Term Paper

A Study on FMCG Sector in India and HUL It’s Capabilities, Grand Strategies and Benchmarking

Course: Strategic Management Course Code: MGT 612 Submitted By: Varun Puri
10800464 RR1805 A 19

Submitted To: Rajan Giridhar

Department of Management Lovely Professional University

Acknowledgement

Words are the dress of thoughts, appreciating and acknowledging those, who are responsible for the successful completion of the project. My sincere gratitude goes to Mr. Rajan Giridhar who assigned me responsibility to work on this project and provided me all the help, guidance and encouragement to complete this project. The encouragement and guidance given by him have made this a personally rewarding experience. I thank him for her support and inspiration, without which, understanding the details of the project would have been exponentially difficult With Sincere Thanks, (Varun Puri)

DECLARATION

Declaration

I, "Varun Puri”, hereby declare that the work presented herein is genuine work done originally by me and has not been published or submitted elsewhere for the requirement of a degree programme. Any literature, data or works done by others and cited within this dissertation has been given due acknowledgement and listed in the reference section.

(Varun Puri) Registration No.:- 10800464 Date: 09-05-2010

..................................3 1......6 2.....................................2............4 Demand Dynamics..............2 1...........2 1.....................................................Table of Contents 1 Introduction to Subject................................................................1 Higher Penetration of the Rural population...................................................................................1 FMCG Sector in India.7 ................................5 Rise in Disposable Income.........................................2 PERSONAL CARE..............................................................2.................................................................................1 HOUSEHOLD CARE..................4 1......................................................................2 1............5...........................2 1.3 FOOD AND BEVERAGES..........................................................................................2 Over 100 Years Link with India.....1 HULBackground...3 FMCG Sector: Statistics................2 Constituents of FMCG Sector in India.................................4 2 Company profile....................................................................................................................................................................................................1 1..............4 1............6 2................2....1 1......................................................................................................................................................................................................................

..............3 Portfolio of Strong Brands...............................................................13 3......8.........................................................6 Technology....................................................................................16 3.14 3.................................16 3...........8........................................3 Capabilities & Strengths.....................................................13 3.....................3 Exports...................................................................1 Food...................................................1 Types of Grand Strategies...4 Investment in the FMCG sector..................14 3...................................................................4 Better Value......................................14 3.................................................................................................15 3...............................................18 4.......................................................................................................... the Key Differentiator........................................................................................................................................ ..............................................................................................1 The new Hindustan Lever: Focused on FMCG........................................................13 3..................2 FMCG still offers enormous potential............17 3.....8 Opportunities Ahead.............................. .8.....5 Bigger Role in Consumers’ Lives...................2 Grand Strategies Adopted by HUL.........................8..............................2 Beverages.........7 Winning with Customers. ............. 18 4............................................................................15 3.......................................................17 4 Grand Strategies.................................16 3.........18 .................

..................1..............................................................................24 6 Conclusion:..............1 Large domestic market.... ..........................................2Joint Venture............. ...............................................................1Concentrated Growth & Market Development........................................1 India Competitiveness and Comparison with the World........2...........................2...............................................................22 5.a large consumer goods spender...............2 3 5.........2.4 Product Development........5Divestiture..........................3Backward Integration............21 5............................................................24 5................6POLICY..21 5..........................19 4....................................................................2.......................19 4.......... ...........21 5..........................3 Materials availability..1..............................4 Cost competitiveness.....1............26 ................................. ............................................19 5 Benchmarking.......................5 Presence across value chain....2 India ...............................................................1 8 4....................................................1........................1.....................................................................................4............................................18 4.............21 5......1...........................2.............................................................................................................................................. ....................................

................................................................................................................. Urban Households Growth...............21 Chart 5:...27 List of Charts Chart 1: Rise in Disposable Income (In USD Thousands)......................17 Chart 4:........................ ..........................April 2004)..............22 Chart 6:-Labor cost comparison (Worldwide)......................................4 Chart 2: Rural Vs...............................................7 References....................................................Consumption pie.............................23 ..............................................................................................5 Chart 3: Investments in FMCG Sector (August 1991.................................................Consumer Expenditure on Food (Worldwide)............................................

