric Care 12%
Food Products 43%
Hair Care 8%
Household 4%
OTC Products 4%
Others 5%
Personal Care 22%

Figure 7: Market Segment of FMCG in India

As per the data from 2013, the food products occupy the majority of portion in FMCG followed by
personal care, fabric care, hair care, households, OTC products and baby care respectively.

Many companies influence the customers through heavy advertising, marketing, packaging, low
price strategy and more. Both rural and urban areas contribute the growth of this sector. Foreign
FMCG players are also willing to enter the market of India, as there are many growth opportunities
for them.

The main factors or the drivers for the growth of FMCG sectors in India are;

 Per Capita Income

 Increase population
 Changing life style of people
 Support from Foreign Direct Investment (FDI)
 Low labour cost
 Availability of raw materials

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The following figure shows the revenue growth pattern of overall FMCG Industry in India.

Growth Pattern
50
45
40
35
Revenue ( billions)

30
25
20
15
10
5
0
2006 2007 2008 2009 2010 2011 2012 2013

Figure 8: Growth Pattern of FMCG in India

From the year 2006, revenue in FMCG has been increasing from 15.7 billion to 17.8 billion and
likewise. In the year 2013, revenue had reached to 44.9 billion. FMCG sector in India has grown
with compound annual growth rate (CAGR) of 16.2% during the year 2006-2013. This revenue and
growth pattern places FMCG Industry in the fourth largest position in India. There are various
reasons behind this such as increase in consumption pattern, change in lifestyle and high purchasing
power. But in the year 2012, there was a moderate growth rate of 9.24% because of high inflation
and reduced GDP growth.

In India, there are plenty of FMCG companies. As per a study conducted by Nielsen, 62 of the top
100 brands are owned by MNCs and the rest by Indian companies. Among these 62 brands,
Hindustan Unilever owns 27.
The top 10 FMCG companies (2014) in India are namely;
1. ITC Limited
2. Hindustan Unilever Limited
3. Nestle India
4. Dabur India

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5. Godrej Consumer Care private Limited

6. Colgate-Palmolive Company
7. Marico
8. Procter & Gamble
9. Britannia Industries
10. Emami

These leading companies are providing food to household care and beauty to personal care products.

1.4 ANALYSIS OF FMCG INDUSTRIES

In this report, we will be doing an industry analysis on 5 major FMCG companies of India. Namely:
1) ITC Limited
2) Hindustan Unilever Limited
3) Dabur India Limited
4) Godrej Consumer Products Limited
5) Procter & Gamble

1.4.1 Reason for choosing these Industries

 These Industries holds maximum number of shares

 These Industries covers 70% of the total FMCG market.
 Major of Indian people are using products from these brands.
 Consumers of India are more aware about these companies.
 Advertisement and promotion of these companies are hardcore in India.
Let’s take a glimpse into the background of each FMCG companies that we are going to analyse
upon.

1.4.2 ITC Ltd:

ITC was established in 1910 as the Imperial Tobacco Company of India Limited but later in the year
1970, it was renamed as Indian Tobacco Company and further in the year 1974, it was named as
I.T.C Ltd. In 2001, periods were removed from the name.

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It is an Indian conglomerate headquartered in Kolkata, West Bengal. Its businesses include mainly

five segments: FMCG, Hotels, Paperboards & Packaging, Agri Business & Information Technology.

It employs more than 25000 people at more than 60 locations all across India.

1.4.3 Hindustan Unilever Limited:

HUL was established in the year 1933 as Lever Brothers but in the year 1956, it renamed as
Hindustan Lever Limited as there was a merger between the Lever brothers, Hindustan Vanaspati
Manufacturing Company Limited and United Traders Ltd. Later in June 2007, it was again renamed
as Hindustan Unilever Limited. It is based in Mumbai.

It employs more than 16,500 workers in India and indirectly helps to assist the employment of more
than 65,000 people.

As per the research conducted by Nielsen, two out of three people use the products of HUL in India.
Moreover, HUL has more than 2 million direct retail store all across India and its products are
available in more than 6.5 million outlets in the country.

1.4.4 Dabur India Ltd:

Dabur is derived from the word “ Daktar Burman”. Dabur India was established in the year 1884 by
a physician names as Dr.SK Burman. This company is the India’s largest Ayurvedic medicine related
manufacturer. In June 2008, Fresenius SE, a German company bought 73.27% equity stake in Dabur
at a price of Rs.76.50 per share. Moreover, the same company also bought another 17.62% shares
through an open letter at the same price.

Dr.SK Burman produced Ayurvedic medicine for various diseases such as malaria and cholera. In
the Ayurvedic Specialities Divison of Dabur, there is more than 260 medicines treating various
health related problems such as common cold to chronic paralysis.

1.4.5 Godrej Consumer Products Limited:

Godrej Consumer Products Limited was founded in 2001. Its headquarter is in Mumbai,
Maharashtra. Its subsidiaries are;

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 Essence Consumer Care Products Pvt. Ltd

 Naturesse Consumer Care Products Pvt. Ltd
 Godrej Hygiene Products Ltd.
 Godrej Netherlands B.V.

GCPL products can be categorized into personal care and household care segment.

It provides toilet soaps, hair color, liquid detergent, air fresheners, household insecticides and many
more.

It provides jobs to more than 1300 full time employees in India and moreover, it’s involved in many
social awareness activities as well.

1.4.6 Procter & Gamble:

P&G, a multinational company, was established in the year 1837 in Ohio, America. In India, it was
founded in the year 1964 and now it serves more than 650 million consumers in the India. Its
headquarter is in Mumbai. It’s one of the renowned brands not just in India but also all across the
world. P&G is one of the major leaders in FMCG industry and the main reason behind their success
is superior product propositions and innovation in terms of technology.

In India, P&G operates under three entities; 1837

 “ Procter & Gamble Hygiene and Health Care Limited ”

 “ Gillette India Limited ”
 “ Procter & Gamble Home Products “

P&G provides jobs to more than 26,000 workers both directly and indirectly. In addition to this, it is
dedicated to sustainable growth in India. It also focuses on Environmental Protection and Social
Responsibility in the places it operates.

