ASSIGNMENT ON

CHANGING TRENDS IN FMCG INDUSTRY

IN INDIA

By

Shubhangi Sood
MDU-MBA(Victor)

Under the Guidance and Supervision of

PROF: ALOK ANAND
 Introduction to FMCG Industry
FMCG Concept and Definition:

The term FMCG (fast moving consumer goods), although popular and frequently
used does not have a standard definition and is generally used in India to refer to products
of everyday use. Conceptually, however, the term refers to relatively fast moving items
that are used directly by the consumer. Thus, a significant gap exists between the general
use and the conceptual meaning of the term FMCG.

Further, difficulties crop up when attempts to devise a definition for FMCG. The
problem arises because the concept has a retail orientation and distinguishes between
consumer products on the basis of how quickly they move at the retailer’s shelves. The
moot question therefore, is what industry turnaround threshold should be for the item to
qualify as an FMCG. Should the turnaround happen daily, weekly, or monthly?

One of the factors on which the turnaround depends is the purchase cycle.
However, the purchase cycle for the same product tend to vary across population
segments. Many low-income households are forced to buy certain products more
frequently because of lack of liquidity and storage space while relatively high-income
households buy the same products more infrequently. Similarly, the purchase cycle also
tends to vary because of cultural factors. Most Indians, typically, prefer fresh food
articles and therefore to buy relatively small quantities more frequently. This is in sharp
contrast with what happens in most western countries, where the practice of buying and
socking foods for relatively longer period is more prevalent. Thus, should the inventory
turnaround threshold be universal, or should it allow for income, cultural and behavioral
nuances?
Characteristics of FMCG Products:

 Individual items are of small value. But all FMCG products put together account
for a significant part of the consumer's budget.

 The consumer keeps limited inventory of these products and prefers to purchase
them frequently, as and when required. Many of these products are perishable.

 The consumer spends little time on the purchase decision. Rarely does he/she
look for technical specifications (in contrast to industrial goods). Brand loyalties
or recommendations of reliable retailer/dealer drive purchase decisions.

 Trial of a new product i.e. brand switching is often induced by heavy

advertisement, recommendation of the retailer or neighbors/friends.

 These products cater to necessities, comforts as well as luxuries. They meet the
demands of the entire cross section of population. Price and income elasticity of
demand varies across products and consumers.

ABOUT THE INDUSTRY IN INDIA

FMCG in India has a strong and competitive MNC presence across the entire value chain.
It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from
US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian
population are the most promising market for FMCG, and give brand makers the
opportunity to convert them to branded products. Most of the product categories like
jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as
well as low penetration level, but the potential for growth is huge.

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid
urbanization, increased literacy levels, and rising per capita income.
The big firms are growing bigger and small-time companies are catching up as well.
According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by
MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands,
and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by
Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola
(8) and Parle (9). These are figures the soft drink and cigarette companies have always
shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest
categories in FMCG. Between them, they account for 35 of the top 100 brands

According to a report by the Federation of Indian Chambers of Commerce and Industry

(FICCI), several FMCG registered double-digit growth in value terms, for example,
shaving cream (20%), deodorant (40%), branded coconut oil (10%), anti-dandruff
shampoos (15%), hair dyes (25%) and cleaners and repellents (20%). On the contrary,
negative growth of up to 8% was registered in products such as personal healthcare,
laundry soaps, dish wash, toilet soap, toothpaste and toothpowder.

Industry Category and Products

Household Care
Personal Wash:-
The market size of personal wash is estimated to be around Rs. 8,300 Cr. The
personal wash can be segregated into three segments: Premium, Economy
and Popular. The penetration level of soaps is ~92 per cent. It is available in 5
million retail stores, out of which, 75 per cent are in the rural areas. HUL is the
leader with market share of ~53 per cent; Godrej occupies second position
with market share of ~10 per cent.

Detergents:-
The size of the detergent market is estimated to be Rs. 12,000 Cr. Household
care segment is characterized by high degree of competition and high level of
penetration. In washing powder HUL is the leader with ~38 per cent of
mar-ket share. Other major players are Nirma, Henkel and Proctor & Gamble.

Personal Care
Skin Care:-
The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care
market is at a primary stage in India. The penetration level of this segment in
India is around 20 per cent.. The major players in this segment are Hindustan
Unilever with a market share of ~54 per cent, fol-lowed by CavinKare with a
market share of ~12 per cent and Godrej with a market share of ~3 per cent.

