INDUSTRY ANALYSIS REPORT – FMCG SECTOR

Submitted in partial fulfilment of PGDM 2018-20 in

SVKM’s NMIMS
School of Business Management, Hyderabad

Submitted By: Faculty Mentor:

Shuchi Mathur Dr. Kavita Kulkarni
80303180114
 ACKNOWLEDGEMENT
The satisfaction that accompanies the succеssful cоmplеtiоn оf any task wоuld bе incоmplеtе
withоut thе mеntiоn оf thе pеоplе whо madе it pоssiblе and whоsе cоnstant guidancе and
еncоuragеmеnt crоwn all thе еffоrts with succеss. This acknоwlеdgеmеnt transcеnds thе
rеality оf formality whеn wе wоuld likе tо еxprеss dееp gratitudе and rеspеct tо all thоsе
pеоplе bеhind thе scrееn whо guidеd, inspired and hеlpеd us fоr thе cоmplеtiоn оf оur
prоjеct work.

I am thankful tо Dr. Prithvi Yadav (Dirеctоr, NMIMS Hydеrabad) fоr giving us an оppоrtunity
tо dо thе prоjеct оn Industry Analysis. I wоuld alsо likе tо thank tо our guidе Dr. Kavita
Kulkarni (Assistant Prоfеssоr, Markеting) whо has cоntinuоusly hеlpеd and gavе valuablе
suggеstiоns tо guidе us in thе succеssful cоmplеtiоn оf thе prоjеct wоrk.

My thanks tо all our Teachers and friеnds whо havе dirеctly оr indirеctly hеlpеd us in
cоmplеting thе task successfully.
 PREFACE
Thе succеssful complеtion of this projеct was a uniquе еxpеriеncе for mе and I achiеvеd a
bеttеr knowlеdgе about FMCG Industry of India. Thе еxpеriеncе which I got by doing this
projеct is еssеntial to my futurе. Thе information in this projеct bеing submittеd by mе
contains dеtailеd analysis of thе rеsеarch undеrtakеn by us.

Thе rеsеarch providеs an opportunity to mе to dеvotе my skills, knowlеdgе and compеtеnciеs

during thе knowlеdgе gathеring sеssions of markеting managеmеnt.
 EXECUTIVE SUMMARY
With a population of over one billion, India is one of the largest economies in the world in
terms of purchasing power and consumer spending. The fast-moving consumer goods (FMCG)
sector is an important contributor to India’s GDP growth. The sector includes food & dairy
products, packaged food products, household products, drinks and others. FMCG is the fourth
largest sector in Indian economy and provides employment to around 3 million people
accounting for approximately 5% of the total factory employment in India. The sector is
characterized by strong presence of leading multinational companies, competition between
organized and unorganized players, well established distribution network, and low
operational cost. Growth in the country’s FMCG sector is being fueled by improving scenario
in both demand as well as supply side. Major demand side drivers include growing affluence
and appetite for consumption of the Indian consumer, growing youth population, rise in per
capita expenditure, and increasing brand consciousness. On the other hand, easier import of
materials and technology, reduced barriers to entry of foreign players, and new product
development, rapid real estate infrastructure development and improvement in supply chain
efficiency are the major supply side drivers for the sector. The growth of the FMCG sector,
which primarily includes Food & beverages, personal care and household care has been
driven in both the rural and urban segments. Rural consumption growth has outpaced urban
consumption with the increase in percentage in monthly per capita expenditure in rural
markets surpassing its urban counterparts over the past five years. Several government
measures such as GST Bill, Food Security Bill and FDI in retail sector are expected to have a
significant positive impact on the country’s FMCG sector in the coming years.
 TABLE OF CONTENTS

Acknowledgement
Preface
Executive Summary

S.NO. CONTENTS PAGE NO.

1.0 INTRODUCTION 1
1.1 Fast Moving Consumer Goods (FMCG) 1
1.2 Growth of FMCG Sector 2
1.3 Hindustan Unilever (HUL) 3
1.4 Prospects of FMCG Sector 3
1.5 Strategies adopted by FMCG brands 4
1.6 Competitors in FMCG Sector 5
1.7 Employee Opportunities in FMCG Sector 7

2.0 INDUSTRY AND COMPETITION 12

2.1 Market Overview of FMCG Sector
12
2.2 Market Trends of FMCG Sector & HUL
14
2.3 Market Structure
17
2.4 Market Challenges in FMCG Sector
22
2.5 Recent M&A of HUL
24

3.0 METRICS OF FMCG INDUSTRY 31

3.1 Metrics of FMCG Industry
31
3.2 Key Performance Indicators of HUL
3.3 32
Financial Highlights of HUL
34

4.0 PROJECTIONS AND INSIGHTS 36

5.0 REFERENCES 41
 CHAPTER 1

INTRODUCTION

1.1 Fast Moving Consumer Goods (FMCG)

The Fast Moving Consumer Goods (FMCG) sector is the key contributor of the Indian
economy. This fourth largest sector of Indian economy provides employment to around 3
million people which accounts for approximately 5% of the total factory employment in the
country. These products are daily consumed by each and every strata of the society
irrespective of social class, income group, age group etc.

FMCG sector is more lucrative because of low penetration levels, well established distribution
network, low operating cost, lower per capita consumption, large consumer base and simple
manufacturing processes for most of products resulting in fairly low capital investments. The
industry is highly competitive due to presence of multinational companies, domestic
companies and unorganized sector.

A major portion of the market is captured by unorganized players selling unbranded and
unpackaged products. More than 50 per cent of the total revenues of FMCG companies come
from products worth Rs 10 or less. This has made the proliferation of localized brands which
are offered in loose form in small towns and rural part where brand awareness is low. In last
10 years domestic players are giving tough competition to multinationals; in fact they have
outstripped many MNCs in growth and market cap.

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As per the analysis by ASSOCHAM, companies like Hindustan Unilever Ltd and Dabur India
generate half of their sales from rural India while Colgate Palmolive India and Marico
constitute nearly 37% respectively.

Favourable demographics and rise in income level to boost FMCG market. FMCG market in
India is expected to grow at a CAGR of 23.15 per cent and is expected to reach US$ 103.70
billion by 2020 from US$ 68.38 billion in FY18. FMCG sector is the 4th largest sector in the
Indian economy. Final consumption expenditure is set to increase at a CAGR of 25.44 per cent
from 2017-2021. Final consumption expenditure is expected to reach nearly US$ 3.6 trillion
by 2020 from US$ 1.82 trillion in 2017. Rise in rural consumption to drive the FMCG market.
In FY18, Rural consumption rose by 9.7 per cent. The rural FMCG market in India is expected
to grow to US$ 220.00 billion by 2025 from US$ 23.63 billion in FY18.