With 200 million people expected to shift to processed and packaged food by 2010.4 billion in 2015. . so the cumulative profit on such products can be large. toothpaste. intense competition between the organised and unorganised segments and low operational cost. cheaper labor costs and presence across the entire value chain gives India a competitive advantage. This contrasts with durable goods or major appliances such as kitchen appliances. which are generally replaced over a period of several years.6 billion in 2003 to US$ 33. Penetration level as well as per capita consumption in most product categories like jams. presents an opportunity to makers of branded products to convert consumers to branded products. they generally sell in large quantities. skin care. Availability of key raw materials. FMCG products are generally replaced or fully used up over a short period of days. The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13. and within one year. It has a strong MNC presence and is characterized by a wellestablished distribution network. India needs around US$ 28 billion of investment in the foodprocessing industry. particularly the middle class and the rural segments.1 FMCG Sector in India Fast Moving Consumer Goods (FMCG) are products that are sold quickly at relatively low cost.1 Introduction to Subject 1. hair wash etc in India is low indicating the untapped market potential. Though the absolute profit made on FMCG products is relatively small. Growth is also likely to come from consumer 'upgrading' in the matured product categories.1 billion. The FMCG market is set to treble from US$ 11. weeks. Burgeoning Indian population. or months.

. household cleaners to be $239 million and the production of synthetic detergents at 2. especially toothpastes. remains under penetrated in India (with penetration level below 45 per cent). The industry is very competitive both for organised and smaller regional players.3 FOOD AND BEVERAGES The size of the Indian food processing industry is around $ 65. Gillette India and Godrej Soaps. the premium and middle-end soaps are growing at 10 per cent. bread and biscuits at $1. Marico (with Parachute) and Dabur are the leading players.2.7 billion.6 million tonnes. 1.2. 1.2 Constituents of FMCG Sector in India 1. including $20. Nirma. The oral care market. The demand for detergents has been growing at an annual growth rate of 10 to 11 per cent during the past five years. The urban market prefers washing powder and detergents to bars. The Indian skin care and cosmetics market is valued at $274 million and dominated by HLL. In the branded coconut hair oil market. The market for branded coconut oil is valued at approximately $174 million. chocolates at $73 million and ice creams at $188 million. The regional and small un-organized players account for a major share of the total volume of the detergent market. Of this.1. The leading players in this market are HLL.2.6 billion. While the overall personal wash market is growing at one per cent. Godrej Soaps and Reckitt & Colman. Colgate Palmolive.1 HOUSEHOLD CARE The size of the fabric wash market is estimated to be $1 billion. The coconut oil market accounts for 72 per cent share in the hair oil market. hair care products at $831 million and oral care products at $537 million. the health beverage industry is valued at $230 million.6 billion of value added products.2 PERSONAL CARE The size of the personal wash products is estimated at $989 million.

3 FMCG Sector: Statistics • • • The size of the food processing industry exceeds US$65.1 billion. The urbanrural split of the tea market was 51:49 in 2000. ○ Bread and biscuits sales exceeds US$1. Dust tea is popular in southern India. The market is predominantly urban with 25 per cent contribution from rural areas. soya processing units and starch/glucose/sorbitol producing units have also come up. predominantly urban (>70%). catering to domestic and international markets. the monthly consumption is estimated at 4.7 billion. Consumers in different parts of the country have heterogeneous tastes. The soft drink (carbonated beverages and juices) market is in excess of US$1 billion. 1. and its consumption is highly seasonal. On an average. However. biscuits and soft drinks. The Indian beverage industry faces over supply in segments like coffee and tea. The market is highly seasonal in nature with consumption varying from 25 million crates per month during peak season to 15 million during offseason. Coffee is consumed largely in the southern states. Indian hot beverage market is a tea dominant market. The three largest consumed categories of packaged foods are packed tea. . tea rather than coffee dominates.9 million crates. Large biscuits & confectionery units. Coffee is consumed largely in the southern states.The size of the semi-processed/ready-to-eat food segment is over $1.1 billion. Of the food processing industry. The size of the total packaged coffee market is 19. Coca cola and Pepsi dominate the Indian soft drinks market.6 billion.600 tonnes or $87 million. Mineral water market in India is a 65 million crates ($50 million) industry. ○ Health beverage sales exceeds US$ 230 million. The total soft drink (carbonated beverages and juices) market is estimated at 284 million crates a year or $1 billion. ○ Ice cream exceeds US$188 million ○ Chocolates sales exceeds US$73 million • • In the hot beverage market. The size of the semi-processed/ready-to-eat food segment is over $1. while loose tea in preferred in western India. more than half of this is available in unpacked or loose form. which increases to 5.2 million during peak season.

1 Higher Penetration of the Rural Population • Many companies are deepening their penetration in the rural areas as: ○ The FMCG sector in the urban areas is becoming quite saturated (though it will continue to dominate in the next 8 – 10 years2) while the penetration in the rural areas are only about 1%3. rural areas. and companies’ aggressive promotion of product awareness. Chart 1: Rise in Disposable Income (In USD Thousands) • • Sources: Euro Monitor. 1.• Major players in this segment include Hindustan Lever.4 Demand Dynamics The general factors driving the growth of the FMCG sector are increase in disposable income.5 Rise in Disposable Income • With increasing disposable income and subsequent rise in quality of living and hygiene concerns. .5. the average Indian spends about 48%. Cadbury and Dabur 1. of his total income on groceries (~40%) and personal care products (~8%)1. Currently. also the majority. Goldman Sachs’ BRICS Report 1. Nestle. the average Indian’s spending on grocery and personal care products will likely increase.