Hair Care:-
The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care
market can be segmented into hair oils, shampoos, hair colorants &
conditioners, and hair gels. Marico is the leader in Hair Oil segment with
market share of ~ 33 per cent; Dabur occu-pies second position at ~17 per cent.

Shampoos:-
The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the
penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of
the total shampoo sale. It has low penetration level even in metros. Again the
market is dominated by HUL with around ~47 per cent market share; P&G
occupies second position with market share of around ~23 per cent. Antidandruff
segment constitutes around 15 per cent of the total shampoo market.
The market is further expected to increase due to increased marketing by
players and availability of shampoos in affordable sachets.

Oral Care:-
The oral care market can be segmented into toothpaste - 60 per cent;
toothpowder - 23 per cent; toothbrushes - 17 per cent. The total toothpaste
market is estimated to be around Rs. 3,500 Cr. The penetration level of
toothpowder/toothpaste in urban areas is three times that of rural areas. This
segment is dominated by Colgate-Palmolive with market share of ~49 per cent,
while HUL occupies second position with market share of ~30 per cent. In
toothpowders market, Colgate and Dabur are the major players. The oral care
market, es-pecially toothpastes, remains under penetrated in India with
penetration level ~50 per cent.

Food & Beverages

Food Segment :-
The foods category in FMCG is gaining popularity with a swing of launches
by HUL, ITC, Godrej, and others. This category has 18 major brands
aggregating Rs. 4,600 Cr. Nestle and Amul slug it out in the powders segment.
The food category has also seen innovations like softies in ice creams, ready to
eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury.

Tea :-
The major share of tea market is dominated by unorganized players. More
than 50 per cent of the market share is capture by unorganized players.
Leading branded tea players are HUL and Tata Tea.

Coffee :-
The Indian beverage industry faces over supply in segments like coffee and
tea. However, more than 50 per cent of the market share is in unpacked or
loose form. The major players in this segment are Nestlé, HUL and Tata Tea.
 PESTLE Analysis
Growth Drivers
The current economic trend, exhibiting modest demand and supply is likely to have a
medium-term impact on the demand for FMCG products but promises revival and higher
growth in the long term based on the following fundamentals:
1. Expanding purchase basket resulting in higher penetration of products
2. Increased consumption with higher disposable household family income
3. More consumers entering the market place (Rural and urban base of pyramid)
For these developments to catalyse faster there are two sides of the equation that need to
come together demand and supply along with other systemic factors.

1. Demand-side Drivers
Consistent GDP Growth
The Indian economy has been consistently growing over the last few years. The growth
rate in 2008-09 was lower (6.7%) compared to previous year.

Increasing Consumer Income

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

High Private Consumption

The Indian economy, unlike most Asian economies, has a very high rate of private
consumption (61%). Of that, a further 60% is due to retail spends – goods and products
that people consumer, as opposed to services or essential consumption items like rent and
education

Rising Urbanization
India has 70% of its population living in rural areas. With rising urbanization, more
people will have exposure to modern products and brands and thus shift to branded and
packaged goods and products By 2015, an additional 75 million consumers will have
moved into cities, not only buying FMCG products for themselves but also serving as a
conduit for information and goods to their families still in rural India

Increasing Discretionary Spends

Another encouraging factor is the falling spends on basic food items which frees up
consumer income for other categories of FMCG products. This trend is noticeable among
both urban and rural consumers.

Low labor cost

India has by far the lowest labor cost compared to many emerging countries giving it an
edge for establishing manufacturing base for both Domestic and International FMCG
brands. Average labor cost in India is ~US$ 90/month compared to US$190/month in
China, US$ 210/month in Thailand and even higher US$1,300/month in Taiwan.

Systemic Drivers for Sectoral Growth

Several other factors are also encouraging for FMCG sector growth in the long run, such
as policy change and investments in infrastructure development.

Favorable changes in Government Policies

The Indian government has been trying to foster the growth of various categories of
FMCG by way of making policy changes. Some of the policy changes include:
• Automatic investment approval (including foreign technology agreements within
specified norms), up to 100 per cent foreign equity for most of the food processing sector
• Quantitative restrictions removed
• Five-year tax holiday for new food processing units in fruits and vegetable processing
• Customs duties reduced on plant and equipment, raw materials and intermediates,
especially for export production
• Capital goods freely importable, including second hand ones
• De-reservation of most FMCG categories from SSI
• Many states have also begun competing with each other to offer incentives to different
sectors including FMCG, in the form of tax holidays, fiscal incentives, land at
concessional rates and subsidies to encourage economic development.