1.2 Growth of FMCG sector

• According to Nielsen some of the key drivers for the FMCG industry during the current
year 2019 will be conducive macro-economic environment, the base effect and the
rural growth consumption story. The high base especially in Q3 and Q4 of 2018 to the
tune of ~16 percent will have an impact on the Q3 and Q4 forecast for 2019 and we
expect to be in the high single digit range. Some of the other drivers that will have a
bearing throughout 2019 will be rising prices of crude/kopra, exchange rate, reduction
in repo rate, policy dynamics on e-commerce, and sustained benefits from GST
regime. Elections does not have any major effect on FMCG sector in India.

• The FMCG Industry kickstarted 2019 with double digit value growth of 13.6 percent in
Q1 (Jan-Mar) of 2019. This is at a slightly lower note than the last quarter of 2018
calendar year (-2.3 percent from the previous quarter). Similar sentiments were
witnessed in the economy with a 6.6 percent GDP growth in the December quarter of
2018 against an expected 6.8 percent. Inflationary pressure is also seen mounting in
recent months from 2 percent in January 2019 to 2.9 percent in March 2019. The
FMCG industry was driven by volume growth of 9.4 percent in Q1 of 2019 contributing
69 percent to the overall value growth.

• While slight drop is witnessed in urban growths, there is a significant softening of

growth trends in rural which is dampening the overall FMCG industry growth from Q3
(July-Sep) of 2018 to Q1 (Jan-Mar) 2019. The overall drop witnessed in rural growth
was majorly driven by a slowdown in the packaged food category the drop in demand
side from the rural sector has been registered in essentials (such as packaged Atta,
refined oils, spices) and impulse (chocolates, biscuits, confectionaries etc.) food
categories. The changes have been null in the lifestyle food category which includes
items such as breakfast cereals, cheese etc. Also, compared to large manufacturers,
small manufacturers are more affected by this.

• Rural market has grown 3-5 percentage points faster than urban and the recent
slowdown. The overall drop witnessed in rural growth is majorly driven by slowdown
in packaged food category. While there was a slow down across various food

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 categories in rural, the extend of drop was larger in essentials and impulse food
categories.

• Softening of growth by 1-2 percent sequentially every quarter is expected, leading to

healthy double digit growth in the first half of the year followed by a high single digit
growth in the second half of the year. Expected figures in Q2 (Apr - Jun 2019) will be
in the range of 12-13 percent.

1.3 Hindustan Unilever (HUL)

HUL reported a 7 percent volume growth in March quarter- the lowest in six quarters largely
due to a moderation in demand from rural areas. Following the slowdown in demand, HUL
the country’s largest FMCG company projected that rural demand has been moderated.

The company reported earnings stronger than its competitors. On May 3, HUL shares closed
at 1,693.55 rupees, down 1.7 percent, from the previous close on the National Stock
Exchange. The company announced its earnings after market hours. HUL's earnings are
considered as the bellwether for the domestic FMCG industry as it helps to gauge the
consumer demand and monitor sentiment.

1.4 Prospects of FMCG Sector

▪ Leading players of consumer products have a strong distribution network in rural

India; they also stand to gain from the contribution of technological advances like
internet and e-commerce to better logistics. Godrej is focusing on rural market for
household insecticides segment. At present, Godrej accounts for 25% of the
household insecticides sales from rural areas. Rural FMCG market size is expected
to touch US$ 220 billion by 2025.
▪ Low penetration levels in rural market offers room for growth. Disposable income
in rural India has increased due to the direct cash transfer scheme.
▪ E-commerce segment is forecasted to contribute 11% of the overall FMCG sales by
2030.
▪ Rising incomes and growing youth population have been key growth drivers of the
sector. Brand consciousness has also aided demand. India's contribution to global
consumption is expected to more than double to 5.8% by 2020.
▪ The online FMCG market is forecasted to reach US$ 45 billion in 2020 and the
number of online users in India is likely to cross 850 million by 2025.
▪ Between 2016 – 2020, the Indian FMCG market is expected to grow at a CAGR of
nearly 21%.
▪ Rise in rural consumption is all set to drive the FMCG market. It is estimated to grow
at a CAGR of 14.6% during the period 2016-2025. A major reason behind the spurt is
explained by an increased disposable income that has grown at a CAGR of 4.1%.

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▪ Penetration of modern retail is expected to see a substantial rise at a CAGR of 24.6%
by 2020.
▪ The middle income class population to grow at a CAGR of 10.8% and estimated to
nearly double by 2020.

While urban market accounts for nearly 60% revenue share, semi-urban and rural
segments are the high potential markets that is growing faster and currently accounts for
40% revenue share. It is interesting to note that FMCG products account for 50% of total
rural spends in India. As income levels are rising, there is a clear uptrend in the share of
non-food expenditure in rural India. Mobile internet users in rural India is recording a
growth of nearly 26%. In fact, mobile handset penetration in rural India is much higher
than TV. This statistic make it interesting for FMCG brands to use the mobile medium
creatively to expand its reach. A case in example is Colgate Palmolive Ltd. which has low
unit packs across its mass sub-brands such as Cibaca that caters to “Pocket Dentist
Initiative”. It’s missed call phenomenon or mobile ring-back service provides access to
dental care information in rural India.

1.5 Strategies adopted by FMCG brands

▪ Offer customized product owing to distinct customer preferences. E.g.: Women’s

Horlicks for women and Junior Horlicks for kids.
▪ Since varied choices are available for a singular product, customers are less likely to
stay brand loyal. Hence, FMCG players massively spend on product innovation and
promotion to stay ahead in the competition.
▪ Online research enables customers to make informed purchasing decisions. Hence,
FMCG companies are focusing on building their online presence.

Having extensively discussed the FMCG landscape in India, it becomes clear that it is on
an upswing today growing at a fast pace. However, in order to scale up and maintain this
pace, FMCG sector is subsequently investing in new sales technologies such as SFA among
others. Increased internet users across the country, higher consumption and spends
pattern in the rural segment, cut throat competition, emergence of Modern trade and
need for an organized retail distribution system has therefore prompted leading FMCG
players to integrate SFA solutions in their sales system. This will create an automated,
robust and seamless business environment for organizations.

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1.6 Competitors in FMCG Sector

Personal hygiene products such as bath and shower products, deodorants, etc., hair care,
skin care, color cosmetics and fragrances are the key segments of the personal care
market. Each of these segments exhibit their unique trends and growth patterns.

5
Strategies adopted by Few prominent players in FMCG Industry

• Cost Cutting strategy- HUL fulfills 80 percent of its power requirement for its Sumerpur
plant from solar energy.
• Analytics- Hindustan Unilever Ltd (HUL) implemented a transformational program
called Connected 4 Growth (C4G) to help drive business growth.
• Product Expansion- Nestle, has forayed into India’s pet care segment by introducing a
range of premium dog food, called ‘Purina Supercoat’, under its subsidiary, Nestle
Purina.