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The products offered by selected company with respect to their sales are clearly given below

Company Food& Beverages Personal Care Homecare Healthcare

ITC Ltd. Sunfeast, Vivel, Essenza

Aashirvaad, Di Wills, Fiama
Bingo, Kitchen of Di Wills,
India,mint-o, Superia,
candyman, Engage,
Gumon
Hindustan Fair & lovely, Comfort, Surf
Unilever Ponds, Lakme, Excel, Rin,
Limited Dove, Pears, Vim, Wheel,
Pepsodent, Domex,
LUX, Clinic Sunlight Color
Plus, Axe, guard, Cif, New
Aviance, Magic
Lifebuoy,
Closeup,
Sunsilk,
ELLE18,
Vaseline,
Tresemme,
Hamam. Clear,
Rexona, Ayush,
Liril, Breeze,
Tigi, Sure,
Toni&Guy
Dabur Real, Activ, Amla Oil, Sani Fresh Hajmola,
India Burrst, Vatika Shine, Odonil, Nature Care,
Homemade, Shampoo, Odomos, Pudin Hara,
Lemoneez, Vatika Oil, Odopic Chyawanpra
Capsico Babool sh,
Toothpaste,
Red
Toothpaste,
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Gulabari
Range, Fem
Range, Uveda
Range
Godrej No. 1 soap, Good Knight,
Consumer Cinthol, HIT, Goorej aer,
Products Protekt, Mitu, Goorej Ezee,
Limited Goorej Expert, Air Rreshener
Goorej renew, Stella,
Goorej Nupur
Henna
Procter & Gillette, Head Ambi Pur,
Gamble & Shoulders, Ariel, Duracell,
Olay, Oral- B, Tide
Pampers,
Pantene, Vicks,
Wella, Whisper

Table 1: Products offering of FMCG Players

The following shows the financial performance of the FMCG companies:

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Company Year Sales EBITDA NPM ROA ROE EPS BVPS

Ended (Billion) Margin (%) (%) (%) (Rs) (Rs)
(%)
ITC Mar’12 265.5 35.2 23.6 30.7 32.2 8.0 24.9
Mar’13 316.3 35.7 24.1 31.7 32.9 9.6 29.3
Hindustan Mar’12 236.9 14.9 11.8 28.5 75.8 12.9 17.0
Unilever Mar’13 275.4 15.6 13.9 32.7 133.7 17.7 13.2
Dabur Mar’12 53.05 16.80 12.16 24.06 37.56 3.70 9.86
India Mar’13 61.76 16.70 12.36 27.64 35.94 4.38 12.19
Godrej Mar’12 48.66 17.60 14.78 13.98 18.14 16.18 89.25
Consumer Mar’13 64.07 15.90 12.29 12.64 18.94 19.61 103.51
Products
Limited
Procter & Jun’11 10.38 19.16 14.53 17.19 4.64 10.00 18.50
Gamble Jun’12 13.48 18.63 13.45 16.50 5.58 10.00 21.47

Table 2: Financial Performance of FMCG companies

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CHAPTER 2

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2.1 LITERATURE REVIEW

For gaining the insight about the study a brief review of the literature is required for a researcher,
reader and other scholars. Literature review of the cane be explained on the basis of the following.

2.1.1 Brand Equity

Every consumer has some perception about the respective product the commercial value that drives
the consumer perception about the brand name of a particular product or service rather than the
product or the service itself. A company can build its brand equity for their respective product by
making the product memorable or easily recognizable and superior in the quality and reliability.
Various marketing campaigns or mass marketing campaign can help an industry to create its brand
equity. If the consumers are willing to pay more for a generic product than from a branded product
then the brand however is said to have negative brand equity. In different researchers view the brand
equity in variety of the perspectives.

According to the researcher Farquhar in 1989, he wrote in his article that brand equity can be viewed
in three perspectives, first firm perspective second trade perspective and the third consumer
perspectives. Another researchers Srivastava and Shocker in the year 1991 that the definition of the
brand equity is categorized in the other group of the definitions in which the brand equity consist of
both the financial and consumer perspectives. According to both of them brand equity comprises of
brand strength and brand values. According to one more researcher Keller in the year 1993 there are
two motives for studying the brand equity. First: to estimate the financial base motivation of the
financial value of the brand more precisely for the accounting purpose or for the merger. Although
financial approach may provide a brand more precise insight about the valuation of the brand. For a
brand manager it may not be useful to establish marketing strategies because financial approach is
limited with the estimation of the brand values. Second: to improve marketing productivity
motivation arises from strategy based motivation.

Researcher Lassar, Mittal and sharma in 1995 discussed the two perspectives of the brand equity
which are based on financial (Discussed above by Simon and Sullivan 1993) and customer based.
Promoter or adherent of financial perspectives considers brand equity as a separate asset which can
be sold separately to the consumer. According to the Simon and Sullivan in the year 1993 brand
equity can be defined as the incremental cash flow which accrue in the case of the branded product
over the unbranded products. Brand equity of the customer emphasizes the customer’s mind-set.

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Another researchers Capon, Berthon, Hulbert and Pitt in the year 2001 further suggested that there
are two types of the brand equity that is original brand equity and the customer brand equity. The
brand equity can be examined from two important perspectives that is financial and customer based.
The financial base approach or measures the brand value by the net additional cash flow created by
the brand. The additional cash flow results the customer willingness to buy the respective brand more
than its competitors even after another brand is cheaper because customer is willing to pay more
because of the benefits and the brand that create the believe throughout in their minds of the
customer while marketing of the respective brand.

2.1.2 Customer Based Brand Equity

For a particular brand to have value it must be valued by the customer. For a particular or any brand
the power lies in what the customer have learned, felt, seen and heard about the brand the brand as a
result of over time experience while using the product said by the researcher Keller in the year 2003.
In the year 1995 Keller and in the year 1995 Cobb-Walgren and Ruble told that brand has no
meaning to the customer nor the other perspectives of brand equity are meaningful. Researcher
Cobb-Walgren In 1995 told that the value can only be created among the investor, the manufacturer
and the retailer if only if it create value to the respective consumer. Conceptualizing the brand equity
from the customer perspective is useful because if suggests both the specific guidelines for marketing
strategies. In the year 1993 Keller found out that the source of the brand equity is all about the
customer perception, so it is really important for a manager to measure and track the brand equity
come across in more practical. As the respective information offers a customer behaviour in strategic
vision and the managers can develop different strategies accordingly. In the year 1996 Dyson found
out that in the mind of a potential customer brand exist and it totally depend on that customer what
he/she thinks for that particular brand and which help in determining the value. He also told that
foundation of a brand composed of the peoples how he or she is mentally attached toward the
respective brand.