Other companies would start catering to these regions in near future. ○ Between 2005 and 2010.4 billion. nearly 34% of the off take of FMCG companies come from rural areas. the FMCG sector in the rural and semiurban areas will experience some 50% growth. ITC and Colgate have already established good distribution networks in these regions. ○ Rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of the total disposable income5. Urban Households Growth Sources: Statistical Outline of India (2001-02). ○ Currently. Chart 2: Rural Vs.○ The rural areas have and will continue to make up more than 50% (153 million) of India’s total households and accounting for more than its current 66% contribution to total FMCG consumption4. at a CAGR of 10% and increase its market size to nearly US$ 23 billion from the 2005 level of US$11. NCAER . ○ Companies like HUL.

it has been recognised as a Golden Super Star Trading House by the Government of India. HUL was formed in 1933 as Lever Brothers India Limited and came into being in 1956 as Hindustan Lever Limited through a merger of Lever Brothers.000 employees and contributes for indirect employment of over 52.000 crores. Hindustan Vanaspati Mfg.000 people. touching the lives of two out of three Indians with over 20 distinct categories in home & personal care products and food & beverages.2 Company profile 2. HUL is also one of the country's largest exporters. Hindustan Unilever was rated as the most respected company in India for the past 25 years by Businessworld. The rating was based on a compilation of the magazines annual survey of India’s Most . They endow the company with a scale of combined volumes of about 4 million tonnes and sales of over Rs. Co. one of India’s leading business magazines. The company was renamed in June 2007 to “Hindustan Unilever Limited”.Background Hindustan Unilever Limited (HUL) is India's largest fast moving consumer goods company. 13.. In 2007. It is headquartered in Mumbai. India and has an employee strength of over 15.1 HUL. and United Traders Ltd. Ltd.

and Karachi Pears soap introduced in India Brooke Bond Red Label tea launched Lux flakes introduced Vim scouring powder introduced Vinolia soap launched in India Vanaspati introduced by Dutch margarine manufacturers like Van den Berghs. i. HUL is the market leader in Indian consumer products with presence in over 20 consumer categories such as soaps. nearly 80% of the retail outlets in India. Hindustan Unilever's distribution covers over 1 million retails outlets across India directly and its products are available in over 6. HUL was one of the eight Indian companies to be featured on the Forbes list of World’s Most Reputed companies in 2007 2. Chennai. Kolkata. detergents and shampoos amongst others with over 700 million Indian consumers using its products. 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). Sixteen of HUL’s brands featured in the ACNielsen Brand Equity list of 100 Most Trusted Brands Annual Survey (2008). Lever Brothers appoints agents in Mumbai. It has over 35 brands.3 million outlets in India. The Anglo-Dutch company Unilever owns a majority stake (52%) in Hindustan Unilever Limited. Jurgens. tea.Reputed Companies over the past 25 years. and Hartogs Rinso soap powder introduced Gibbs dental preparations launched Lever Brothers gets full control of North West Soap Company .2 Over 100 Years Link with India YEAR 1888 1895 1902 1903 1905 1913 1914 1918 1922 1924 1925 MILESTONES Sunlight soap introduced in India Lifebuoy soap launched. Verschure Creameries.8 According to Brand Equity. 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.e.

more new foods introduced. Sunsilk shampoo launched Signal toothpaste launched. Nickel catalyst production begins. Taj Mahal tea launched Hindustan Unilever Research Centre. Tiruchy. opened Etah dairy set up. Indian shareholding increases to 14% Lever's baby food. and Ghaziabad Vanaspati factories bought 65% of managers are Indians Three companies merge to form Hindustan Unilever Limited. concentration on building up Dalda Vanaspati as a brand Agencies in Mumbai. company acquires own sales force Unilever takes firm decision to "train Indians to take over junior and senior management positions instead of Europeans" Personal Products manufacture begins in India at Garden Reach Factory Reorganisation of the three companies with common management but separate marketing operations Pond's Cold Cream launched Mr Prakash Tandon becomes first Indian Director Shamnagar. joins HVM Garden Reach Factory purchased outright. Animal feeds plant at Ghaziabad. Prakash Tandon. Prakash Tandon takes over as the first Indian Chairman. with 10% Indian equity participation Unilever Special Committee approves research activity by Hindustan Unilever Research Unit starts functioning at Mumbai Factory Surf launched Mr. Sewri factory site bought United Traders incorporated on May 11 to market Personal Products Mr. 1966 Indian shareholding increases to 15% Statutory price control on Vanaspati. Mumbai. Kolkata and Karachi taken over. opens in 1967 . Chennai. 191 of the 205 managers are Indians. Anik ghee launched. one of the first Indian covenanted managers. Formal Exports Department starts Head Office building at Backbay Reclamation.1926 1930 1931 1935 1937 1939 1941 1942 1943 1944 1947 1951 1955 1956 1957 1958 1959 1961 1962 1963 1964 1965 1966 Hartogs registers Dalda Trademark Unilever is formed on January 1 through merger of Lever Brothers and Margarine Unie Hindustan Vanaspati Manufacturing Company registered on November 27.