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 • Product launches- ITC to launch 30-40 products every year to become India’s biggest
FMCG company.
• Expansion- Dabur to invest Rs. 250-300 crore (US$ 37.29-44.75 million) in FY19 for
capacity expansion and is also looking for acquisitions in the domestic market.
• Joint Venture- Eveready Industries India has entered into a joint venture with Wings
Group, a large conglomerate and major FMCG companies in Indonesia called, Universal
Wellbeing.

1.7 Employee Opportunities in FMCG Sector

Employees from the FMCG industry receive the highest pay in India with an average annual
CTC for talent across all levels and functions in the sector standing at INR 11.3 lakhs. A robust
demand for experienced and qualified personnel in sales & marketing and supply chain
management roles, coupled with close to 30% of jobs being posted in the 10 lakh+ category
is being seen as a primary driver for the FMCG industry to emerge as the winner. This is
followed by Power sector and the IT sector, where employees across all levels and functions
earn average annual salaries at INR 9.8 lakhs and INR 9.3 lakhs respectively. Pharma and
Healthcare, offering an average annual CTC of INR 8.8 lakhs and Telecom at INR 8.7 lakhs take
the fourth and fifth position in the list as India’s most lucrative industries, reveals the study.

As far as the location-specific salary trends are concerned, Bangalore, the IT capital of India
tops the chart as the highest paying city in the country, with an average annual CTC paid for
talent across all levels and functions standing at INR 14.6 lakhs,. This is closely followed
by Mumbai which stands at INR 14.2 lakhs, Hyderabad and NCR with an average annual CTC
figure of INR 13.6 lakhs and INR 13.5 lakhs respectively.

Chennai (INR 13.4 lakhs) Pune (INR 13.2 lakhs) and Kolkata (INR 11.4 lakhs) are the next three
names that got featured in the list of top Indian cities paying the highest average salaries for
professionals.

7
Highest paying job functions by city across all experience levels:

Highest paying cities by experience level:

8
The pay package varies based on your educational background and designation offered.

For example, an MBA from a reputed business school can easily expect a salary between
3,00,000 INR and 20,00,000 INR.

On the other hand, individuals with a Bachelor’s Degree can expect salaries between 3,80,000
INR and 15,29,412 INR.

Designations include (from lowest to highest salary) Area Sales Manager, Brand Marketing
Manager, Marketing Manager, Brand Manager, Marketing Director, Finance Manager, and
Operations Manager among others.
Note: The numbers have been scaled on an average. Different companies may offer different
pay packages for different designations.

Innovation in FMCG is a wide concept which aside from creating, launching and marketing
new products also includes improving shopping processes, providing consumers with a range
of tools to purchase products as also ensuring that the entire organization is focused on the
singular goal of improving the customer’s overall experience. Therefore, in all functions like
marketing, Finance, HR, IT, operations and strategy, there is a demand for talent by FMCG
companies.

Insight:

As Indian consumers become more global in their aspirations and desires, as they travel
abroad and are exposed to global products, their appetite to consume products in their home
market will only increase. To meet this demand, FMCG companies need to focus on R&D and
innovation as a means to grow the business. At the same time, product lifecycles are
shrinking, companies across categories are launching new products, and the pressure to
market new products, quickly, is strong.

9
Due to these factors, FMCG companies recruit people at all levels including freshers from B-
schools. As innovation becomes critical to the sector’s growth story, there is more demand
for freshers as companies want to capitalize on their fresh ideas.

Recruitment in HUL

• HUL believes in competing with organizations across sectors, and ensuring that the
organization doesn’t become complacent being at the top in their own sector. HUL
strived to attract the top talent in all functions across sectors, and the constant
reinvention in Employer branding in line with the needs of the talent proved to be a
key strength.
• Since the focus was cantered on brands and people – two of the biggest assets – HUL
created a platform when their position was endangered by sectors like consulting
firms and banks. The organization and its line leaders put their might behind this
agenda as attracting the right talent and grooming them was made every individual’s
job. This also happened to be line with the company policy of leaders building leaders.
Line leaders devoted sufficient energy and resources to establish this employer brand,
as attracting top talent was considered critical to business success.
• The Management Training programme, Unilever Future Leaders’ Programme had
several features that worked for it, like putting trainees being put into leadership roles
directly at the end of training, maintaining a buddy or mentor system, reverse
feedback, international stints to help trainees understand foreign market and
cultures, rural stints to inculcate social responsibility, international and domestic e-
learning developmental plans, and 100% trainee interaction with organization Board
members, and a special Executive General Management for IIT graduates at IIM
Bangalore, to establish an understanding of business fundamentals prior to landing
full-time roles.

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Insight:
The goal is to ensure that HUL, as an employer brand remains relevant to students. This would
be achieved by constant reinvention, to meet the changing talent needs, which would
ultimately attract top talent. The changing aspirations of students have resulted in an upsurge
in the attractiveness of e-commerce sector as well as entrepreneurship as a career
alternative, and fur HUL this has meant to continue their impetus on making the organization
nimble footed, fast paced with even more vigour. An essential step would be to refresh the
communications to highlight the large leadership role that management trainees get into
after their training which actually make them CEOs of their areas/brands, thereby providing
them with rich entrepreneurial experience, with the safety net of a large organization.

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 CHAPTER-2

INDUSTRY AND COMPETITION

2.1 Market Overview of FMCG Sector

Growth of FMCG Sector

Source: https://www.ibef.org/download/FMCG-Report-May-20181.pdf

• Revenues of FMCG sector reached Rs 3.4 lakh crore (US$ 52.8 billion) in FY18 and are
estimated to reach US$ 103.7 billion in 2020F. The sector is projected to grow 11-12
per cent in 2019.
• The sector witnessed growth of 16.5 per cent in value terms between July-September
2018; supported by moderate inflation, increase in private consumption and rural
income. It is forecasted to grow at 12- 13 per cent between September-December
2018.
• The Union Budget 2019-20 initiatives to increase consumer spending among middle
class are expected to boost consumer confidence and improve demand generation for
branded consumer products.
• FMCG sector to gain support for growth from Inland Waterways Authority of India
(IWAI) multi-modal transportation project of freight village at Varanasi which will
bring together retailers, warehouse operators and logistics service providers,
investment worth Rs 1.7 billion (US$ 25.35 million).
• Nielsen India estimates the FMCG industry to grow at 11-12 per cent in 2019 as against
13.8 percent in 2018.