Infrastructure Development
The government has invested a considerable amount in the Golden quadrilateral project
to connect the four corners of the country, of which over 96% has been completed. 50%
of existing highways are being improved and expanded. An outlay of Rs. 59,000 crores
was earmarked for road development projects in the 10th Plan, between the
aforementioned projects as well as projects to develop the National highways
(Primary system), the state highways (secondary system), major district roads and rural
roads. The railways are also increasing capacity through increasing tracks, improving
existing tracks and adding more freight compartments to enable better carrying of goods
and products.

Challenges
With the growth drivers in place, there are many issues and challenges the sector grapples
with.
The key challenges faced by FMCG sector players in India are as follows:
1. Tax Structure - Complicated tax structure, high indirect tax, lack of uniformity,
high octroi & entry tax and changing tax policies.
2. Infrastructural Bottlenecks - Agriculture infrastructure, power cost, transportation
infrastructure and cost of infrastructure and Pass-offs.
3. Emergence of Private Labels.
4. Regulatory Constraints
5. Price of Inputs.
Tax Structure
i. Complicated Tax Structure - In India, problems are exacerbated by the complicated
tax structure.There is a VAT which is to be levied at state level, there are other state taxes
such as entry taxes and then centre levies excise duties and service tax. As a result, no
product cost isexactly the same from one state to the next.

ii. High Indirect Tax - Indirect Tax levels are quite high, especially in light of the fact
that the sector provides goods meant for daily consumption. China, for instance, levies a
tax of 10%19 on average, whereas in India, the average is around 30%.

iii. Lack of uniformity - Despite VAT states do not implement rates and procedures
uniformly. Each state still continues to approach taxation differently, and thus moving
goods from one state to another is like moving them from one country into another. The
taxation rate policies on many FMCG goods differ from state to state and centre to state.
Centre has classified many FMCG products under Merit (VAT exempt) list, such as
processed foods, tooth powder, sanitary napkins but states levy on the same products high
rate of 12.5%

iv. High Octroi & Entry Tax - There are Octroi and Entry Tax at city and state entry
points in a few states, which leads to an increase in pricing and affords opportunities for
arbitrage. For instance, Mumbai has octroi of 4-6% on goods produced outside of
Mumbai. Thus, a bottle of mineral water produced by Coke or Pepsi which have their
plants in Thane, which is considered outside the city limits of Mumbai, have to pay this
extra charge, while Parle, which has a bottling plant within the city limits does not. So
Bisleri is sold in Mumbai for Rs. 12, while Kinley or Aquafina cost Rs. 13,
just because of the factory location. This opens up possible arbitrage opportunities, apart
from causing a genuine grievance to the consumer.
v. Changing Tax Policies - Tax policies keep changing which makes it difficult to plan
for the long term. For instance, tax havens were created in J&K some years ago and many
companies opened facilities there. However, recently part of the exemption was
withdrawn by the government, thus leading to a sudden hike in costs.

.Infrastructural Bottlenecks
i. Agricultural Infrastructure - Agriculture infrastructure in India is particularly weak.
Firstly, irrigation and modern farming methods are not widespread and thus agriculture in
India is at the mercy of nature. Thus, it makes for grossly varying amounts of harvest of
critically needed inputs into FMCG manufacture, from one season to the next and one
year to the next.

ii. Power Costs - Power costs in India are very high and they contribute substantially to
cost of goods sold. They are 3-4 times the optimal costs.

iii. Transportation Infrastructure - To compound this problem is the poor

transportation and roadways infrastructure – many of the villages are extremely poorly
connected with means of transportation – either road, rail or sea – so the amount of time
it takes for the harvest to be transported to the FMCG manufacturers is unpredictable, and
results in substantial spoilage of the goods. For example, it costs nearly 12 days to
transport goods from Baddi in Himachal Pradesh to South India, a distance of 3000 km.
The lack of a cold chain adds to this problem, because it means a tremendous amount of
farm output actually rots or gets spoiled in transit. Nearly 8% - 10% of dairy produce is
lost to pilferage.

iv. Cost of Infrastructure - It takes almost Rs. 7- 8 crores to lay 1km. of road. Along
with this problems in land acquisition due to fragmented land holding further delay
development of road and rail infrastructure increasing the cost associated.

Emergence of Private Labels

Apart from the pressure on margins, the biggest fear of FMCG players when facing MR
is the introduction of private labels or own brands. The fear is justified because world
over, private labels have served to lower the consumer’s price points, particularly at the
mass level. Moreover, there are inevitable conflicts of interest when a retail chain has its
own label whose packaging looks like category leaders’ and stocks brands of other
manufacturers, in terms of display space, promotions etc.

