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ROLL NO.: 29 SUBJECT: PROJECT 1 PROJECT TITLE: FAST MOVING CONSUMER GOODS COLLEGE: K.J.SOMAIYA SCIENCE AND COMMERCE GUIDED BY:
* * * * * * * * INTRODUCTION FAST MOVING CONSUMER GOODS (FMCG) HISTORY OF FMCG COMPANIES IN INDIA CURENT SITUATION ANALYSIS OF FMCG SECTORS STRUCTURAL ANALYSIS OF FMCG INDUSTRY FORECASTING OF FMCG COMPANIES STRATEGY OF FMCG COMPANIES
* TOP 10 FMCG COMPANIES IN INDIA * SOLUTION OF FMCG COMPANIES
FMCG stands for Fast Moving Consumer Goods, supplied in the retail marketing as per the daily demand of a consumer. These daily needs have to be fulfilled to satisfy their hunger. There for a hard working team of sales, marketing and distribution have to be their on the field, just to satisfy the need of the consumer on right time & place. Still the consumer check the quality and date of packaging of the product. In the market like India, consumers are more conscious before purchasing a fmcg product. So its even more necessary to deliver the fresh product in the market. Because the consumer have the alternative option to move to an another branded product available in the same market. Now the competition has been rising on the top of the head on each brand. A small mistake in the market could lead to heavy loss of the brand image. Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this category include all consumables (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet
soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories and extends to certain electronic goods. These items are meant for daily of frequent consumption and have a high return. The Indian FMCG sector with a market size of US$14.8 billion is the fourth largest sector in the economy. The FMCG market is set to double from USD 14.7 billion in 2008-09 to USD 30 billion in 2012. FMCG sector will witness more than 60 per cent growth in rural and semi-urban India by 2010. Indian consumer goods market is expected to reach $400 billion by 2010.Hair care, household care, male grooming, female hygiene, and the chocolates and confectionery categories are estimated to be the fastest growing segments. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas. The growing incline of rural and semi-urban folks for FMCG products will be mainly responsible for the growth in this sector, as manufacturers will have to deepen their concentration for higher sales volumes. Major Players in this sector include Hindustan Unilever Ltd., ITC (Indian Tobacco Company), Nestlé India, GCMMF (AMUL), Dabur India, Asian Paints
Nirma. Marico Industries. The . and employment is directly proportionate to reduction in indirect taxes which constitute no less than 35% of the total cost of consumer products the highest in Asia. production. increase in demands. at relatively low cost and don't require a lot of thought. Britannia Industries. Fast Moving Consumer Goods(FMCG) FMCG are products that have a quick shelf turnover. While Colgate Palmolive India and Marico constitutes nearly 37% respectively. however Nestle India Ltd and GSK Consumer drive 25 per cent of sales from rural India. The bottom line is that Indian market is changing rapidly and is showing unprecedented consumer business opportunity. However the huge number of goods sold is what makes the difference. The Finance Minister has proposed to introduce an integrated Goods and Service Tax by April 2010. Hence profit in FMCG goods always translates to number of goods sold. ‘Fast Moving’ is in opposition to consumer durables such as kitchen appliances that are generally replaced less than once a year. As per the analysis by ASSOCHAM.Coca-Cola. Dabur India originates half of their sales from rural India. time and financial investment to purchase. a large number of opportunities is available in the FMCG sector.This is an exceptionally good move because the growth of consumption. Companies Hindustan Unilever Ltd .(India). Procter & Gamble Hygiene and Health Care. presence of large number of young population. The margin of profit on every individual FMCG product is less.. Cadbury India. Pepsi and others. A rapid urbanization.