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Source: https://www.ibef.org/download/FMCG-Report-May-20181.pdf

• Accounting for a revenue share of around 55 per cent, urban segment is the largest
contributor to the overall revenue generated by the FMCG sector in India.
• Rural segment is growing at a rapid pace and accounted for a revenue share of 45 per
cent in the overall revenues recorded by FMCG sector in India. FMCG products
account for 50 per cent of total rural spending.
• In the last few years, the FMCG market has grown at a faster pace in rural India
compared with urban India. In 2018-19, revenues from the rural segment are
expected to grow 15-16 per cent outpacing.
• Demand for quality goods and services has been going up in rural areas of India, on
the back of improved distribution channels of manufacturing and FMCG companies.
• FMCG urban segment is expected to have a steady revenue growth at 8 per cent in
FY19.
• India’s increasing internet penetration, rising digital maturity along with developing
infrastructure has helped boost online transactions.
• The online FMCG market is forecasted to reach US$ 45 billion in 2020 from US$ 20
billion in 2017, backed by growth in online users from 90 million in 2017 to 200 million
in 2020E.
• By 2020, about 40 per cent of FMCG consumption is estimated to be digitally
influenced.
• Around 72 per cent Indian consumers are most likely to shop online locally for
premium products.

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2.2 Market Trends of FMCG Sector & HUL

Over the decade, shoppers are given highest importance due to the rise of personalized,
customer-centric experience. Right from machines, media, management, marketing, and
sales, FMCG is one of the rapidly-growing industries worldwide. The FMCG sector has been
witnessing a noteworthy growth through the technological shift and has succeeded to meet
the adapting needs of consumers.

Source: https://www.pwc.in/assets/pdfs/consulting/technology/

• Analytics supports the shift to value by identifying key price points in the market,
defining customer segments, developing new pricing strategies based on competitive
intelligence and increasing efficiency in manufacturing and logistics to reduce costs.

• Companies will experience greater pressure to better align offerings and activities
with customer interests and values. Big Data and analytics help to better understand
customer sentiment, preferences and behaviour. At the same time data analytics
enables supply chain visibility and identifies potential risks.

• An increasingly larger share of consumer's spend and activity will take place through
digital channels. Analytics is key in better understanding of purchase and consumption
occasions as well as tailoring channel experience.

• In a world where customized products and personalized, targeted marketing

experiences win companies market share, technologies like digital commerce,
additive manufacturing and artificial intelligence can give a company an edge by
allowing it to create customized product offerings.

• Analytics can fuel a better understanding of the resource market volatility and more
efficient use of critical resources in the production process.

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Following are some more major trends which can drive FMCG growth:

1) Using Advanced Analytics In Effective Decision-Making Process-

The following factors that can contribute to the accurate analysis:

▪ Automated tools to track sales, distribution, and every sale activity

▪ Tracking real-time ordering and delivering
▪ Measuring the accurate number of sold goods and demand forecasting with the help
of business intelligence tools
▪ Offline and online commerce activities
▪ Promotion and marketing campaign to stay connected with customers
▪ Keeping track of all the distribution channels
▪ Region-wise sales activities to identify real-time scenario of products
▪ Efficient, quick, and powerful sales force
▪ Insights-driven marketing will surely become a key trait to generate significant ROI
along with a number of growth opportunities. Using predictive analytics to create
advanced, highly-personalized, and sustainable strategies for FMCG.

2) Creating More Health And Environment-Oriented Goods:

Customers have taken a stand against products which harmful to the health and
environments. Due to the rise of social media and effective marketing channels, customers
become knowledgeable and raised their voices if something wasn’t in their favour. So, health
and environment friendly goods will be given priority.

3) Online Marketing

A recent survey states that they are more interested to know the experiences to share it on
various social media platforms. Living in a digital world, online marketing is definitely a way
to reach out to the audience. As everyone today is influenced by social media, it definitely
gives an overview to understand or know any specification about products. In order to
expand, the FMCG companies should emphasize on experience sharing to attract consumer
attention.

4) Making the buying process convenient

Friction-free shopping is all about making the buying process as convenient as possible.
Advancements like the promise of cashier-less stores and voice assistant are removing friction
from FMCG shopping while establishing new purchase and shopping behaviours.

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5) Omnichannel eCommerce

eCommerce made shopping simpler by giving customers a multitude of choices, secure

payment options, and convenience of offline/online shopping. eCommerce is everywhere
and so the customers are.

Omnichannel eCommerce is all about serving your customer by prioritizing their convenience.
Powerful influencers, stronger social media presence, use of modern digital solutions to offer
24*7 assistance, omnichannel brand presence, and personalization will surely level up the
strategy of FMCG growth.

6) Launching local products

The FMCG companies have also realized this and are increasingly appealing to consumers by
launching products with regional flavours, ingredients, recipes and more. The big brands as
well as SMEs are connecting with consumers by using regional flavours and ingredients.

Trends HUL followed:

1) Digital Readiness-

• Building capability
• More brands, more platforms, always on
• Significant step up in investment

2) Mobile, Social search, gaming and DTH

• 500% increase in search

• 100% in social and 90% on mobile
• Online video is 10% of total digital spends

3) Consumer insights, analytics, ROI

• CMI integration on DTH, mobile and display

• Pre-testing of digital creatives
• Digital campaign effectiveness

4) Build consumer centric platforms

• Axe Angels Club -Top 10 FB page in India -2nd largest Unilever FB page
• JammyArt.com: India’s largest Kida UGC platform
• BeBeautiful.in: India’s largest beauty platform

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2.3 Market Structure

Indian FMCG Market in Comparison with Global FMCG Market:

• India accounts for a share of just 0.68% of the Global FMCG market, this share is
expected to increase significantly over the next 5 years mainly due to the macro-
economic factors such as improving demographics, rising disposable income,
expansion of organized retail in tier II & III cities in India, changing consumer
preferences etc.

• Major FMCG markets include USA, China, European Union, Japan etc. Globally, the
FMCG sector is expected to grow at a CAGR of 4.4%, which when compared to India is
a lot slower. Many foreign FMCG multinationals have established themselves in India.

• Globally, the FMCG companies have now shifted their focus on E-commerce due to
the increasing mobile internet penetration. The global economic growth has been
decelerating as several large economies face decreasing economic growth, primarily
China and the Eurozone, as well as a few key emerging markets like Brazil and Russia.
This offers an advantage to India which has a significantly better economic condition.
Technology adoption, urbanization and other structural reforms are the other major
drivers resulting in better market potential compared to other markets.

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Market Growth of HUL

Source: https://www.hul.co.in/Images/mq19-results-presentation_tcm1255-536983_1_en.pdf

• HUL’s net sales were at Rs 9,809 crore for the three months till March, and volumes
accounted for three-fourths of incremental growth, consistent with HUL’s expansion
strategy over the past couple of years. Still, at 7 per cent volume growth was the
lowest since the September 2017 quarter. Net profit at the maker of Rin detergents
and Lux soap climbed 14 per cent to Rs 1,538 crore.