Taloja chemicals unit begins functioning Jammu synthetic Detergents plant inaugurated. T Thomas. Fair & Lovely skin Cream launched Sodium Tripolyphospate plant at Haldia commissioned Dr.57% Indian shareholding increases to 34%.first range of hybrid seeds comes out. informal price control on soap begins Rin bar launched. Unilever shareholding in the company comes down to 51% Government allows 51% Unilever shareholding Foods. informal price control on soaps withdrawn. Merger ultimately accomplished in December 1994. Indian shareholding increases to 18. 1993. merges with the 1993 company with effect from April 1. statutory price control on Vanaspati and baby foods withdrawn.1968 1969 1971 1973 1974 1975 1976 1977 1978 1979 1980 1982 1984 1986 1988 1990 1991 1992 1993 Mumbai Mr. Fine Chemical Unit at Adhenri . Bru coffee launched Mr V G Rajadhyaksha presents plan for diversification into chemicals to Unilever Special Committee . Animal Feeds businesses transferred to Lipton Agri-products unit at Hyderabad starts functioning . Kissan acquired from . Close-up toothpaste launched Construction work of Haldia chemicals complex begins. A S Ganguly taken over as chairman from Mr. Jammu project work 1975 begins. Fine Chemicals Unit starts production. Clinic shampoo launched Mr T Thomas takes over as Chairman from Mr Rajadhyaksha. Khamgaon Soaps unit and Yavatmal Personal Products unit start production Launch of Lipton Taaza tea Mr. Tata Oil Mills Company (TOMCO). S M Datta takes over as Chairman from Dr A S Ganguly Surf Ultra detergent launched HUL recognised by Government of India as Star Trading House in Exports HUL's largest competitor. V G Rajadhyaksha takes over as Chairman from Mr. Pilot plant for industrial chemicals at Taloja. Liril marketed Ten-year modernisation plan for soaps and detergent plants. the biggest such in Indian industry till that time. Prakash Tandon. Launch of Vim bar.plan approved.

with effect from January 1. the first public sector company to be disinvested by the Government of India HUL enters Ayurvedic health & beauty center category with Ayush Range and Ayush Therapy Centers Launch of Hindustan Lever Network.the UB Group 1994 1995 1996 1997 1998 2000 2002 2003 2005 2006 2007 2008 HUL forms Unilever Nepal Limited. 1998 HUL acquires Lakme brand. HUL and US-based Kimberley-Clark Corporation form 50:50 joint venture . HUL recognised as Super Star Trading House Mr. B Dadiseth takes over as Chairman from Mr S M Datta. new Regional Innovation Centres also come up Group company. HUL acquires 74% stake in Modern Food Industries Ltd .000 crore mark HUL completes 75 years on 17th October 2008 . K.to market Huggies diapers and Kotex feminine care products Factory set up at Pune in 1995. with HUL. HUL and Indian cosmetics major. factories and Lakme Ltd Mr. Lakme Ltd . HUL introduces branded atta.Lakme Lever Ltd . Merger of Group 1996 company. Surf Excel launched Unilever sets up International Research Laboratory in Bangalore. merges with HUL with effect from January 1. who joins the 2000 Unilever Board. form 50:50 joint venture . HUL enters branded staples business with salt.Kimberley-Clark Lever Ltd . Pond's India Ltd . M S Banga takes over as Chairman from Mr K B Dadiseth. HUL acquires Kwality and Milkfood 100% brandnames and distribution assets. Brooke Bond Lipton India Limited. HUL introduces Wall's. acquisition of the Amalgam Group Launch of "Pureit" water purifiers Brookefields food operations moved to Mumbai Company name formally changed to Hindustan Unilever Limited after receiving the 2007 approval of share holders during the 74th AGM on 18 May 2007 Sales of Brooke Bond and Surf Excel each cross the Rs 1.