The lower-middle income group accounts for over 60% of the sector's sales. Market share movements indicate that companies such as Marico Ltd and Nestle India Ltd. This has been also aided by the lack of competition in the respective categories. cosmetics. But in the last ten years. have improved their market shares and outperformed peers in the FMCG sector. As a result. Unlike the perception that the FMCG sector is a producer of luxury items targeted at the elite. aided by . cereals. Single product leaders such as Colgate Palmolive India Ltd and Britannia Industries Ltd have also witnessed strength in their respective categories. beverages (health beverages. dairy products. The main segments of this sector are personal care (oral care.category may include pharmaceuticals. soft drinks. the sector meets the every day needs of the masses. in reality. although these are often categorized separately. bakery products) and tobacco. soaps. chocolates. staples. Rural markets account for 56% of the total domestic FMCG demand. hair care. The FMCG sector represents consumer goods required for daily or frequent use. consumer electronics and packaged food products and drinks. Many of the global FMCG majors have been present in the country for many decades. the unorganized and regional players have witnessed erosion in market share. branded and packaged food. many of the smaller rung Indian FMCG companies have gained in scale. with domination in their key categories. toiletries). household care (fabric wash and household cleaners).
able to charge a premium for their products.innovations and strong distribution. therefore. These companies were. FMCG companies have been forced to fight for a market share. Cadbury and Nestle have been a dominant force in the FMCG sector well supported by relatively less competition and high entry barriers (import duty was high). In this context. . HISTORY OF FMCG IN INDIA In India. With the gradual opening up of the economy over the last decade. In the process. Strong players in the economy segment like Godrej Consumer Products Ltd in soaps and Dabur in toothpastes have also posted market share improvement. with revived growth in semi-urban and rural markets. more so in the last six years (FMCG sector witnessed decline in demand). Colgate. margins have been compromised. companies like ITC. HLL. the margins were also on the higher side.
Threats: • Removal of import restrictions resulting in replacing of domestic brands • Slowdown in rural demand . increase in purchasing power of consumers • Large domestic market. i.Opportunities: • Untapped rural market • Rising income levels.Weaknesses: • Lower scope of investing in technology and achieving economies of scale. which illegally mimic the labels of the established brands. especially in small sectors • Low exports levels • "Me-too? products.Strengths: • Low operational costs • Presence of established distribution networks in both urban and rural areas • Presence of well-known brands in FMCG sector 2. These products narrow the scope of FMCG products in rural and semi-urban market.e. • Export potential • High consumer goods spending 4.a population of over one billion.Swot Analysis ANALYSIS OF FMCG SECTOR 1. 3.
This announcement has a positive impact on the industry. reducing excise duties. But the benefit from the 4 per cent reduction in excise duty is not likely to be uniform across FMCG categories or players. biscuits (Britannia Industries. 100 per cent ex-port oriented units can be set up by government approval and use of foreign brand names is now freely permitted. * Central & State Initiatives Recently Government has announced a cut of 4 per cent in excise duty to fight with the slowdown of the Economy. Even players with manufacturing facilities located mainly in tax-free zones will also not see material excise duty savings. ITC) or ready-to-eat foods.• Tax and regulatory structure ADVANTAGES TO THE SECTOR * Governmental Policy Indian Government has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions. * Foreign Direct Investment (FDI) . as these products are either subject to specific duty or are exempt from excise. Godfrey Phillips). automatic foreign in-vestment and food laws resulting in an environment that fosters growth. The changes in excise duty do not impact cigarettes (ITC. Only large FMCG-makers may be the key ones to bet and gain on excise cut.
There is an increase of about 150 per cent in Net Inflow for Vegetable Oils & Vanaspati for the year 2008. up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies(OCBs) investment. is allowed for most of the food processing sector except malted food.Automatic investment approval (including foreign technology agreements within specified norms). alcoholic beverages and those reserved for small scale industries (SSI). GROWTH PROSPECT . There is a continuous growth in net FDI Inflow.
Source: UN Population Division: Medium variant India is second largest Country in terms of Population growth and increase in population has a direct relation to FMCG Products. FMCG Industry which is directly related to the population is expected to maintain a robust growth rate. According to the estimates. • SPENDING PATTERN An increase is spending pattern has been witnessed in Indian FMCG market.LARGE MARKET India has a population of more than 1.450 Billion and will surpass China to become the World largest in terms of population. by 2030 India population will be around 1. There is an upward trend in .150 Billions which is just behind China.