• Macro-economic factors such as declining liquidity and slower wage increases

restrained sales growth. The moderation is happening primarily in the general trade
and wholesale channels and from the lens of geography, it was more pronounced in
rural markets.

• Consumption in rural India, which accounts for about a third of the market, logged
double-digit growth in the past two years. The pace of rural growth had outpaced the
rate of expansion in cities. This was underpinned by higher farm incomes and minimal
supply disruption in the runup to the rollout of the goods and services tax (GST) in July
2017. That pace of growth has moderated.

• HUL’s rural growth rates are now on a par with those in urban areas, compared with
1.5 times a year ago. Low wage rates and food prices mean less money in the hands
of the rural people that is what reflected in the consumption pattern or growth
slowing down.

• HUL’s beauty and personal care business, which accounts for about half of its overall
sales, rose 7 per cent to Rs 4,393 crore, while the homecare segment expanded 13 per
cent to Rs 3,502 crore. Its largest brand, Surf Excel, nearly touched the Rs 5,000-crore
sales mark. Till March 2019, the company expanded sales 9 per cent to Rs 37,660

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 crore, while net profit climbed 15 per cent to Rs 6,036 crore. Despite a harsh winter
and delayed summer, both personal- and home-care categories have done well.

Source: https://www.hul.co.in/Images/mq19-results-presentation_tcm1255-536983_1_en.pdf

• Most FMCG companies have seen rural distress, but it is temporary (until the next
quarter. The maker of Dove soap and Lipton beverages also projected that a stable
central government, good monsoon rains and investment-oriented initiatives should
boost demand.

Source: https://bit.ly/2UYKG7m

19
Source: https://www.hul.co.in/Images/mq19-results-presentation_tcm1255-536983_1_en.pdf

Home- Care

In Fabric Wash growth was driven by premiumization and market development initiatives like
launch of Surf Excel Easy Wash liquid nationally. In Household Care Sustained double digit
growth performance was driven by Liquids upgradation and increased penetration on bars
like launching of access pack of Domex liquid in Tamil Nadu to aid market development.

Beauty & Personal Care

In Personal Wash category premium brands performed well and popular segment delivery
below expectations like launch of Liril body wash & bar variants – strong freshness
proposition. In Skin Care double digit growth on the back of steady performance across the
portfolio. Relaunched FAL with renewed communication and product; launched Pond’s Sun
Protect. In Hair Care: Good growth delivery across brands with launching of new Dove
Nourishing secrets nationally with natural ingredients.

Food & Refreshments

In Beverages consistent, secular growth was led by WiMI actions. Purpose led campaigns
underpin brand communication and drive salience were organised. In Ice Cream & Frozen
Desserts strong performance across all formats was observed and exciting range of
innovations were launched for season. In Foods category steady growth sustained like good
performance in Kissan range

20
 Source: https://www.ibef.org/download/FMCG-Report-May-20181.pdf

• Favorable demographics and rise in income level to boost FMCG market.

• FMCG market in India is expected to grow at a CAGR of 23.15 percent and is expected
to reach US $103.70 billion by 2020 from US $68.38 billion in FY18.
• Final consumption expenditure is set to increase at a CAGR of 25.44 percent from
2017-2021.
• Final consumption expenditure is expected to reach nearly US $3.6 trillion by 2020
from US $1.82 trillion in 2017.
• Rise in rural consumption to drive the FMCG market.
• In FY18, Rural consumption rose by 9.7percent.
• The rural FMCG market in India is expected to grow to US $220.00 billion by 2025 from
US $23.63 billion in FY18.

21
2.4 Market Challenges in FMCG Sector

Source: https://www.financialexpress.com

Counterfeiting:

• Counterfeit products have an economy-wide effect on trade, investment,

employment, innovation, environment, and most importantly on the health and
safety of consumers. Growing FMCG industry provides great shopping choices and
experiences to Indian shoppers today, there has also been a growth in the availability
of counterfeit goods in the marketplace as well.

• The counterfeiting issue certainly encompasses many facets of the economy, including
intellectual property rights (IPR), security concerns, and global trade. Distribution
centers, retail outlets, and third-party logistics providers are the most vulnerable to
infiltration of counterfeit products.

• Indian supply chains are not equipped in terms of their ability to protect and detect
the penetration of counterfeit goods into legitimate and secured supply chains.
Several leading online marketplaces were accused by many consumer brands and
channel partners for undercutting prices and encouraging the sales of counterfeit
goods by sellers of dubious origins on their sites. There has been an increase in the
number of cases about the quality of products sold.

• Some of the technologies used by FMCG players to tackle counterfeiting include usage
of tamper evident packaging, barcodes with proper standards, barcodes & RFID, laser
coding, and optically variable features.

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Poor Supply Chain Infrastructure:

• Lack of storage and transport facilities with rising costs of raw materials and energy
has been a major challenge for the Indian FMCG market. Food items tend to have a
significantly shorter shelf life and requires quick delivery systems, regular
replenishment of products on the shelf, and vast different distribution and storage
requirements.

• In the Food and Beverages segment, shelf life can vary from seven days to three
months on average, while in the HPC space the shelf life can be up to three years.
Many small towns and villages in India lack adequate infrastructure, a major
bottleneck in setting up supply chain networks.

• It is easier to bring home and personal care products to consumers in rural areas of
India, as the shelf life is comparatively longer compared to food & beverage products
such as milk, chocolate, and ice-cream, which have a shorter shelf life and need
investments in cold storage facilities.

Multiple Micro-markets & Fragmented Retail Landscape

• Multiple micro-markets across geographies have distinct needs, which triggers

category preferences that vary from state to state and from one district to another.
This poses a continuous challenge for players to balance out the market needs and the
inefficiencies related to customization.

• The estimated 8 million retail outlets in India selling F&B are direct indicators of this
fragmentation. Even the best in class companies are able to reach around 2 million
outlets directly and approx. 6 million outlets totally.

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2.5 Recent M&A of HUL

The GSK (GlaxoSmithKline) Consumers Health Care Limited has received 99.99 per cent votes
in favour of the scheme of amalgamation among the company and Hindustan Unilever Ltd
(HUL) in the National Company Law Tribunal-convened meeting of the equity shareholders
on June 1, 2019. GSK CH India is the market leader in the health food drinks (HFD) category,
with popular brands such as Horlicks and Boost. Under the deal, Unilever's Indian arm, HUL
has acquired GSK CH India via an all-equity merger, valuing the total business of the latter at
Rs 31,700 crore.