2.1.3 Dimensions of Customer based Brand Equity

There are two main frame workers in the brand equity literature which conceptualize based brand
equity. Keller In the year 1993 considers the brand equity for being the differential effect of brand
knowledge on customer response to the marketing of the respective brand. How can the customer
based brand equity can be constructed or measured or managed for better understanding Keller in the

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year 1998 described all total conceptualization of the brand knowledge. Brand knowledge can be
defined as the perceptions about a particular brand which is reflect in the memory of the customer
about the respective brand.

Aaker in the year 1991 have proposed the definition of the brand equity which was one of the most
generally accepted and comprehensive. Aaker in the year 1991 and 1996 consider the brand equity as
the set of the brand assets and the liabilities which are linked with the brand it may be its name or the
symbols that add or subtract to the value provided by the respective product or the service to the
particular industry or the firm by the consumers. According to him set of assets and liabilities are
grouped into the five categories which are as per the brand loyalty or the brand name awareness or
for brand quality or brand association or other proprietary brand assets. According to Yoo and
Bonthu in 2001 other brand assets include the patents, trademarks and channel relationship. The fifth
component of the other brand assets is not relevant to the consumer perceptions therefore the first
four component should be accepted as the customer based brand equity.

The total concept of the customer based brand equity can be visualised in two angles which involve
consumer perceptions or cognitive approach and also include involving consumer behaviour
awareness, brand associations and perceived quality. Based on the definition given above Kamakura
and Russel in the year 1991 given that there are five important considerations to the definition to the
brand equity. At first the brand equity refers to the consumer perceptions rather than the indicators.
Second he refer brand equity to the global value associated with the particular brand. Third he told
that the global value is associated with the brand stem from brand name not only from the physical
aspects of the brand. Forth brand equity is not absolute but it is relative to the competition. Finally
according to him the brand equity have positive influence on the financial performance.

2.2 ACQUISITION AND MERGERS

Acquisition or mergers is the combination of the two companies in which one corporation is totally
absorbed by another corporation. In merger and acquisition basically the company which is less
important loses its identity and have to become a part of the more important corporation. Some of the
important mergers and acquisition which happened in the FMCG industry are as fallows.

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1. Godrej: Godrej Consumer Products limited (GCPL) is one of the consumer goods company
based in the Mumbai India. Godrej consumer Product Ltd acquired Africa’s Frika hair for
estimated around Rs 75-80 crores. This was the fifth acquisition of the Godrej in Africa since
entered the continent.
2. ITC acquisition and Mergers are as follows:
a. ITC Ltd have acquire Savlon and Shower to shower trademarks and other intellectual
property frm Johnson and Johnson Pte. Ltd.
b. ITC Limited is also looking forward to acquire Century Textiles And Industries Ltd
c. ITC Hotels Limited has formed the joint venture with Espirit Hotels. Looking forward
to buld luxury hotel in Hyderabad. ITC have 26% Stake in the JV for Rs 45 Crore
d. ITC Infotech is planning to acquire targets in North America and Europe as its seeks
to become a billion dollar business

3. Dabur India Ltd is looking forward for possible acquisition target in both India and abroad
and has bought Turkey based Hobi Kozmethik in 2010 and US based Namaste Group in
2011.
4. HUL acquisition and Mergers are as follows:
a. Hindustan Unilever Ltd one of the FMCG giant acquire another 75% stake in
Bhavishya Alliance Child Nutrition Initiatives.
b. HUL is planning to acquire the remaining 74% Stake in Aquagel Chemicals Pvt Ltd.
Now HUL is holding 26% Stake currently
5. Hindustan Unilever is set to acquire the remaining 74% stake in Aquagel Chemicals Pvt. Ltd.

Holding 26% currently, the buy would make Aquagel its wholly owned subsidiary. FMCG giant,
Hindustan Unilever Ltd is acquiring another 75% stake in Bhavishya Alliance Child Nutrition
Initiatives (Bhavishya Alliance), a Not for Profit Company.

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CHAPTER 3

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3.1 PEST ANALYSIS OF FMCG INDUSTRY

3.1.1 POLITICAL

 Tax Structure

There is pretty complicated tax structure and there is high indirect tax. As far as uniformity is
concerned there is lack of uniformity also. Octroi is also high. There is entry tax and changing tax
policy.

 Infrastructure Issues

The effectivity of FMCG depends on the fact that how much government spends on the agricultural
infrastructure. It also depends on the power and transportation infrastructure a lot.

 Regulatory Constraints

There is requirement for multiplicity of permits and licenses for various states. There is outdated
labour law. The export procedure is very tiresome. The subsidy available is very confusing and time
consuming.

 Policy framework

Approval concerned to investment of FDI into Retail sector (single-brand retail &multi-brand retail,
License rules in setting up of Industry, Changes in Statutory Minimum Price (SMP) of commodities
and Priority sector classification of industry.

3.1.2 Economical

 GDP Growth

Growth of the industry is pretty consistent with the Indian economy.

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 Inflation

Inflationary pressures decreases the purchasing power of money to a great extent. And the concept
of inflation has a substantial impact on the spending power of consumer. This has direct impact on
business investment

 Consumer Income

Increase in incomes is largely an outcome of economic growth across sectors. Over the past few
years, India has seen increased economic growth, with a continuing and substantial impact on
consumer disposable incomes leading good growth for the FMCG sector.

 Private Consumption

The Indian economy, unlike other economies, has a very high rate of private consumption (61%)

 Urbanization

In India if we talk about rural areas, seventy % of its population lives in rural areas. And with the
rising concept of urbanization more people are getting exposed to the modern products and brands.
And there is a shift to branded and packaged goods and products.

3.1.3 Social

 Change in consumer Profile

As there is rapid urbanization and increased literacy and per capita income is also increasing, have
all caused rapid growth. There is change in demand also. It leads to a great demand opportunities. As
a matter of fact around 45 % of the population in India is below the age of 20 years.