Nielsen shows about 71 per cent of Indian take notice of packaged goods' labels containing nutritional information compared to two years ago which was only 59 per cent. C. There is a change in the mind set of the Consumer and now looking at “Money for Value” rather than “Value for Money”. C. • CHANGING PROFILE AND MINDSET OF PEOPLE People are becoming conscious about health and hygienic. rising disposable income etc. Findings according to a recent survey by A. of household mainly because of in-crease in nuclear family where both the husband and wife are earning. An increase in disposable income. has leads to growth rate in FMCG goods. HOUSEHOLD CARE • Personal Wash: .urban as well as rural market and also an increase in spending in organized retail sector. Nielsen shows about 71 per cent of Indian take notice of packaged goods? labels containing nutritional information compared to two years ago which was only 59 per cent. because of changing lifestyles. We have seen willingness in consumers to move to evolved products/ brands. INDUSTRY CATEGORY AND PRODUCTS 1. Consumers are switching from economy to premium product even we have witnessed a sharp increase in the sales of packaged water and water purifier. Survey by A.
Household care segment is characterized by high degree of competition and high level of penetration. Henkel and Proctor & Gamble. In washing powder HUL is the leader with ~38 per cent of market share. The segment is expected to grow by double digit.The market size of personal wash is estimated to be around Rs. The penetration level of soaps is ~92 per cent. It is available in 5 million retail stores. With increase in disposable incomes. 2.300 Cr. in the recent past there has not been much change in the volume of premium soaps in proportion to economy soaps. • Detergents: The size of the detergent market is estimated to be Rs. Godrej occupies second position with market share of ~10 per cent. HUL is the leader with market share of ~53 per cent. However. growth in rural demand is expected to increase because consumers are moving up towards premium products. Limited is the biggest producer of Personal wash and detergents. The demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market. With rapid urbanization. The personal wash can be segregated into three segments: Premium. 12. 8.000 Cr. Economy and Popular. because increase in prices has led some consumers to look for cheaper substitutes. out of which. the demand for the household care products is flourishing. emergence of small pack size and sachets. PERSONAL CARE . Other major players are Nirma. 75 per cent are in the rural areas.
3. greater product choice and availability. P&G occupies second position with market share of around ~23 per cent. • Hair Care:The hair care market in India is estimated at around Rs. shampoos. • Shampoos:The Indian shampoo market is estimated to be around Rs. and hair gels. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent. The hair care market can be segmented into hair oils. increase in disposable incomes. 2.400 Cr. Sachet makes up to 40 per cent of the total shampoo sale. hair colorants & conditioners. people are becoming aware about personal grooming. It has low penetration level even in metros. fol-lowed by CavinKare with a market share of ~12 per cent and Godrej with a market share of ~3 per cent. With changing life styles. Again the market is dominated by HUL with around ~47 per cent market share. It has the penetration level of only 13 per cent in India. Antidandruff segment constitutes around 15 per cent of the total shampoo market. The market is further expected to . The penetration level of this segment in India is around 20 per cent. Dabur occu-pies second position at ~17 per cent.800 Cr. Marico is the leader in Hair Oil segment with market share of ~ 33 per cent. The skin care market is at a primary stage in India. The Skin Care segment is expected to register a growth rate of mare that 16 percent. 3.• Skin Care: The total skin care market is estimated to be around Rs.700 Cr.
• Oral Care:The oral care market can be segmented into toothpaste . 4. The oral care market.600 Cr. 3.increase due to increased marketing by players and availability of shampoos in affordable sachets. toothbrushes . ITC. and others. FOOD AND BEVERAGES • Food Segment :The foods category in FMCG is gaining popularity with a swing of launches by HUL. More than 50 per cent of the market share is capture by unorganized players. remains under penetrated in India with penetration level ~50 per cent.23 per cent. The penetration level of toothpowder/toothpaste in urban areas is three times that of rural areas. ready to eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury. Godrej. . toothpowder .17 per cent. This category has 18 major brands aggregating Rs.60 per cent. 3. Colgate and Dabur are the major players.500 Cr. The food category has also seen innovations like softies in ice creams. • Tea :The major share of tea market is dominated by unorganized players. This segment is dominated by Colgate-Palmolive with market share of ~49 per cent. especially toothpastes. while HUL occupies second position with market share of ~30 per cent. In toothpowders market. The total toothpaste market is estimated to be around Rs. Nestle and Amul slug it out in the powders segment. Leading branded tea players are HUL and Tata Tea.