they . they were a drain on the core FMCG business.2 FMCG still offers enormous potential As the largest FMCG player it was up to them to reverse the downtrading to realize its true growth potential. 3. They decided to disengage from all non-FMCG or commodity businesses. At those levels. They could achieve this by raising the bar and becoming world class in what their brands offered and how they worked.1 The new Hindustan Lever: Focused on FMCG In 2000. Over the next 10 years. Nothing less would do. In 2000. Today they are a focused on FMCG company with our branded business accounting for over 90% of sales.000 crores from a current value of Rs. Adhesives. people talent or media spend. Speciality Chemicals.750 crores as in 1999.3 Portfolio of Strong Brands Their main challenge was to reverse the downtrading in the categories and reestablish the relevance of their brands in the mind of the consumer. Besides. be it technology.000 crores. This is an opportunity that they have to seize. Thermometers. Across the world. the FMCG market will be over Rs. we have divested and discontinued 15 businesses including Animal Feeds. 75% of their sales came from FMCG businesses.1. Nickel Catalyst. The rest came from several nonFMCG businesses which were not profitable. In all. they are seeing a strong correlation between income levels and the size of FMCG markets. These will be their main engines of growth. consisting of 35 brands across 20 categories. Penetration levels in several of the categories and consumption levels in all of the categories is low by any comparison. per capita income in India is likely to touch China’s current levels.100. Mushrooms etc.3 Capabilities & Strengths 3. 3.40. with higher levels of resource concentration. and did not offer prospects for long-term leadership. Seeds. both in terms of resource and focus. with sales of Rs.

in the last three years to upgrade the brands. it was only when they associated it with the promise of health and protection against disease that it claimed a larger space in the consumer’s mind. In the case of Lifebuoy.400 crores. . Today Lifebuoy. has grown at over 15% for the last three years. They chose to focus on 35 power brands covering all consumer appeal and price segments. Better quality and more affordable prices have increased the value to the consumer. How often have we heard someone say.5. They are already seeing the benefits. Surf Excel is one of their fastest growing brands today. Similarly. They had to move from selling a soap or a detergent to something far more important and central to the consumer’s life. each with sales of more than Rs. in the laundry market. “A soap is a soap is a soap!” Or indeed.had 110 brands.4 Better Value The first step was to ensure that they offer world class quality and real differentiation backed by technology to give them the advantage over low priced competition. their oldest brand. 3. “All detergents clean clothes as well”. Surf Excel went well beyond the benefit of ‘great clean’ by saving two buckets of water with every wash.5 Bigger Role in Consumers’ Lives Perhaps the most significant change has been to move the brands beyond merely making functional claims to playing a bigger and deeper role in the lives of consumers. Imagine the importance of that benefit to consumers in cities. Rin and Wheel – have emerged as mega brands in the last five years. Six brands – Brooke Bond. In several cases they reduced prices to make the brands more affordable. many undifferentiated and lacking scale. who often get running water for only a couple of hours a day.5 and a branded quality shampoo in a bottle at Rs. they are the first to introduce a branded toothpaste in a tube at Rs. Lifebuoy. Fair & Lovely. or 5% of sales. They have also launched several low unit size and price packs for single use to make the brands more accessible to all income groups. They have invested over Rs.500 crores. For example. 3. It moved from being a mere soap to a health essential. Lux.

They have over 200 of the brightest scientists and technologists based in India. All these initiatives together have enhanced operational efficiencies.000 high quality minds across Unilever working relentlessly to provide new benefits that make a real difference to the consumers. This is possible because of IT connectivity across the extended supply chain of about 2.7 Winning with Customers Hindustan Lever has historically had a strong bond with its customers. .Both Lifebuoy and Surf Excel have succeeded because they are relevant to two key concerns of the Indian housewife: family health and the scarcity of water. 3.6 Technology. improved the service to the customers and have brought us closer to the marketplace. they have over 4. In all. which supports the units across the country. Their customers are serviced on continuous replenishment. 3. The sales structure has been transformed to leverage scale and build expertise in servicing Modern Trade and Rural Markets. the Key Differentiator Their brands and sound understanding of the local consumer are supported by a world class Research and Development capability. They have strengthened this and reinvented the way they manage their distribution channels and their customers. They have also combined backend processes into a common Shared Service infrastructure. of which four are in India.000 stockists. hygiene and personal care benefits and thereby deliver Vitality. They have also de-layered their sales force to improve the response times and service levels. Their portfolio of 35 power brands is uniquely positioned to offer nutrition. consumers today are looking for ways to look good and feel good so that they can get much more out of life.000 suppliers. 80 factories and 7. In short. Their recent reorganization leverages the talent pool from across 16 global technology centres. consumers are seeking Vitality in their lives. In addition to the growing consciousness of health.