 Change in Lifestyle

Changing Lifestyle of Indian consumers has led to focus on premium products among Indian FMCG
players. These days the market is very volatile and the lifestyle is changing with a great pace. Earlier
people used to be very traditional and they were not willing to change to a great extent, they were
like if they use a product then they cannot change their product. Today there are couple with single
income and couple with double income. Both have different lifestyle. Their purchasing power varies
to a great extent

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 Rural focus

As market is getting saturated, companies are focusing on rural area for penetration, by providing
consumers with small-sized or single-use packs. These days’ companies are focusing more on the
rural areas a lot. They want to expand a lot in this segment to a great extent.

3.1.4 Technology

Adoption of ERP (like SAP and the like.), Supply Chain Optimization tools and Business
Intelligence Tools will help FMCG companies to integrate business processes across the enterprise,
suppliers and customer’s .And with this higher productivity can be achieved to a great extent. With
the level of competition and sluggish growth most FMCG corporates are looking at IT to reduce
money in the supply chain, and flattenthe bottom line Marketing and advertising through mobile and
social media platforms. These days social network, yes social network, companies are using this
social network to a great extent as an advertisement tool and it is very much effective. But right now
from cost point of view, the cost is pretty high in this ad tool.

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CHAPTER 4

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4.1 DATA ANALYSIS

4.1.1 Net Sales

Mar-14 Mar-13 Mar-12 Mar-11 Mar-10

ITC LTD.; NET 33,238.60 29,901.2 25,147.46 21,458.9 18,153.19
SALES 7 8
HUL,; NET 28,019.13 25,810.2 22,116.37 19,735.5 17,501.68
SALES 1 1
DABUR,; NET 4,870.08 4,349.39 3,757.54 3,264.98 2,855.96
SALES
GODREJ,; NET 4,079.84 3,581.02 2,980.08 2,468.90 1,267.80
SALES
P&G,; NET 5,381.11 4,831.33 3,930.39 2,852.74 2,104.17
SALES
Table 3: Net sales

Chart Title
35,000.00

30,000.00

25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00
ITC LTD.; HUL,; DABUR,; GODREJ, P&G,;
NET NET NET ; NET NET
SALES SALES SALES SALES SALES

Mar-14 Mar-13 Mar-12 Mar-11 Mar-10

Figure 9: Net Sales

Interpretation:

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ITC: In the year 2010 the net sales was 17500.00. In the year 2011, 21000.00 there is increase in
this year. In the year 2012, net sales was 25000.00 again increased. In the year 2013 again increase
was seen in the form of 30,000. In the 14 it went to 33,000.00.

HUL: In the year 2010, 17000.00 sales was seen. In the year 2011, 19000.00 sales was seen. In the
year 2012 , 22000.00 was seen. In 2013, 26000.00 sales was seen. In the year 2014, 27000.00 sales
was seen.

DABUR: It can easily be seen that there is no substantial growth in this company comparatively to
the other two company like ITC, and HUL.

GODREJ & P&G: comparatively low.

4.1.2 R & D

2014 2013 2012 2011 2010

ITC LTD.; 137.28 123.37 100.97 115.06 85.83
HUL 90.94 112.46 161.23 99.36 89.12
DABUR, 21.56 4.16 5.05 7.01 2.31
GODREJ, 9.5 8.4 7.9 4.9
P&G,
Table 4: R&D

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Chart Title
180

160

140

120

100

80

60

40

20

0
ITC LTD.; HUL DABUR, GODREJ, P&G,

2014 2013 2012 2011 2010

Figure 10: R&D of FMCG Companies

Interpretation:

HUL: HUL did a great job in the year 2012. They invested a lot. If we compare it from the year 2010
to 2014.

ITC LTD.: In the term of R & D, ITC invested less in the year 2012. But in the other years HUL
AND ITC are bit comparable.

DABUR: not substantial

4.1.3 Ad Expenditure

2014 2013 2012 2011 2010

ITC LTD.; 795.89 806.65 706.12 623.59 511.97
HUL 6,026.91 5,370.27 4,584.73 4,608.33 3,898.69
DABUR, 865.26 751.65 606.4 581.93 566.4
GODREJ, 919.96 766.36 587.71 501.94 267.19
P&G, 1,832.19 1,920.60 1,503.69 1,046.82 669.78
Table 5: Ad Expenditure

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7000
Chart Title
6000

5000

4000

3000

2000

1000

0
ITC LTD.; HUL DABUR, GODREJ, P&G,

2014 2013 2012 2011 2010

Figure 6: Ad Expenditure

Interpretation:

HUL: In this segment HUL is the king in term of ad expenditure. In the year 2014 it went to 6000.
No industry can match in this segment.

ITC: ITC LTD lag behind in this segment of ad expenditure.

DABUR, GODREJ AND P & G: They put less money in this segment of ad expenditure.

4.1.4 Fund Flow

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2014 2013 2012 2011 2010

ITC LTD.; 9587.44 8334.6 6981.61 6253.27 7981.98
HUL 4505.81 4958.3 3015.73 3363.14 3535.73
9
DABUR, 718.2 915.96 721.74 1101.97 594
GODREJ, 990.51 806.1 1216.42 1426.57 605.94
P&G, 881.21 1110.5 994.99 605.36 240.11
7
Table 6: Fund Flow

Chart Title
12000

10000

8000

6000

4000

2000

0
ITC LTD.; HUL DABUR, GODREJ, P&G,

2014 2013 2012 2011 2010

Figure 7: Fund Flow

Interpretation:

ITC: fund flow in ITC is pretty higher in the year 2014 it went to 9000. In year like 2010 to 2013
fund flow was comparable a bit.

HUL: fund flow in HUL is not that much higher, in the year 2013 it was merely 5000.

DABUR: not very high

GODREJ: In the year 2011 it went a bit high but again came down.

P & G: fund flow is not very high in comparison with the other companies like ITC, HUL, DABUR,
and GODREJ.

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4.1.5 PBITM

2014 2013 2012 2011 2010

ITC LTD.; 26.95 25.63 25.54 23.87 23.25
HUL 17.13 15.34 14.97 14.23 15.53
DABUR, 17.88 17.46 15.83 18.45 18.77
GODREJ, 17.51 17.18 19.02 21.7 23.39
P&G, 0.78 -8.37 -7.37 -10.73 12.31
Table 7: PBITM

Chart Title
30

25

20

15

10

0
ITC LTD.; HUL DABUR, GODREJ, P&G,
-5

-10

-15

2014 2013 2012 2011 2010

Figure 8: PBITM
Interpretation:

ITC: The variation is not very high in PBITM, in year 2014 it went a bit.