HUL has pared down the colour palette used for print-ing across many products. The major players in this segment are Nestlé. However. more than 50 per cent of the market share is in unpacked or loose form. COMPANY PROSPECTS HINDUSTAN UNILEVER LIMITED • Unilever is lowering its expenditure on packaging across its portfolio of food brands as part of a wider cost-cutting drive. • Coffee :The Indian beverage industry faces over supply in segments like coffee and tea. HUL and Tata Tea. It is also eco-friendly because it reduces waste in the printing process. .export of tea is expected to be more that 210 million kg for the year 2008 against about 179 million kg last year. The system has been used to reduce printed packaging costs for Unilevers products.
Pond’s.Pureit (a water purifier) has received the UNESCO Water Digest Water Award 2008-2009 in the category of best domestic non-electric water puri-fier.HUL is taking different steps to reduce the cost and increase the margin. Liril. Clinic 5) Oral care: Pepsodent . scien-tific & public health institutions and meets the germ-kill criteria of the Environmental Pro-tection Agency. Dove. Rin. Products A) HOME AND PERSONAL CARE: 1) Personal wash : Lux . Pureit received the award for outstanding contribution in the field of water in India. The product is available across 21 Indian states and has reached more than 1 million homes in India giving them access to microbiologically safe drinking water. • Hindustan Unilever’s product . Aviance 4) Hair care: Sunsilk naturals. Breeze. Close up 6) Deodorants: Axe. Rexona 7) Colour Cosmetics: Lakme . the drinking water regulatory agency in the USA. Lifebuoy. Hamam 2) Laundry: Surf Excel. Pureit’s performance has been tested by leading international & national medical. Pears. Wheel 3) Skin Care: Fair and lovely.
. The company is planning to launch the rest 13 product in India. • The company has an aggressive plan to set up 20 new factories across the World out of which 19 is expected to come in emerging markets and most of them would be seen in Brazil. India. Lipton 2) Coffee: Brooke Bond Bru 3) Foods: Knor. The company expects to see a growth in other categories.8) Ayurvedic Personal and health care: Ayush B) FOODS 1) Tea: Brooke Bond. Annapurna 4) Ice cream: Kissan Kwality walls C) WATER PURIFIER Pureit PROCTER AND GAMBLE HYGIENE & HEALTH CARE LIMITED (P&G) • The Company has 21 product categories out of which only 8 product have presence in India. Russia. and China (BRIC) nations.
• Whisper which is one of the company’s power brands has recorded 50 per cent market share in urban India. Products: nutrition cover girl duracell charger lams pantene pringles cascade powder mr.clean scrubber dawn detergent .
Kinky is among one of the largest brand into hair segment with product portfolio. the Joint Venture which owns the ‘Snuggy’ brand of baby diapers will become a 100 per cent subsidiary of GCPL.cresent toothpaste GODREJ CONSUMER PRODUCTS LIMITED (GODREJ) • The Board of Directors of Godrej Consumer Products Limited (GCPL) has approved the acquisition of 50 per cent stake of its joint venture partner SCA Hygiene Products’ stake in Godrej SCA Hygiene Limited. • Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky Group Limited. South Africa. After the transaction. products .
they expect to capture a market share of 10 per cent of the Rs. . The Company is expected to create synergy by this deal. 1.900 Crores malted food drink market over the next two years. According to the company. for Rs 203.7 Crores in an all-cash deal.DABUR INDIA LIMITED (DABUR) • Dabur has entered into the malted food drink market with the launch of a new health drink “Dabur Chyawan Junior”. • Dabur has acquired 72.15 per cent of Fem Care Pharma Ltd (FCPL). 130 Crores. a leading player in the women’s skin care products market. • Dabur got approval from Government of Himachal Pradesh to set up another medicine manufacturing unit. The project has an expected investment of Rs.