The total soft drink (carbonated beverages and juices) market is estimated at 284 million crates a year or US$ 1 billion. biscuits and soft drinks. 3. bread and biscuits at US$ 1. while loose tea in preferred in western India. Dust tea is popular in southern India.7 billion. Total exports of food .600 tonnes or US$ 87 million.6 billion including US$ 20. chocolates at US$ 73 million and ice creams at US$ 188 million.8. However. The size of the semi-processed/ready to eat food segment is over US$ 1. The market is predominantly urban with 25 per cent contribution from rural areas.2 million during peak season. more than half of this is available in unpacked or loose form. Coffee is consumed largely in the southern states.9 million crates.8.3 Exports India is one of the world's largest producers for a number of FMCG products but its exports are a very small proportion of the overall production. Of this. The size of the total packaged coffee market is 19. the monthly consumption is estimated at 4. Indian hot beverage market is a tea dominant market. 2009) 3. On an average. Consumers in different parts of the country have heterogeneous tastes.8.3.2 Beverages The Indian beverage industry faces over supply in segments like coffee and tea. The urban-rural split of the tea market was 51:49 in 2000.8 Opportunities Ahead 3.1 Food According to the Ministry of Food Processing. Coca cola and Pepsi dominate the Indian soft drinks market. Mineral water market in India is 65 million crates (US$ 50 million) industry. (IBEF FMCG Report. soyaprocessing units and starch/glucose/sorbitol producing units have also come up. which increases to 5. catering to domestic and international markets.1 billion. The urban rural split in the coffee market was 61:39 in 2000 as against 59:41 in 1995. the size of the Indian food processing industry is around US$ 65.6 billion of value added products. The market is highly seasonal in nature with consumption varying from 25 million crates per month during peak season to 15 million during offseason. Large biscuits & confectionery units. The three largest consumed categories of packaged foods are packed tea. the health beverage industry is valued at US$ 230 billion.

3 per cent of the total sectoral investment. they are focusing more on the overseas markets like Bangladesh. Chart 3: Investments in FMCG Sector (August 1991.4 Investment in the FMCG sector The FMCG sector accounts for around 3 per cent of the total FDI inflow and roughly 7.April 2004) + . Dabur and Vicco laboratories are amongst the top exporting companies. Godrej Consumer. Pakistan. Middle East and the CIS countries because of the similar lifestyle and consumption habits between these countries and India. while the vegetable oils and vanaspati sector accounts for the highest domestic investment in the FMCG sector. 3. The food-processing sector attracts the highest FDI.9 billion in 2001-02 and marine products accounted for 40 per cent of the total exports. Though the Indian companies are going global.processing industry were US$ 2. Marico. HLL. Nepal.8.

1 Types of Grand Strategies Consortia Concentrated Growth Market Development Product Development Innovation Horizontal Integration Vertical Integration Concentric Diversification Conglomerate Diversification Turnaround Divestitu re Liquidati on Bankrupt cy Joint Ventures Strategic Alliances 4.2 Grand Strategies Adopted by HUL . and/or organizational development through acquisition. long-term plan of essential actions by which a firm plans to achieve its major objectives. 4.4 Grand Strategies Grand Strategies are Comprehensive. or strategic alliances. diversification. divestiture. product. joint ventures. Key factors of this strategy may include market.

In one of the most visible and talked about events of India's corporate history. Brooke Bond & Co.2. which was an Indian co. the erstwhile Tata Oil Mills Company (TOMCO) merged with HUL.4 Product Development . deregulation permitted alliances. By the end of the year. and in 1977 Lipton Tea (India) Limited was incorporated.2.2 Joint Venture Simultaneously. while they already had Lipton brand in their Tea Segment which was acquired in 1977. two plantation companies of Unilever. they first acquired Brooke Bond & Co. the company entered into a strategic alliance with the Kwality Ice-cream Group families and in 1995 the Milk food 100% Ice-cream marketing and distribution rights too were acquired 4. India Limited was formed.2. Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Limited (BBLIL). In 1995. enabling greater focus and ensuring synergy in the traditional Beverages business. Then in July 1993. Lakme Limited sold its brands to HUL and divested its 50% stake in the joint venture to the company. Tea Estates and Doom Dooma.4. 4. Lakme Limited. Lakme Unilever Limited. the company had launched Red Label tea in the country. formed a 50:50 joint venture. effective from April 1. acquisitions and mergers. 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. By 1903.2.1 Concentrated Growth & Market Development The erstwhile Brooke Bond's presence in India dates back to 1900. HUL and yet another Tata company. Unilever acquired Lipton in 1972. were merged with Brooke Bond.3 Backward Integration As a measure of backward integration. HUL made many acquisitions in Tea segment. In1994. 1993. Subsequently in 1998. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. 1994 witnessed BBLIL launching the Wall's range of Frozen Desserts. to market Lakme's market-leading cosmetics and other appropriate products of both the companies. The erstwhile Lipton's links with India were forged in 1898. When they acquired Brooke Bond in 1984 it was a strategy aimed at market development as the Lipton brand was meeting the needs of Premium segment. 4. while Red Label Brand aimed to meet the needs of middle segment. in 1984. In 1912.