HUL: In 2014 it went 16. There was growth if we look from 2010 to 2013.

DABUR: Almost a kind of constant graph could be seen for dabur.

GODREJ: In the year 2010 it went a bit higher and again started decreasing till 2014.

P & G: There is negative PBIT, you can easily see it from the graph itself.

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CHAPTER 5

5.1 Research Hypothesis

When we talk about science, hypothesis is an explanation or idea that we test by conducting a proper
study and experimentation. But when we go beyond science, then it’s a theory or assumption.

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Hypothesis falls between a wild guess and a well-established theory. In science, a hypothesis
goes through series of testing and then only it is termed as a theory. But in contrary, hypothesis is
more like making an assumption.

In hypothesis testing, the alternative hypothesis H1 and the null hypothesis Ho are the two
rival hypothesis. These two opposite hypothesis are compared by using statistical hypothesis test.

For FMCG Industry, we have developed the hypothesis as follows:

Ho: There is no significant difference in the mean variance of profitability of FMCG Industry in
India.

H1: There is a significant difference in the mean variance of profitability of FMCG Industry in India.

- With 95% confidence level and 5% as level of significance.

Ho as a null hypothesis indicates that there is no statistical significance in the FMCG Industry
in India. It attempts to articulate that there is no existence of variation between the variables
such as cash profit, net operating profit ratio, net profit margin and profit before interest and
tax (PBIT) of 7 years of 5 major FMCG companies namely: HUL, ITC, Dabur, Godrej and
P&G.

H1 as an alternative hypothesis shows that there is statistical significance in the FMCG

Industry in India. This is contrary of null hypothesis.

So, in order to test the hypothesis, in our project report, we have taken 7 years of data of five
major FMCG Industry namely: HUL, ITC, Dabur, Godrej and P&G. Extracted data are cash
profit, net operating profit ratio, net profit margin and profit before interest and tax (PBIT)
which we have considered as a variables.

In order to test the hypothesis of five FMCG Industry we have to conduct ANOVA Test.

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ANOVA test is analysis of variance. It is a statistical analysis tool which is used to test the
degree to which two or more group vary or differ. It basically determines the impact of
independent variables have on the dependent variable.

The data are as follows:

Cash Profit as % of Net Worth

Year HUL DABUR ITC GODREJ P&G

2008 13.56 16.16 23.45 19.22 22.13
2009 12.29 15.97 24.22 15.53 23.58
2010 12.76 15.88 23.98 19.71 22.77
2011 11.59 15.58 25.6 17.17 17.05
2012 12.46 14.9 26.38 15.14 15.52
2013 12.96 14.97 26.63 14.95 13.37
2014 13.61 14.59 28.19 14.57 15.82
Total 89.23 108.05 178.45 116.29 30.24
Mean 12.74714 15.43571 25.49286 16.61286 18.60571
Combined 17.77886
Mean
Table 8: Cash Profit Data of FMCG
ANOVA: Two factor without replication

Source of variation SS df MS F P-value F crit

Rows 28.37863 6 4.729772 0.922893 0.4961 2.508189
Columns 646.5026 4 161.6256 31.53709 3.08E-09 2.776289
Error 122.9985 24 5.124939
Total 797.8798 34
Table 9: ANOVA Test of Cash Profit

Interpretation:
Rows indicate the comparison between the companies with data of 7 years where F cal value
is 0.922893 and F critical is 2.508189 so as F cal is not greater than F critical, we cannot
reject Ho.
Columns indicate the comparison within the company itself for 7 years where F cal is
31.53709 and F critical is 2.776289 so as F cal is greater than F critical, we reject Ho.

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Net Operating Profit Ratio

Year HUL DABUR ITC GODREJ P&G

2008 14.95 18.6 31.57 22.27 27.75
2009 14.46 18.33 32.84 15.54 27.75
2010 15.74 19.17 33.02 21.47 26.21
2011 13.57 17.06 34.54 19.05 16.64
2012 14.88 17.54 35.15 19.29 15.43
2013 15.51 17.34 35.54 17.59 14.85
2014 15.97 16.95 37.47 18.31 20.51
Total 105.08 126.99 240.13 133.52 149.14
Mean 15.01143 18.14143 34.30429 19.07429 21.30571
Combined 21.56743
Mean
Table 10: Net Operating profit ratio Data of FMCG

ANOVA: Two factor without replication

Source of variation SS Df MS F P-value F crit

Rows 20.364 4 5.091 2.566675 0.119498 3.837853
Columns 612.785 2 306.3927 154.4707 4.06E-07 4.45897
3
Error 15.868 8 1.9835
Total 649.017 14
3
Table 11: ANOVA of Net Operating profit ratio Data of FMCG

Interpretation:
Rows indicate the comparison between the companies with data of 7 years where F cal value
is 2.566675 and F critical is 3.837835 so as F cal is not greater than F critical, we cannot
reject Ho.
Columns indicate the comparison within the company itself for 7 years where F cal 154.4707
is F critical is 4.45897 so as F cal is greater than F critical, we reject Ho.

Net Profit margin Ratio

Year HUL DABUR ITC GODREJ P&G

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2008 12.58 15.06 21.5 16.5 19.89

2009 12.09 15.44 21.18 14.22 22.36
2010 12.29 15.03 21.3 18.87 19.31
2011 11.52 14.27 22.63 17.58 14.54
2012 12.01 12.17 23.7 19.93 13.44
2013 14.37 13.32 24.05 14.06 11.58
2014 13.5 13.49 25.57 13.71 14.17
Total 88.36 98.78 159.93 114.87 115.29
Mean 12.62286 14.11143 22.84714 16.41 16.47
Combined 16.49229
Mean
Table 12: Net Profit Margin Ratio Data of FMCG

ANOVA: Two factor without replication

Source of variation SS Df MS F P-value F crit

Rows 14.26134 6 2.37689 0.379096 0.885052 2.508189
Columns 427.227 4 106.806 17.03488 9.63E-07 2.776289
2
Error 150.4772 24 6.26988
5
Total 591.9656 34
Table 13: ANOVA of Net Profit Margin Ratio

Interpretation:
Rows indicate the comparison between the companies with data of 7 years where F cal value
is 0.379096 and F critical is 2.508189 so as F cal is not greater than F critical, we cannot
reject Ho.
Columns indicate the comparison within the company itself for 7 years where F cal is
17.03488 and F critical is 2.776289 so as F cal is greater than F critical, we reject Ho.