Hindustan Unilever Limited (HUL) has announced it has signed an agreement with Vijaykant
Dairy and Food Products Limited (VDFPL) and its group company to acquire its ice cream and
frozen desserts business consisting of its brand Adityaa Milk in September 2018. Adityaa Milk
is a fast- growing brand and has presence in dairy and dairy based products. In India HUL
markets ice creams and frozen desserts under the Kwality Wall’s Magnum. HUL is already a
strong number two player in ice cream and this acquisition will help in closing the gap with
Amul. HUL will bring its distribution muscle and analytics capability to Adityaa Milk.

24
2.6 Behavioural traits of major competitors

• In terms of Dabur, the volume growth at 4.3 percent in the domestic business came
on a high base of 7.7 percent in Q4 FY18, it was in sharp contrast to the average 12
percent volume growth seen in the last six quarters. Dabur consolidated net profit in
Jan-Mar fell 6.5 percent on year to Rs 371.49 crore.

• Biscuit maker, Britannia Industries management said there is a 'slowdown in market

place in the recent months' which will be closely watched in the near term. The
company said it will undertake gradual price hikes to mitigate the high expenses.
However, the rise in prices may hit the already-slackened rural demand. The company
reported 11.82 percent rise in the consolidated net profit at Rs 294.27 crore for the
fourth quarter ended March 31, 2019. The company had posted a net profit of Rs
263.16 crore in the corresponding quarter of the previous fiscal.

• Despite strong results, shares of Britannia Industries fell nearly 4 percent on May 4
due to fears that the company may see a contraction in operating margins in the near
term due to a rise in input costs.

• Shares of GCPL closed 2 percent lower as its volume growth in the domestic market
disappointed investors. The company said that volumes grew merely 1 percent in
the domestic market during the quarter as a delayed summer and a slowdown in
demand hit the company's sales growth. The maker of Cinthol Soap and Good Knight
repellent, GCPL reported a 51 percent jump in its Q4FY19 net profit at Rs 935.2 crore
against Rs 617.19 crore in a year ago period.

25
SWOT ANALYSIS OF HUL

STRENGTHS

• Variety in products is a great strength of HUL. For e.g. LUX, since its launch in India in the
year 1929, Lux has offered a range of soaps in different sensuous colors and world class
fragrances. BREEZE, comes in 4 exotic fragrances – Rose, Sandal, Lime and Rajanigandha. All
this at a very affordable price for the masses.

• HUL is one of India’s Largest exporters of branded FMCG. It has been recognized by the
Government of India as a Golden Super Star Trading House. Hindustan Unilever’s distribution
covers over 1 million retail outlets across India directly and its products are available in over
6.3 million outlets in the country, nearly 80% of all retail outlets in India.

• Project Shakti – Rural India is spread across 627,000 villages and possesses a serious
distribution challenge for FMCG Cos. HUL has come up with a unique and successful initiative
wherein the women from the rural sector market HUL products, and hence, are able to reach
the same wavelength as of the common man in village.

WEAKNESSES

• HLL’s market dominance, originating from its extensive reach and strong brand presence,
allowed it to raise the prices even as raw materials were getting cheaper. Hence, though the
volumes decreased, the margins grew, and company was able to earn more profits. But higher
margins attracted competition in areas of operations.

• HUL’s major strategy is focused on creating power brands and earning higher margins.
Because of this it was not left with any other option but to try cutting down the costs in order
to protect volumes, if not increase it. They continued with the same old strategy which helped
them gain profits but was not genuine in this changed environment.

• Lack of pricing power in core business due to tough competition and absence of growth
drivers have put HUL on a deflationary mode.

• Changing consumption pattern is also a weakness of HUL. Some of the products it

manufactures are of old style and the consumption pattern are changing.

OPPURTUNITIES

• The advent of modern trade has opened up greater opportunities for HUL to diversify its
brand and strength its food division. It could look at introducing products from its parents
stable like margarines and could also look at expanding its Knorr range of products.

• HUL reach out 80% of 207 million households in the country through various brands. It has
a very well-defined product portfolio spread across many product categories. Penetration

26
levels for some major categories like skin-cream (22%), shampoo (38%), toothpaste (48%) and
processed foods, continue to remain low offerings but great growth opportunities products.
Growing consumption in Out of Home categories. Leveraging the latest IT technology.

THREATS

• ITC has reduced its dependence on the cigarettes business and ITC has extended its
presence into areas like foods, retailing, hotels, greetings, paper, etc. These are businesses
that can give it growth impetus in the long run.

• With ITC gaining momentum in each of these businesses, it is turning into a consumer
monolith, and hence, the greatest threat to HUL’s Business. This can low the sales of HUL
products or they can have a race for the better products.

• Grey imports, changes in fiscal benefits, unfavorable raw material prices in oils, tea
commodity etc, reduction in real income of consumers due to high inflation. As a part of CSR,
HUL has initiatives like project Shakti, plastic recycling, women empowerment etc.

ITC

ITC is one of India’s foremost multi-business enterprises with a market capitalisation of US $

40 billion and a turnover of US $ 8 billion. ITC is rated among the World’s Best Big Companies,
Asia’s ‘Fab 50’ and the World’s Most Reputable Companies by Forbes magazine and as ‘India’s
Most Admired Company’ in a survey conducted by Fortune India magazine and Hay Group.
Within a relatively short span of time, ITC has established vital brands like Aashirvaad,
Sunfeast, Dark Fantasy, Delishus, Bingo!, Yippee!, Candyman, mint-o, Kitchens of India in the
Branded Foods space; Essenza Di Wills, Fiama Di Wills, Vivel, Vivel Cell Renew, Engage and
Superia in the Personal Care products segment; Classmate and Paperkraft in Education &
Stationery products; Wills Lifestyle and John Players in the Lifestyle Apparel business;
Mangaldeep in Agarbattis and Aim in the Safety Matches segment. This growth has been
rated by a Nielsen Report to be the fastest among the consumer goods companies operating
in India.

27
Marico

Marico's ability to innovatively brand and package commodity items both in domestic and
international market makes it one of the top FMCG companies. In the domestic market
Parachute and Saffola are among the two most well-known brands. Even in a highly saturated
branded coconut oil market, Parachute has maintained a market share of nearly 50 per cent
by coming up with regular packaging innovations, increasing user base with low-cost blister
packs targeted at lower income classes and with focused micro-marketing initiatives.

28
Nestle

Nestle is the most geographically diverse of all major food and beverage companies. The
strategy of Nestle is all about creating long-term value and catering to customer’s wants and
needs by employing a decentralized approach to its market (DuBois). Although Nestle derives
much of its success from superior marketing and strategy, its true competitor advantage is
due to its manufacturing operations. All manufacturing of Nestle products take place in its
own plants to better control all aspects of value creation, from marketing and supply chain
factors to technology and plant processes.