Products Vatika hair oil Vatika shampoo Amla hair oil Amla lite Binaca tooth powder Dabur albela aam chulbuli imli Dabur Honey Candy Dabur santra Dabur chawanprash Dabur pudin hara Glucose d Dabur Gulabari Jasmine oil Lal dant manjan Kewra water Sharbat e azam Binaca top brush .
Products • Ajax all purpose cleaner . which is currently holding 75 per cent of the share capital of SS Oral Hygiene Products Private Ltd. Hyderabad.COLGATE PALMOLIVE (INDIA) LIMITED • Colgate Palmolive (India) Ltd. has acquired the remaining 25 per cent share capital from the local shareholders at an aggregate price of Rs 77.70 lakh. Consequently. SS Oral Hygiene Products has become a wholly owned subsidiary of the company.
• • • • • Ajax ammonium all purpose cleaner Ajax cutting board destainer Ajax expert neutral multi surface Ajax pine forest all purpose cleaner Fabuloso all purpose cleaner • Palmolive dishwashing liquid • Palmolive automatic dishwashing gel • Palmolive triple action machine dishwasher • Soft soap • Liquid soft soap • Soft soap lotion • Colgate fluoride toothpaste • Colgate toothbrush NESTLE INDIA LIMITED • Nestle is planning to invest Rs 6 billion in India in 2009 for expansion of its business in the country.The company which has allotted an investment of Rs 3 billion in the Indian market in 2008. would be doubling the investment in 2009 as part of its business strategy. Nestle International is .
reinvesting and expanding in India and Nestle India will have all the financial resources to expand and grow from the parent company. During the quarter.210.12. the profit of the company rose 26.78% to Rs. The company posted earnings of Rs.56 a share during the quarter.40 million. Net sales for the quarter rose 23.1.90 million from Rs. last year.10.61% growth over prior year period. • Nestle India reported a good increase in its standalone net profit for the second quarter.30 million. when compared with the prior year period. while total income for the quarter rose 23.45% to Rs.10.356. Products Cerelac vegetable Maggi hot & sweet Maggi ketchup Maggi noodles Milo Nescafe coffe Soup tomato Nescafe freppy Chilli garlic sauce Nestle kitkat . registering 26.90 million in the same quarter.54% to Rs.423.956.
Oral Care . Even investment opportunities exist in value-added products like desserts. puddings etc. yet only around 15 per cent of the milk is processed.Nestle power bar Uncle tobys bodywise Uncle tobys crunchy SECTORAL OPPORTUNITIES Major Key Sectoral opportunities for Indian FMCG Sector are mentioned below: Dairy Based Products India is the largest milk producer in the world. thus highlighting the huge potential for expansion of this industry. Packaged Food Only about 10-12 per cent of output is processed and consumed in packaged form. The organized liquid milk business is in its infancy and also has large long-term growth potential.
MARKET OPPORTUNITIES Vast Rural Market Rural India accounts for more than 700 Million consumers. Multi National Companies out-source its product requirements . Hindustan Unilever Ltd is the largest player in the industry and has the widest market coverage. Still there is an untapped market and most of the FMCG Companies are taking different steps to capture rural market share. And an average citizen in rural India has less then half of the purchasing power as compare to his urban counterpart. Beverages Indian tea market is dominated by unorganized players. More than 50% of the market share is capture by unorganized players highlighting high potential for organized players. Even the Government has offered zero import duty on capital goods and raw material for 100% export oriented units. Lower price and smaller packs are also likely to drive potential up trading.“Leveraging the Cost Advantage” Cheap labor and quality product & services have helped India to represent as a cost ad-vantage over other Countries. especially toothpastes. The working rural population is approximately 400 Millions. The market for FMCG products in rural India is estimated 52 per cent and is projected to touch 60 per cent within a year. or 70 per cent of the Indian population and accounts for 50 per cent of the total FMCG market.The oral care industry. the growth potential is huge. Export . remains under penetrated in India with penetration rates around 50 per cent. With rise in per capita incomes and awareness of oral hygiene.