1 India Competitiveness and Comparison with the World 5. HUL's entry into Bread is a strategic extension of the company's wheat business. India’s competitive advantages of good quality leather and the ability to service small orders were neutralized by China’s significant cost advantages and a welldeveloped market for components. The annual size of the rural FMCG market was estimated at around US$ 10. Conglomerate Diversification In 1993. with a population of over one billion. The total number of rural households is expected to rise from 135 million in 2001-02 to 153 million in 2009-10. As at that time both of the business concerns were on peak & the best promising businesses. In January 2000. India is one of the largest economies in the world in terms of purchasing power and has a strong middle class base of 300 million. in a historic step.1 Large domestic market India is one of the largest emerging markets. a leader in value added Marine Products exports 4. The business is run by Pond’s Exports. thereby beginning the divestment of government equity in public sector undertakings (PSU) to private sector partners.HUL made a strategic acquisition aimed at development of new product.1.5 Divestiture HUL puts its leather business sale on hold Hindustan Unilever (HUL) has put the sale of its leather business on hold as it failed to find a suitable buyer.5 . This presents the largest potential market in the world. In 2003. Around 70 per cent of the total households in India (188 million) resides in the rural areas. The annual report said leather exports had a difficult year due to forex volatility and recessionary conditions in Europe. it acquired the Kissan business from the UB Group and the Dollops Icecream business from Cadbury India. 5 Benchmarking 5. In 2002.2. a wholly-owned subsidiary of HUL. the government decided to award 74 per cent equity in Modern Foods to HUL. HUL acquired the Cooked Shrimp and Pasteurised Crabmeat business of the Amalgam Group of Companies. HUL acquired the government's remaining stake in Modern Foods.

a large consumer goods spender An average Indian spends around 40 per cent of his income on grocery and 8 per cent on personal care products. Chart 4:. total consumer expenditure on food in India at US$ 120 billion is amongst the largest in the emerging markets.billion in 2001-02. The large share of fast moving consumer goods (FMCG) in total individual spending along with the large population base is another factor that makes India one of the largest FMCG markets.Consumer Expenditure on Food (Worldwide) . 5.2 India . the market potential is expected to expand further.1. next only to China. With growing incomes at both the rural and the urban level. Chart 5:.Consumption pie Even on an international scale.

The availability of these raw materials gives India the locational advantage.6 million tonnes of caustic soda in 2003-04. India is the largest producer of livestock. the raw materials in the production of soaps and detergents – India produced 1. 5. India also has an ample supply of caustic soda and soda ash. one of the largest producers of synthetic soda ash in the world is located in India.5.1. coconut. spices and cashew and is the second largest producer of rice.1. sugarcane.3 Materials availability India has a diverse agro-climatic condition due to which there exists a wide-ranging and large raw material base suitable for food processing industries. milk. wheat and fruits & vegetables. Tata Chemicals.4 Cost competitiveness Chart 6:-Labor cost comparison (Worldwide) .

Japan and other Asian countries. In 2003-04. sources a major portion of its product requirements from its Indian subsidiary. but at more competitive rates. . This enables P&G to continue exporting Vicks Vaporub to Australia. Easy raw material availability and low labor costs have resulted in a lower cost of production. Procter & Gamble (P&G) outsourced the manufacture of Vicks Vaporub to contract manufacturers in Hyderabad. whilst maintaining its high quality and cost efficiency. HLL. India. Many multi-nationals have set up large low cost production bases in India to outsource for domestic as well as export markets.1. Unilever.4. Labor cost in India is amongst the lowest in Asian countries. Unilever outsourced around US$ 218 million of home and personal care along with food products to leverage on the cost arbitrage opportunities with the West. 5. To take another case. existence of low-cost labor force also works in favor of India.1 Leveraging the cost advantage Global major.Apart from the advantage in terms of ample raw material availability.