Procter & Gamble

P&G is one of the largest and amongst the fastest growing consumer goods companies in
India It now serves over 650 million consumers across India. Its presence pans across the
Beauty & Grooming segment, the Household Care segment as well as the Health & Well Being
segment, with trusted brands that are household names across India. These include Vicks,
Ariel, Tide, Whisper, Olay, Gillette, Ambipur, Pampers, Pantene, Oral-B, Head & Shoulders,
Wella and Duracell. Superior product propositions and technological innovations have
enabled P&G to achieve market leadership in a majority of categories it is present in.

29
Insight:
Hindustan Unilever Limited is facing tough competition than years before from ITC, Procter &
Gamble, Colgate-Palmolive, Nestle and Godrej. ITC is competing toughly with HUL through
various brands that are market leaders. The competition is further intensified by several new
entrants. This intensified competition already witnessed by HUL’s losing market share in
certain segments and also increase in operation costs.

30
 CHAPTER-3

METRICS OF FMCG INDUSTRY

3.1 Metrics of FMCG Industry

A FMCG metric or KPI is a measurable value that helps to monitor and accomplish pre-defined
organizational goals. Key performance indicators for the FMCG industry consider branch-
specific characteristics such as its fast-moving nature, high consumer demands and short sales
cycles.

Out of Stock Rate (OOS)

Managing inventory in FMCG industry is important. A FMCG company need to have an

accurate vision of their stocks because of the short sales cycle time and high demand:
evaluating the Out of Stock Rate will gives them a great advantage in terms of supply.
Approximately 80% of the ‘stockouts’ are actually caused by defective shelves replenishment
practices: implementing appropriate internal measures to refill your store’s sections will
decrease the OOS rate. Studies for the FMCG industry usually show an average OOS rate of
8% managing to keep your stockouts below this line is crucial.

Average Time To Sell

Based on the type of items (food and beverages, personal care, tobacco, household care etc.),
the freshness varies and has to be respected to avoid poisoning and observe the law.
Evaluating how long it takes for your products to be sold will give material for the
procurement strategies, but will also help in the inventory management. Holding items in
your inventory incurs costs, such as labour, storage, or freight costs.

Cash-To-Cash Cycle Time

This FMCG KPI combines 3 ratios: the days of inventory (DOI), the days of payables (DOP), and
the days of receivables (DOR). It represents the time period needed between the moment a
business pays cash to its suppliers, and receives cash from its customers. It is also referred to
as “cash conversion cycle”, and is useful when you need to determine the amount of cash
needed to fund ongoing operations.
For fast moving goods, estimating the financing requirements is crucial for smooth
operations. The formula used to calculate the cash-to-cash cycle is the following: Cash-to-
Cash Cycle = DOI + DOP – DOR. The shorter the cycle, the better it is for a company’s
operations.

On-Shelf Availability

This FMCG metric evaluates the performance of a business to address demand. If shoppers
are repeatedly facing out-of-shelves items in the same store, they will move to another one.

31
Carrying Cost Of Inventory

The Carrying Costs of Inventory are also referred to as ‘holding costs’, and are calculated as a
percentage of the inventory value. It is essentially all the costs incurred by a business to hold
and store its inventory over a certain time. It includes employee costs, insurance, opportunity
cost, cost of capital, but also the losses caused by obsolescence, pilferage, and damage.

Carrying Cost of Inventory = Inventory carrying rate * Average inventory value.

By determining the carrying costs of inventory, businesses know how much profit can be
made on current inventory. In the fast-moving goods sector, businesses have a “JIT” (Just in
Time) inventory, since most products expire quickly.

3.2 Key Performance Indicators of HUL

HUL has divided its key performance indicators in two types financial and non- financial.
Financial key performance indicators are measured based on Revenue from operations,
EBITDA, EPS and Cash from Operations.

Source: https://www.hul.co.in/Images/hul-annual-report-2017-18_tcm1255-523195_en.pdf

• Revenue from operations is the revenue generated from the sale of HUL’s products.
The domestic consumer business grew by 12% and turned out to be RS 35,218 crores
in 2017-18 in a challenging environment. On the other hand, for its competitors like
Marico the sales and services decreased in the year 2017-18 as compared to 2016-17.
So HUL is performing better than its competitors.

• In case of EBITDA, HUL’s overall Earnings before interest and tax depreciation grew by
155 bps as compared to 2016-17 and same was the case with Marico and ITC they also
increased their EBITDA as compared to previous year.

• Earnings per share (EPS) is the portion of company’s profit allocated to each share of
common stock, for HUL EPS grew to Rs. 24.20 per share in the year 2017-18 from Rs.
20.75 per share in the year 2016-17.

32
 • As the cash from operations for HUL is the amount of money it makes from the sale
of its products in various segments and it grew up to Rs 1369 crores in the year 2017-
18.

Source: https://www.hul.co.in/Images/hul-annual-report-2017-18_tcm1255-523195_en.pdf

• In non- financial Key Performance Indicators HUL basically measures itself on three
parameters Better livelihoods, Sustainable Sourcing and Health and well- being. For
improving the livelihood HUL has launched Shakti Entrepreneurship program in which
they are empowering women, enhancing livelihoods and building opportunities for
small-scale entrepreneurs in rural India. HUL has now nearly 80,000 Shakti
Entrepreneurs across India who make a respectable living by distributing HUL
products.

• Unilever is planning to source 100% of its agricultural raw materials for its global
operations sustainably and in India a total of 52% of tea sourced for its brands is from
sustainable sources. In addition to that, 99% of paper and board used for packing
HUL’s products is from sustainable sources only. They have also reduced their water
consumption in manufacturing operations from 53% to 55%.

• The Unilever Sustainable Living Plan(USLP) has three big goals of improving health and
well-being of more than 1 billion people globally by 2020, halving our environmental
footprint by 2030, and enhancing livelihoods for millions across the globe by 2020 has
delivered growth for the business. The success of HUL’s sustainable living brands is
driven by the growing consumer demand for brands that have purpose at their core.

33
3.3 Financial Highlights of HUL

Source: https://www.hul.co.in/investor-relations/quarterly-results/

34
MQ’19 Results of HUL

Source: https://www.hul.co.in/investor-relations/quarterly-results/

• Domestic Consumer Growth at 9%

• EBITDA improvement 90bps
• Exceptional Item in current quarter includes true up of deferred consideration
payable on account of Indulekha acquisition

FY 2018-19 Performance of HUL

Source: https://www.hul.co.in/investor-relations/quarterly-results/

35
 CHAPTER-4

PROJECTIONS AND INSIGHTS

• Demographic trends in emerging markets suggest there is vast potential in many
different product categories, rendering these markets very attractive to many global
CP companies. Major food company, nestle notes that’s they achieve 45% of sales
from emerging market. Similarly, HUL has its sights set on making emerging markets
75 percent of its revenue stream by 2020.