It adds a cost advantage as well as easily available raw materials. Himachal Pradesh will continue to encourage FMCG companies to relocate to these areas. sugarcane. coconut. India is the largest producer of livestock. Tata Coffee and other such companies Duty reduction in food grade hexane will have a marginally positive impact on companies like Marico and HLL Area specific excise exemptions for North East. HLL. Nestle and HLL The measure to abolish excise duty on dairy machinery is a positive for companies like Nestle Concessional rate for tea and coffee plantation machinery is a positive for Tata Tea. BUDGET MEASURES TO PROMOTE FMCG SECTOR 2% education cess corporation tax. fruits & vegetables. milk. spices and cashew apart from being the second largest producer of rice. J&K. BUDGET OVER THE YEARS Budget 2001-02: .from its Indian company to have a cost advantage. excise duties and custom duties Concessional rate of 5% custom duty on tea and coffee plantation machinery Budget Impact The education cess will add marginally to the tax burden of all FMCG companies The dividend distribution tax on debt funds is likely to adversely effect the other income components of companies like Britannia. wheat.
2 per Kg to Re. juices. ketchup. Only for tea.1 • Customs duty on tea and coffee doubled to 100% • Duty on imported pulses upped to 80% • Import duty on wine and liquor slashed from 210% to 180% Budget 2003-04: • Excise on biscuits reduced to 8% from 16%. sauces. the duty was reduced from Rs. railways and airports • Customs duty on alcoholic beverages reduced . jams etc. coconut.• From 35-55% to 75% for crude edible oil • From 45-65% to 85% for refined edible oil • From 35% to 70% for copra. tea and coffee • From 25% to 55% for crude palm oil • Development allowance of tea industry raised to 40% from 20% • All food preparations based on fruits and vegetables (pickles. ports.) made completely exempt from excise duty • Excise on cosmetics and toiletries halved to 16% Budget 2002-03: • Increased focus on agricultural reforms with an aim to integrate the countrywide food market • Deregulation of the milk processing capacity • Excise duty structure largely untouched. Excise on soft drinks and sugar boiled confectionery also reduced • All states to switch to VAT in FY04 (deadline now has been extended till end FY05) • Loans to agriculture and to small-scale sector will now be available at maximum 2 % above prime lending rate (PLR) • Development plans for roads.
Moreover. The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade. however the rate of growth has slowed down and the sector has recorded sales growth of just five per . A. Penetration level as well as per capita consumption in most product categories like jams. hair wash etc in India is low indicating the untapped market potential. The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1. The FMCG market is set to treble from US$ 11.000 crore only. is expected to grow at a compounded 30 per cent over the next five years. skin care.4 billion in 2015.India is rated as the fifth most attractive emerging retail market. presents an opportunity to makers of branded products to convert consumers to branded products. analysts feel. lower volume of higher value added products reduce scope for export to developing countries.6 billion in 2003 to US$ 33. India is one of the world’s largest producers for a number of FMCG products but its FMCG exports are languishing at around Rs. toothpaste. The FMCG sector has traditionally grown at a very fast rate and has generally out performed the rest of the industry.T. It has been ranked second in a Global Retail Development Index of 30 developing countries drawn up by A T Kearney.6 billion. particularly the middle class and the rural segments.1 billion. Burgeoning Indian population. Small-scale sector reservations limit ability to invest in technology and quality up gradation to achieve economies of scale. Kearney has estimated India's total retail market at $202. There is significant potential for increasing exports but there are certain factors inhibiting this. Over the last one year.