PBIT As % Of Net Worth

Year HUL DABUR ITC GODREJ P&G

2008 13.78 17.29 27.5 20.39 25.21
2009 13.39 17.11 28.37 13.73 25.02
2010 14.59 17.97 28.97 19.56 22.69

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2011 12.28 17.76 30.65 17.55 13.93

2012 13.72 16.36 31.34 18.07 12.76
2013 14.26 15.35 31.88 16.46 12.5
2014 14.71 15.49 33.64 17.27 18.08
Total 96.73 117.33 212.35 123.23 130.19
Mean 13.81857 16.76143 30.33571 17.60429 18.59857
Combined 19.42371
Mean
Table 14: PBIT Data of FMCG

ANOVA: Two factor without replication

Source of SS df MS F P-value F crit

variation
Rows 28.8010 6 6.46684 0.692119 0.658156 2.508189
6 3
Columns 1130.97 4 282.744 30.26097 4.64E-09 2.776289
8 6
Error 224.244 24 9.34353
9 9
Total 1394.02 34
4
Table 15: ANOVA of PBIT

Interpretation:
Rows indicate the comparison between the companies with data of 7 years where F cal value
is 0.692119 and F critical is 2.508189 so as F cal is not greater than F critical, we cannot
reject Ho.
Columns indicate the comparison within the company itself for 7 years where F cal is
30.26097 and F critical is 2.776289 so as F cal is greater than F critical, we reject Ho.

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CHAPTER 6

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6.1 Opportunities in the FMCG sector in India

In the past few years, FMCG sector in India is growing at a rate of 11%. This double-digit growth
rate year by year indicates that the consumer demand has been increasing. There has been 17%
growth in this sector in last five years. The shows tremendous growth in the FMCG sector in India.

Changing customer demand is the important factor that FMCG should focus on and moreover,
companies are trying their level best to keep up with that. By doing this, they want to be a leader in
the sector and outperform than their competitors. This very fact indicates that the growth is inevitable
in the sector.

Moreover, rural area accounts for more than 700 million consumers, which is 70% of the Indian
population and 50% of the total FMCG market. Right now, there is approximately 400 million
working rural population. Average citizens in rural India have less purchasing power than urban
counterparts. Regardless of this, FMCG market has great potential, and FMCG consumers are
shifting from economy to premium products such as packaged water.

6.2 Comparison of FMCG industry with different Countries

6.2.1 Brazilian FMCG companies

Brazil is a very highly competitive market that is further divided between the two big abroad brand
owners Unilever and P&G, and other small but strong foreign brands such as Reckitt Benckiser as
well as small brands such as Hypermarcas and Ypê. About 21 companies, each with revenues almost
above US$ 65 million 65 million a year, account for 74% of the FMCG market.
 
As a matter to their development and market position, maximum number of Brazilian FMCG
companies have been acquired by abroad FMCG companies. Anheuser-Busch Inc Bev now controls
Brazilian powerhouse AmBev. It is the merger of two market leading Guaraná Antarctica, the
development of famous soft drinks in Brazil. Right now there is fight going on between Pão de
Açúcar which is the largest Brazilian retail chain and Casino, its French partner, for control of
Carrefour in Brazil. Casino declared Brazil as the starting of 50% of its global development in the
next five year
As a contrast, Chinese cosmetic companies like Baojia and Shanghai Jahwa are trying hard earnestly
to ignore being acquired by abroad companies and compete with those international brands both at

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home and abroad. Shanghai Jahwa United Co., a maker and distributor of cosmetics, household
cleaning products, items and perfumes, bought a change by restructuring and shifted a 9% percent
stake to Shanghai Chengtou Corporation and Shanghai Juice Corporation in the hopes of
solidification of its grip in China. Currently, it is already selling their products in more developed
markets in countries like Europe and the US, so, Shanghai Jahwa is in a noble situation to enter
developing markets of Brazil if it can continue to develop its brand recognition.

In 2010, the non-refrigerated food sector led the FMCG logistics spending in Brazil with a share of
53.2 percent. The beverages sector shadowed with a 26.1 percent share of the entire FMCG logistics
expenditure. Assumed the huge and under-tapped markets in Brazil in the FMCG market such as in
mueslis, soaps and cosmetics, there is still a lot of development in Brazil. .
 For itself, not many have offered abroad to tout their properties. Instead, Brazilian companies are
progressively looking outwards for production in its place. The Brazilian footwear company,
Vulcabras, newly proclaimed that it would buy a factory in India to decrease manufacture costs.

6.2.2 Chinese FMCG companies

China-based FMCG companies have their work decoration for them in their own nationwide market.
The very impression of wrapped foods goes in contradiction of traditional Chinese food purchasing
patterns, with consumers frequently choosing for new foods. Moreover, a fresh survey by the China
Market Research Group designates that creation safety is the top importance amid Chinese shoppers
– something that Chinese brands are not typically related with.  A review by Global Intelligence
Alliance (GIA) between consumer and retail manufacturing professionals in different countries like
China, India and South East Asia in November 2010 exposed that 94 percent of customers in China
prefers foreign brands. With Chinese consumers showing a hunger for fresh foods and international
products, coupled with food care anxieties, Chinese FMCGs until lately have not had the motivation
– or abilities – to enlarge globally. Its old populace and the need to increase to younger customer
markets could though, become an upcoming driving force behind Chinese FMCG companies’. 

As a telling device of China’s mounting FMCG market, FMCG logistics expenditure in China
produced at a CAGR of 6.5 percent amid 2005 and 2010 rendering to a June 9, 2011, account by
Data monitor. The same account predictions logistics expenditure for FMCG to produce at CAGR
(6.3)

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In 2010, the non-refrigerated food subdivision led the FMCG logistics expenditure in China
secretarial for a share of 51.6 percent. Drinks sector followed with 22.2 percent share of the spending
(FMCG).
Given the cumulative spending propensities among the central and upper lessons, as well as a liking
for western goods, these statistics are probable to grow. Though, as businesses like Kraft and
Unilever surge their labours in China, the Chinese FMCG market will develop progressively modest,
giving all the more incentive for Chinese FMCG businesses to enlarge to other evolving markets in
the forthcoming.