• Digital technologies have removed business barriers for many agile players. It will
drive differentiation through efficiency and creativity. Digital technologies will
continue to enable the growth of e-commerce. The transition from traditional sales
channels to e-retailers will fuel the growth of the FMCG sector.

• Innovation is required not only in launching or marketing new products but also in
technology, business model, distribution channel, and network. New value to a
customer, new basis of competition in the existing market, new players in the value
network and new technologies for making and delivering the product or service.

• Most of the household and personal care products sold in India still have low market
penetration in rural and semi-rural areas. This offers a wide opportunity for market
players to tap these markets by offering low cost, small packaging products.

• With growing disposable incomes, middle and upper middle-class income consumers
in urban areas have shifted their purchasing trends from essential to premium
products. Premium brands are manufacturing smaller packs of premium products. In
response, firms have started enhancing their premium products portfolio.

• Indian consumers are highly adaptable to new and innovative products. As Indian
consumers become increasingly exposed to global products, their demand for
innovative products has been increasing, which is resulting in higher R&D expenditure
by the leading market players.

36
 Source: https://www.ibef.org/download/FMCG-Report-May-20181.pdf

• The number of online users in India is likely to cross 850 million by 2025.
• FMCG industry expected to grow 12-13 percent in fourth quarter FY19.
• Retail market in India is estimated to reach US$1.1 trillion by 2020, with modern trade
expected to grow at 20 percent - 25 percent per annum, which is likely to boost
revenues of FMCG companies.
• In2018, ecommerce segment contribution is projected to be around 1.3 percent of the
overall branded packaged FMCG sales.
• Revenues of FMCG sector reached Rs3.4 lakh crore (US$52.8 billion) in FY18 and are
estimated to reach US$ 103.7 billion in 2020F. The sector is projected to grow 11-12
percent in 2019.
• Nielsen India estimates the FMCG industry to grow at 11-12 per cent in 2019 as against
13.8 percent in 2018.
• FMCG urban segment is expected to have a steady revenue growth at 8 percent in
FY19.

37
Source: https://www.ibef.org/download/FMCG-Report-May-20181.pdf

• In FY18, rural India accounted for 45 percent of the total FMCG market.
• Total rural income, which is currently at around US$ 572 billion, is projected to reach
US$ 1.8 trillion by FY21. India’s rural per capita disposable income is estimated to
increase at a CAGR of 4.4 percent to US$ 631 by 2020.
• As income levels are rising, there is also a clear uptrend in the share of non-food
expenditure in rural India.
• The Fast-Moving Consumer Goods (FMCG) sector in rural and semi-urban India is
estimated to cross US$ 220 billion by 2025.
• The revenue of FMCG’s rural segment is forecasted to grow to15-16 percent in FY19
from estimated 10 percent in FY18.
• The online FMCG market is forecasted to reach US$ 45 billion in 2020 from US $20
billion in 2017, backed by growth in online users from 90 million in 2017 to 200 million
in 2020E.
• By 2020, about 40 percent of FMCG consumption is estimated to be digitally
influenced.
• Around 72 percent Indian consumers are most likely to shop online locally for
premium products.

38
 CONCLUSION

• Indian FMCG market is expected to exhibit a positive growth trend in the coming
years. Positive economic environment, low inflation rates and development initiatives
led by the new government mainly are instrumental in the uptick of the market.

• India is the largest milk producer in the world, yet only 15 per cent of the milk is
processed. The US$ 2.4 billion organized dairy industry requires huge investment for
conversion and growth. Investment opportunities exist in value-added products like
desserts, puddings etc. The organized liquid milk business also has large long-term
growth potential.

• Only about 8-10 per cent of output is processed and consumed in packaged form, thus
has huge potential for expansion in FMCG industry. Growth of dual income
households, where both spouses are earning, has given rise to demand for instant
foods, especially in urban areas. Increased health consciousness and abundant
production of quality soyabean also indicates a growing demand for soya food
segment.

• The FMCG industry fared well in India in the recent years with consumer food services,
soft drinks, household and personal care segments experiencing a tremendous growth
with the increasing disposable income and the growing economy. The alcoholic drinks,
tobacco had witnessed low growth given the stricter government policies and the
increasing health awareness among the consumers.

• Ready to eat food segment such as instant noodles and pasta would be experiencing
enormous growth given the new FSSAI guidelines with clearly designed rules, along
with the relaunch of the most preferred brand of noodles in the country and with
Patanjali starting its own ready to eat food range. The personal care products are
anticipated to witness huge advancements especially among the haircare segment.

• Local Players such as Patanjali, with their aggressive marketing and expansion
strategies and ever diversifying product portfolio dominate major part of the market.

• Most of the consumer goods products are moving to Online platforms and most of the
major super markets have their own online ordering portals and mobile apps making
it convenient for the consumers to order online with just a click of a button during
their busy schedules. Owing to lack of awareness and security issues Cash on Delivery
(CoD) remains the most preferred method of payment among the Indian consumers.

• An increasing demand from the rural and tire-2 population can be witnessed given the
increasing annual income and the awareness for the products and the increasing
digitization making them one of the major influencers of the FMCG sector. Given the
fact that more than 66% of the population in India is rural it widens the scope for the
FMCG segment digitally.

39
• Rising income levels and change in lifestyle shows a clear uptrend in the share of non-
food expenditure in rural India. Rural customers have upgraded their lifestyles and as
a result are purchasing lifestyle products like cosmetics, beverages, mobile phones,
etc, which have become necessities for them.

• Investors are optimistic on India and situation is favorable following government’s

announcement of a series of reform measures. Many of the foreign firms have
increased their exposure in the FMCG companies like Hindustan Unilever, Godrej
Consumer Products, Britannia Industries etc, motivated by their robust financial
performance and attractive valuations. The government allowed 100 percent FDI in
the cash and carry segment and in single-brand retail.

• With emergence of India as a strong regional economy, domestic and multinational

FMCG players can leverage India as a strategic sourcing hub for cost-competitive
products to cater to international markets. This has been witnessed as a strategy of
several FMCG companies whose revenues from the international markets has been
increasing.

40
 CHAPTER-5

REFERENCES

• https://www.ibef.org/download/FMCG-Report-May-20181.pdf

• https://www.hul.co.in/Images/hul-annual-report-2017-18_tcm1255-523195_en.pdf

• https://www.financialexpress.com

• https://www.moneycontrol.com/news/business/nielsen-india-projects-fmcg-
industry-growth-at-11-12-in-2019-3843701.html

• https://www.thehindu.com/business/dull-year-likely-for-fmcg-sector-
report/article26867496.ece

• https://www.equitymaster.com

• https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-
new-model-for-consumer-goods

• https://www.pwc.in

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