FMCG companies estimate they have already cornered a four to six per cent market share. Give the large market and the requirement for continuous repurchase of these products. the long term outlook for revenue growth is positive.cent in the last four quarters. most of the companies are concentrating on cost reduction and supply chain management. Moreover. is unlikely to help matters. The high burden of local taxes is another reason attributed for the slowdown in the industry. too. This should yield positive results for them. The growth of imports constitutes another problem area and while so far imports in this sector have been confined to the premium segment. At the same time. Rural demand is on the decline and the Centre for Monitoring Indian Economy (CMIE) has already down scaled its projection for agriculture growth in the current fiscal. FMCG companies should continue to do well in the long run. the general slowdown in the economy is also likely to have an adverse impact on disposable income and purchasing power as a whole. . Moreover. Poor monsoon in some states. The outlook in the short term does not appear to be very positive for the sector.
Although companies like HLL and ITC have dedicated initiatives targeted at the rural market. The bottlenecks of the conventional distribution system are likely to be removed once organized retailing . unleashing a latent demand with more money and a new mindset. industry estimates suggest that the industry could triple in value by 2015 (by some estimates. these are still at a relatively nascent stage.Technopak. Due to infrastructure constraints (this influences the cost-effectiveness of the supply chain). companies were unable to grow faster. Around 45% of the population in India is below 20 years of age and the proportion of the young population is expected to increase in the next five years. the industry could double in size by 2010). testing times for the FMCG sector are over and driving rural penetration will be the key going forward. increased literacy and rising per capita income are the key growth drivers for the sector. of the total consumption expenditure. Aspiration levels in this age group have been fuelled by greater media exposure. as the percapita consumption of almost all products in the country is amongst the lowest in the world. In our view. almost 40% and 8% was accounted by groceries and personal care products respectively. As per the Consumer Survey by KSA. In this backdrop. Rapid urbanization.CURRENT SCENARIO The growth potential for FMCG companies looks promising over the long-term horizon.
In the Industry all the major players are growing consistently. ITC is still having major part of revenues from cigarette business. Marico is also the leader in hair care market and aggressively increasing its presence in overseas market organically and inorganically. forced-buying by offering many choices and also opens up new avenues for growth for the FMCG sector. Among heavyweights HUL has strong presence in the Indian FMCG market so one can hold the stock or buy at decline. Currently. In our view. The companies are having almost negligible debt proportion in their balance-sheet. FUTURE OUTLOOK Indian FMCG sector is fourth largest sector in the economy. Over a period of time with growth in GDP. It makes very safe and strong case for anyone to invest. We believe these stocks . organized retailing accounts for just 3% of total retail sales and is likely to touch 10% over the next 3-5 years. change in lifestyle and with established distribution system across the country this sector is also growing with new market horizons and also seize sustained growth in coming years. Dabur is diversifying in to many segments with increasingly adding presence in global market as well. P&G is increasing penetration in Indian markets especially in health care and feminine hygiene. Its FMCG business is still in the investment phase. organized retailing results in discounted prices. Indian FMCG market experienced 16% growth in FY 07-08 and expected to grow by roughly 20% in FY 08-09. Colgate is the market leader in the oral care segment with consistently holding significant market share in the segment.gains in scale.
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toilet soaps. DESIGN AND MANUFACTURING . shampoos. and cigarettes. Typical characteristics of FMCG products are: 1. Brand switching is often induced by heavy advertisement. food products. confectioneries. 5. comfort. toothpaste. The sector covers a wide gamut of products such as detergents. They meet the demands of the entire cross section of population. a consumer buys these goods at least once a month. He seldom ever looks at the technical specifications. 2. The consumer spends little time on the purchase decision. Price and income elasticity of demand varies across products and consumers. 4. Individual items are of small value although all FMCG products put together account for a significant part of the consumer's budget.STRUCTURAL ANALYSIS OF FMCG SECTOR Typically. luxury. creams. beverages. The products often cater to 3 very distinct but usually wanted for aspects such as necessity. as and when required. recommendation of the retailer or word of mouth. 3. Limited inventory of these products (many of which are perishable) are kept by consumer and prefers to purchase them frequently. powders. Brand loyalties or recommendations of reliable retailer/ dealer drive purchase decisions.
