Global Value Chain in FMCG Industry:

Global value chains (GVCs) are changing, with emerging market economies (EMEs), especially those in
South Asia, driving growth in the region. Production networks are developed where different stages of
the production process are in different countries benefiting trade, investment and the overall
development of the economy. At the same time, greater interdependencies across economies also
increase risks and challenges.

Emerging market economies (EMEs) are leading the growing growth seen in the GVC framework, as they
start at a low base. This has a significant impact on trade, investment and development in the economy.
According to the 2013 UNCTAD World Investment Report (WIR), the share of global economic growth
through economic growth increased from 22.0% in 1990 to 42.0% in 2010.
GVC Participation Rate in Selected EMEs: 2010

Source: Euromonitor International from UNCTAD

Note: (1) GVC participation indicates the share of a country’s exports that is part of a multi-stage trade process; it is the foreign value added used in a
country’s exports plus the value added supplied to other countries’ exports, divided by total exports. GVC participation growth here is the annual growth
of the sum of these two component values (CAGR).

Traditionally the competitive area of the FMCG sector is made up of international leaders such as
Procter & Gamble (P&G) of the USA, Unilever, L'Oréal and Nestlé. They have invested heavily in creating
new products and setting industry standards. However, with the digitalization and boom of small
companies and products, the situation changed.
Globalization has changed the way business is done. There are several global impact impacts on the
FMCG (Fast Moving Consuming Goods) industry. Local barriers are integrated, and the world has
become a global village. The FMCG industry is focused on innovation, efficiency and effectiveness. The
industry has made a profit and captured the global market in the sense of global trade.

Indian FMCG companies:

The Indian FMCG industry’s global campaign was led primarily by the need to fight the slowdown in the
domestic market. Indian FMCG firms began to explore markets abroad, especially those with a large
Indian population. And the drive that started in neighboring countries such as Bangladesh, Nepal, and
the UK, has now spread to more than a dozen markets.

The global drive of Indian FMCG companies is guided by a few crucial factors:
a) Niche categories to avoid competition.
b) Localization - customizing their mass brands to suit local needs in different markets.
c)Indian Diaspora

Global value chain has helped these firms to manage and innovate their products by introducing new
markets to foreign markets, importing new products to India and developing new strategies based on
the “reverse learning” learnt in this process.

Marico:

Marico first launched Parachute cream in West Asia, and the consumer response there pivoted its
decision to introduce it in the Indian market. This is an example for reverse learning. It also pursued
foreign acquisitions since 2005. Buying the consumer division of South Africa’s Enaleni Pharmaceuticals
Ltd, it sought to increase the 15% share of foreign markets in its earnings to 20% in the next two
years.Besides acquisitions, Marico set up a greenfield manufacturing facility in Egypt.

DABUR

Dabur India Ltd is often referred to as a home-grown Indian company floating in the Indian business
family. Few significant revenues come from international operations. It has its own manufacturing plants
in Nigeria, Egypt, Dubai, Bangladesh and Nepal, products are marketed in 50+ countries. Dabur also
established a $4 million toothpaste manufacturing base in Nigeria.

TATA Tea

Tata Tea, which used to be a commodity player in the tea business, is now an important player
worldwide, thanks to its acquisition of Tetley in 2000. International business has now donated more
than 70% of its total revenue. It has spent Rs2,000+ crore to acquire companies across the world. The
acquisitions spurred to move away from the low-growth black tea segment towards herbal and green
tea, segments that are becoming more popular.

Godrej:

The acquisition of Godrej of the UK-based Keyline Brand has led to the launch of a new type of shaving
gel, Erasmic, in the Indian market, where it already sells Godrej Shaving Cream. The company plans to
launch more international products, while exporting its products to markets such as South Africa, West
Asia and China.

Wipro:

WCCL, a unit of technologies firm Wipro Ltd, also leveraged a foreign acquisition to good effect. A
significant chunk of its revenue comes from its international business; almost half of this is from the
Singapore-based company, Unza Holdings Pte Ltd.

The acquisition strategy has worked well enough for companies to earmark a higher portion of their
revenue target from foreign markets and seek more buyouts.