6.2.3 Indian FMCG companies

A mounting Indian populace, particularly the intermediate class and the pastoral segments, dowries
an prospect for manufacturers of branded foodstuffs to entice these novel regulars as well as
construction local makers of these things targets for MNC procurement in the FMCG sector. 

In 2010, an unique number of inland and world-wide FMCG troupes alike took lead of this occasion
in India office for US$797.8 million in M&A deal-making, linked to a mere US$47.9 million the
year earlier due to gradually recovering global economy.

By contrast, the 34 M&A contracts within the FMCG group for 2010 in India were chiefly driven by
Indian companies observing to enlarge beyond their limits. Large Indian FMCG companies, such as
Dabur, Godrej and Emami, are flying up their international growth among ambitions to develop truly
multinational and worries about increased domestic flocking. Given India's important long-term
possible, persistent and cumulative FDI influxes into the country have heightened race within the
FMCG sector in India—struggle that could erode current market stocks and latent for future growing
domestically. Therefore, Indian FMCG companies are very determinedly watching to strengthen
their global attendance.

Indian FMCG companies complete a total of 13 attainments in 2010, most of them global.
For instance, Dabur, Godrej and Emami are not latent on their leading locations in India, and are in
its place looking to increase wealth expenditures after US$218.8 million to US$656.5 million, in
instruction to found a tougher market position abroad. Godrej complete seven international
attainments in 2010, Marico complete in two attainments, Dabur made it in two attainments and
Emami was the one who did it in one attainments.

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In difference, their FMCG complements in Brazil and China are not increasing globally at closely the
same rate.

6.2.4 Market entries overseas for popular first target

As Brazilian, Chinese and Indian FMCG companies flex their strengths and in which markets they
probable want to enter GIA mainly forecasts additional emerging republics nation. Countries like
Egypt, Vietnam, Indonesia, Russia and Nigeria will be very nice-looking. These countries have
conventional a lot less care from global companies in general and consequently.

Dabur, India's fourth major FMCG company, has set its highlights on international markets such as
the Persian Gulf, US, Egypt and Nigeria as it airs to scale up the role of foreign markets to entire
sales to 25 percent from the recent 20 percent. Dabur ended its first ultramarine acquisition in the
second half of 2010, obtaining Turkish peculiar care firm Hobi Kozmetik Group for US$69 million
as share of its approach to strengthen its in Middle east.

Extra Indian FMCG Company, Godrej Group's Godrej Consumer Products leading African personal
care brand Tura from Nigeria's Tura Group late in 2010. T, acquired hey also later bought Latin
American hair colour firm Issue Group and Argentinian-brand Argentous. While Issue Group is a
market leader present in countries like Argentina, Peru, Uruguay and Paraguay, argentous is one of
the most mid-sized Argentine hair care company throughout the world. The combined sales of the
two Argentine companies is said to be over US $45 million. In Indonesia, Godrej is one of the
learned baby care products manufacturer PT Megasari.

India’s hungriness for the FMCG market in South East Asia is also tangible. Marico Ltd, a Mumbai-
based private care crops maker, has elect up an 85 percent impartiality in Vietnam-based FMCG firm
International Consumer Crops Corporation (ICP). Vietnam, which has showed tremendous
development in the FMCG market since 2006 when the industry produced 20 percent year-on-year,
has continued to be good-looking. Driven by increasing youth expenditures, better delivery networks
and robust economic evolution, Vietnam’s rapid development in consumer asset has already
concerned in foreign reserves FMCG. Personal care product brands such as Colgate, Olay, Ginvera
have arrived the Vietnam market and are all execution well. Trials continue for less industrialised
FMCG brands though as 70 percent of the delivery and sales of FMCG crops, such as individual care
products, still happen within old-style channels such as “mom and pop” stores and traditional
medication stores. That said, given the achievement of these more developed FMCG companies, the
evolution of the Vietnamese market and its appeal to Chinese and Indian FMCG corporations will

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not abate anytime. The Russian FMCG market is similarly one that has inordinate potential for
evolution, but relics largely unused. Russia is the ninth most packed country in the world and has a
market family that has existed for two decades. However, Russia is a logistical frightening for
FMCG companies given its topographical size. A severe empathetic of regional markets in Russia
will therefore be vital for any FMCG company eager to enter. The welfares would be well worth the
energy though. The overall food market capacity in the country touched US$ 270 billion and is
expected to produce by about 15 percent CAGR through to 2014. Emerging market FMCG
Contestants are set to conquer their home-base and soon other emerging markets.

6.3 Future outlook of FMCG in India

In the year 2020, FMCG is expected to be an industry of Rs. 400,000 crore. The anti-ageing skincare
category has grown five times between the year 2007 and 2008. Today it’s the fastest-growing
segment in the skincare market. The famous brand such as Olay that is the premium anti-ageing
skincare brand of Procter & Gamble captured 20 per cent of the market within a year of its launch in
2007 and now dominates it with 37 per cent share. Indian consumers have become so much
conscious about skincare. In addition to this, oral hygiene has become a daily habit for the Indian
consumers. Mouth rinsing seems to be picking up as a habit. So mouthwash penetration is growing at
35 per cent a year. Rural penetration of shampoos increased to 46 per cent last year, way up from 16
per cent in 2001. Rural areas are slowly making tremendous use of FMCG products.

Consumption patterns have changed rapidly in the last five to ten years. The consumer is trying to
experience new things. Consumers are looking for products with better functionality, quality, value,
and more. What consumer ‘needs’ is fast getting replaced with what consumer ‘wants’. There are
numerous drivers of growth for the FMCG in India in the past ten years and there will be big drifts
and elements that will impact its upcoming.

The FMCG Industry witnessed robust year-on-year growth of approximately 11 per cent in the last
decade; this indicates that there was a boost in size from Rs. 47,000 crore in 2000 and 2001 to Rs.
130,000 crore.

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The ultimate drivers of growth of this FMCG industry is robust GDP growth, opening up of rural
markets, increased income in rural areas, growing urbanisation along with evolving consumer
lifestyles and buying behaviours.