Creating awareness and develop franchise for a new brand requires enormous initial expenditure on launch advertisements. Technology . test marketing and launch. and (3) logistics . For established . market research.1.Manufacturing of products by third party vendors is quite common. free samples and product promotions. Third-party Manufacturing . (2) flexibility in controlling labor costs.Most product categories in FMCG require relatively minor investment in plan and machinery and other fixed assets.Basic technology for manufacturing is easily available. 3.sometimes it’s essential to get certain products manufactured near the market.New products require a large front-ended investment in product development. Modifications and improvements rarely change the basic process. Benefits associated with third party manufacturing include (1) flexibility in production and inventory planning. Major features of the marketing function include the following: 1. MARKETING AND DISTRIBUTION Marketing function is sacrosanct in case of FMCG companies. technology for most products has been fairly stable. High Initial Launch Cost . the business has low working capital intensity as bulk of sales from manufacturing take place on a cash basis . Also. 2. Low Capital Intensity . Also. Launch costs are as high as 50-100% of revenue in the first year.
advertisement expenditure varies from 5 -12% depending on the categories. Super markets virtually do not exist in India. Alternatives like wall paintings.The challenge associated with the launch and/or brand-building initiatives is that few no mass media options.000 villages.brands. 2. theatres. Limited Mass Media Options . including 2 million in 5.160 towns and four million in 627. Huge Distribution Network . video vehicles. special packaging and consumer promotions become an expensive but required activity associated with a successful FMCG. This makes logistics particularly for new players extremely difficult .India is home to six million retail outlets. FORCOSTING OF FMCG COMPANIES Markets all over the world have been on a roll in 2003 and the Indian bourses are no exception . TV reaches 67% of urban consumers and 35% of rural consumers. 3.
having gained almost 60% in 2003. This . market for fast moving consumer goods (FMCG). The Indian FMCG market has been divided for a long time between the organized sector and the unorganized sector. the former has varied between a two-player-scenario to a multi-player one. unpackaged home made products.and wield proportionately higher spending power. India's Rs. By 2015. companies that are able to influence and excite such consumers would be those that win in the market place. Recent survey conducted by a leading business weekly. which is dominated by a handful of global players. competing on margins. approximately 47 per cent of India's 1 + billion people were under the age of 20.S. they wielded INR 14000 Cr worth of discretionary income. Changes in demographic composition of the population and thus the market would also continue to impact the FMCG industry. Together. While the latter has been crowded by a large number of local players. and teenagers among them numbered about 160 million. while there are sectors that have outperformed this benchmark index. Means.460 billion FMCG market remains highly fragmented with roughly half the market going to unbranded. Unlike the U. there are also sectors that have under performed. At the macro level. During this period. and their families spent an additional INR 18500 Cr on them every year. The economic growth would impact large proportions of the population thus leading to more money in the hands of the consumer. Indians under 20 are estimated to make up 55% of the population . Indian economy is poised to remained buoyant and grow at more than 7%. FMCG registered gains of just 33% on the BSE FMCG Index last year.
India is home to six million retail outlets and super markets virtually do not exist. one voice. Godrej Consumer Products Limited and Marico Industries are completely sold on the concept of "power brands". However successfully launching and growing market share around a branded product in India presents tremendous challenges. are these big companies in danger of overlooking the potential offered by some of the also-ran brands? It's been almost five years since these three FMCG giants opted to manage their brand portfolios on the basis of the power brand strategy.the fact is that fmcg is structurally unattractive industry in which to participate. But in their rush to put their best brands forward. Take distribution as an example. This makes logistics particularly for new players extremely difficult . Even So. Indian fast moving consumer goods companies like HLL.other challenges of similar magnitude exist across the fmcg supply chain . POWER BRANDS.presents a tremendous opportunity for makers of branded products. THE NEW FMCG MANTRA Three men. the opportunities keeps fmcg makers trying. How have they fared? And what does the future hold? .
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