100 per cent subsidy on project . This has resulted in a boom in the FMCG market through market expansion and greater product opportunities. Indian firm Amul's product portfolio includes supply of milk as well as the supply of processed dairy products like cheese and butter. Jammu and Kashmir offers incentives such as allotment of land at concessional rates.3 Central and state initiatives Various states governments like Himachal Pradesh.6 POLICY India has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions..1. automatic foreign investment and food laws resulting in an environment that fosters growth. Quantitative restrictions were removed in 2001 and Union Budget 2004-05 further identified 85 items that would be taken out of the reserved list. 5.5 Presence across value chain Indian firms also have a presence across the entire value chain of the FMCG industry from supply of raw material to final processed and packaged goods. up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment. alcoholic beverages and those reserved for small scale industries (SSI). and items reserved for the exclusive manufacture in the small scale industry (SSI) sector. hydrogenated animal fats and oils etc.5. The evolution of a more liberal FDI policy environment in India is clearly supported by the successful operation of some of the global majors like PepsiCo in India. 5. This makes the firms located in India more cost competitive.1 FDI Policy Automatic investment approval (including foreign technology agreements within specified norms).1.1.1. cane sugar. Uttaranchal and Jammu & Kashmir have encouraged companies to set up manufacturing facilities in their regions through a package of fiscal incentives. 24 per cent foreign equity is permitted in the smallscale sector. 100 per cent export oriented units can be set up by government approval and use of foreign brand names is now freely permitted.6. is allowed for most of the food processing sector except malted food. For instance.6. 5. both in the personal care products and in the food processing sector. reduced excise duties. Temporary approvals for imports for test marketing can also be obtained from the Director General of Foreign Trade.6.1.2 Removal of Quantitative Restrictions and Reservation Policy The Indian government has abolished licensing for almost all food and agroprocessing industries except for some items like alcohol. 5.

as well as on raw materials and intermediates. . Customs duties have been substantially reduced on plant and equipment. Wide-ranging fiscal policy changes have been introduced progressively. encompassing food color and preservatives. which applies to domestic and imported food commodities.6.reports and 30 per cent capital investment subsidy on fixed capital investment upto US$ 63. packaging. Excise and import duty rates have been reduced substantially. labelling and regulation of sales.4 Food laws Consumer protection against adulterated food has been brought to the fore by "The Prevention of Food Adulteration Act (PFA). Five-year tax holiday for new food processing units in fruits and vegetable processing have also been extended in the Union Budget 2004-05. including second hand ones in the food-processing sector.000. 5. especially for export production. pesticide residues. Many processed food items are totally exempt from excise duty. The Himachal Pradesh government offers sales tax and power concessions.1. Capital goods are also freely importable. 1954". capital subsidies and other incentives for setting up a plant in its tax free zones.

This is a try to change the fickle minds of consumers towards rival bands . as a brand have good perception from its consumers.6 Conclusion: Hindustan Unilever was the most preferred Brand in India. So those things have to be considered in order to posses the same consumer perception towards HUL! • Private Label/In-house Branding: Ongoing increase in the number of supermarkets.Because of multi production centers. Introduction of variants has to be done only by keeping flagship product without any change. the qualitu of the same nrand product has to be maintained to retain the consumer. So there I a possibility of change in behavior of consumers towards HUL • Quality Management:. following are the major threats waiting for any FMCG company in the market. It was listed in ET-500 ranking of India’s biggest Companies and its ranking was number 32. It has also launched water purifier. hypermarkets & other such concept business results in the promotion of their own brands. •Brand Loyalty: Essential aspect to be considered in this rival competitive world! Recently “Rin & Tide” comparative advertisement made it clear even big giants like HUL finds no way to dominate the market without gaining the loyalty of tits consumers. It has wide range of products varying from Home care to food care and Other FMCG categories. Though HUL.

com/detail..com/companies/hul-puts-its-leatherbusiness-sale-hold-299 Equitymaster. New Delhi.. “Fast Moving Consumer Goods Report 2009”.A.com/research‐it/sector‐info/consprds Equity Master: http://www.equitymaster.thehindubusinessline. Publications & Websites DasGupta.asp?date=1/9/2008&story=2 IBEF’s . Mumbai. Implementation and Control”. RB and Mital.mydigitalfc. P. Robinson Jr. “Strategic Management: Formulation.com/2005/07/19/stories/2005071903080400. “HUL puts its leather business sale on hold”. 10th Ed.com/news/business/1359302/indias_fmcg_brands_ready_to_mov e_into_the _fast_lane/index.org The Hindu Business Line: 19-7-2005 http://www.htm Red Orbit news: http://www. Accessed from:www.. 2008 Journals..7 References Books Pearce II.ibef.equitymaster. Tata McGraw-Hill. J.html . A. Accessed From: http://www.redorbit.com: http://www. (2009).

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