In the year 2020 the FMCG industry is expected to grow at least 12 per cent annually to become Rs.
400,000 crore in size. In addition to this, if some of the aspects work out well, like GDP grows a
little faster, the government removes tailbacks, infrastructure investments speed up, there is more
resourceful spending on government subsidy and so on, then growth can be drastically higher. In the
year 2020, it is expected to be 17% leading to an overall industry size of Rs. 620,000 crore. The
industry will become larger, more responsible and will be more single-minded to its customers by
2020.

Over the next ten years, there will be some important trends that will change the face of the industry.
Some fundamental ones related to advancement of consumer segments are as follows:

 Accelerating ‘premiumisation’

The rising income of Indian consumers has accelerated the trend towards ‘premiumisation’. The
movement can be spotted notably in two income groups that are the rich with annual income of more
than Rs. 10 lakh and the upper middle class with annual income that ranged between Rs. 5 lakh and
Rs. 10 lakh. The behaviour of rich people indicate that they are willing to spend on premium
products for their ‘emotional value’ and ‘exclusive feel’. They are well informed about various
product options, and want to buy products that suit their style. The upper middle class wants to
imitate the rich and up-trade towards higher-priced products that offer greater functional benefits and
experience compared to products for mass consumption.

While these two income groups account for only 3 per cent of the population, it is estimated that by
2020 their numbers will double to 7 per cent of the total population. In 2020 the rich will grow to
approximately 30 million. Similarly, in the very year the upper middle segment will be a population
of about 70 million, which is more than the population of the UK.

 Evolving categories
Categories are sprouting at an abrupt pace in the market for the middle and lower-income segments.
With their rise in their economic standard, consumers are moving from “need” products to “want”

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products. For suppose, consumers have moved from toothpowders to toothpastes and are now also
demanding mouthwash within the same category.

Consumers have started demanding customised products, specifically personalised to their individual
tastes and needs. Complexities have started to develop in this category, as there are too many
varieties. For an instance, before there used to two variety of shampoo that is normal and ant-
dandruff but now anti-dandruff shampoo itself comes in so many variety for different category of
people like short hair, oily hair, curly hair, dry hair and so on

The inclination towards mass-customisation of products will strengthen the FMCG players
categorizing the buyer as per the age, personal taste & preference, ethnical background and
professional desires.

The beauty products are expected to grow by 20 per cent per annum because of the women whose
socio- cultural lifestyle is changing. Middle-class women are now more conscious of their
appearance and are willing to spend extra on enhancing it. Products such as colour cosmetics that is
growing by 46 per cent and sun care products that is growing at 13 per cent have following this trend
briskly.

 Value at the bottom

A consumer who earns less than Rs. 2 lakh per annum per household constitutes about 900 to 950
million people whom we term as low class people. Talking about the middle class segment that
consists of largely urban, well served and competitive in nature, whereas the low class markets are
contrary of middle class that are largely rural, poorly served and uncompetitive in nature. A lot of the
basic needs of lower economic level of consumers are yet unmet.

FMCG companies have already been catering to lower class of people but now, they need to focus
more on delivering products that add more values.

Population of lower class is estimated to be about 78 per cent of the total population of that category.
This sector is becoming an important source of consumption, as it is not just limited to the ‘survival’
approach. As a result of rise in purchasing power of consumers, the 18 per cent growth of FMCG
market in rural areas a year has surpassed 12 per cent growth of urban markets a year. Moreover, the
rural market covers only 34 per cent of the total FMCG market, given the current growth rates, in the
year 2020 its contribution is expected to increase to 45-50 per cent. It will require tailored products at
highly affordable prices with the potential of large volume supplies.

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Products that had no demand in the rural sectors such as fruit juices and sanitary pads have suddenly
started creating their presence in that particular market. Most FMCG companies have achieved
success in creating adequate access to their products in rural areas, now the next move is expected to
come from growth of customised products and movement of rural consumers towards higher-priced
and better products.

Another big trend is the emerging idea of many Indians. The market in India is of homogenous
nature despite the presence of different languages and cultures. There is one product for the whole
nation. We can take the example of Diet Coke; it is same for Karnataka and West Bengal, or for
Punjab and Assam. In addition, there is same advertisement for these products throughout the
country.

Soon there will be differentiation of products not just only in country level but only in the state level.
Suppose, Pepsi has a different product in Andhra Pradesh which is not found anywhere else.

FMCG companies now need to grow ‘regional’ in their thinking and shift towards an increasingly
decentralised operating standard in India. As consumer tastes & preferences alter as per regions and
states, it will be beneficial for companies to follow a regional strategy in terms of product
ingredients, positioning and marketing. In conclusion, regionalisation will become an increasingly
key topic for FMCG companies.

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CHAPTER 7

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CONCLUSION
In India, FMCG Industry is a boom. This industry has been growing day by day from the day it has
been established. Economic condition, political condition and social condition will be affecting less
to this sector. The very reason for this is no matter what happens, people will not stop buying the
products that are essential to them in day-to-day life. Moreover, in the current scenario, there is an
upliftment in the living standard of people in India. They are moving to middle-level category which
means there is increase in their purchasing power. This has contributed to the rise of FMCG
companies in India.

As there are more competition in the FMCG sectors, people are also having more options to choose
from. This has also made shopping of FMCG more fun and has helped to make the life of people
easier.

Advertisement and promotional activities are one of the factors that influences the purchasing
decision of the people. If FMCG companies want to increase their sale, attract more customers and
create brand loyalty then they have to invest heavily in creating a better brand through
advertisements and giving wide variety of range by undercutting the price of the products so that it
can defeat its competitors and build an easily accessible distribution networks to reach its customers.

There are less barriers to entry and exit in the FMCG industry in India but the main problem here is
the sustainability. As there is large number of competitions, survival becomes tough in this sector.
The key ingredients for survival is to create brand value and brand awareness among the consumers.
For the FMCG Company to succeed, it should understand the behavior of the consumers and try to
provide right products at the right time.

One of the major obstacles in FMCG industry is, consumers can be brand loyal for a short period of
time but in the long term, there can shift to a different brand. This change can result because of
change in taste & preference, availability of value-added products, more features, price, accessibility,
income and more. In order to hold customers in short as well as in long run, FMCG should nail in all
the above areas.

Among the five companies (ITC, HUL, Dabur, Godrej, P&G) that we have analyzed, ITC has been
the leader among the rests. The reason for this is ITC has made huge investment in FMCG segment
which helped it to grow at such a fast pace.

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