Regulatory Constraints
i. State borders cause a lot of delays and it is common for 2-3 days of finished
goods inventory out of 20 -30 days’ total stuck on various state borders due to a
requirement for multiplicity of permits and licenses.

ii. The Indian labour laws were drafted in the 1940s and take no note of modern
manufacturing methods and strategies. They need to be changed on a more
dynamic basis to reflect present realities.

iii. There is lack of uniformity in definitions, and these do not follow international
norms either. Currently, drugs and cosmetics come under the same set of laws
when in fact they need to be treated differently. Weights and Measures used under
FDA do not conform to those under the Weights and Measures Act followed in
India. Some products come under the OTC category internationally but come
under Schedule H drugs in India, requiring doctor’s prescription and require to be
distributed only in drug licensed stores

iv. Acquiring manufacturing licenses is a long and painful process, beset with red
tape and corruption. It takes 10-12 months to get multiple licenses and to set up a
manufacturing unit.

v. Reservation of jobs for employees creates many problems. For instance, Himachal
Pradesh has a reservation of 70% of jobs for people domiciled in Himachal Pradesh.
Since they are few in number, attrition happens for as little as Rs. 50 pm, and it becomes
a problem to maintain the requisite labour force.
vi. Export procedures are cumbersome and lengthy. There is no single-party interface so
multiple departments and officers have to be followed up with to get the requisite
licenses. A transport permit has to be sourced for each consignment rather than assigning
a blanket permit for a period of time.

Social

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.

Demographic

With the presence of 12.2% of the world population in the villages of India, the Indian
rural FMCG market is something no one can overlook. Increased focus on farm sector
will boost rural incomes, hence providing better growth prospects to the FMCG
companies. Better infrastructure facilities will improve their supply chain.

Because of the low per capita consumption for almost all the products in the country,
FMCG companies have immense possibilities for growth. And if the companies are able
to change the mindset of the consumers, i.e. if they are able to take the consumers to
branded products and offer new generation products, they would be able to generate
higher growth in the near future.

However, the demand in urban areas would be the key growth driver over the long term.
Also, increase in the urban population, along with increase in income levels and the
availability of new categories, would help the urban areas maintain their position in terms
of consumption.

SWOT ANALYSIS Of INDUSTRY

Strengths

well established distribution network .

extending to the rural areas.
low cost operations .
Presence of well-known brands in FMCG sector

Weakness

1. Lower scope of investing in technology and achieving economies of

scale, especially in small sectors
2. Low exports levels
3. "Me-tooʺ products, which illegally mimic the labels of the established
brands. These products narrow the scope of FMCG products in rural
and semi-urban market.

Opportunities

1. Untapped rural market

2. Rising income levels, i.e. increase in purchasing power of consumers
3. Large domestic market- a population of over one billion.
4. Export potential
5. High consumer goods spending

Threats
1. Removal of import restrictions resulting in replacing of domestic
brands
2. Import policies.
3. Tax and regulatory structures
4. slow down in rural demand .
5. Growth of unorganized markets.
 Key players

The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid
urbanization, increased literacy levels, and rising per capita income.

The big firms are growing bigger and small-time companies are catching up as well.
According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by
MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands,
and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by
Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola
(8) and Parle (9). These are figures the soft drink and cigarette companies have always
shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest
categories in FMCG. Between them, they account for 35 of the top 100 brands.

S. NO. Companies
1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestlé India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and Health Care
10. Marico Industrie
A brief introduction about major FMCG
companies in India

Hindustan Unilever Limited

This Company is earlier known as Hindustan Lever Ltd. This is India's largest FMCG
sector company with all type of household products available with it. It has Home &
Personal Care products, and also food and Water Purifier available with it. According to
Brand Equity, HUL has largest no of brands in most trusted brands list 16 of HUL's
brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008 in an
annual survey.

Products of HUL are:

Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair & Lovely;
Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight; Surfexcel;
Vaseline; Wheel.

Recent Stratergies
 Unilever is lowering its expenditure on packaging across its portfolio of food brands
as part of a wider cost-cutting drive. HUL has pared down the colour palette used for
print-ing across many products. The system has been used to reduce printed
packaging costs for Unileverʹs products. It is also eco-friendly because it reduces
waste in the printing process. HUL is taking different steps to reduce the cost and
increase the margin.

 HUL prioritized opportunities which build upon the existing assets and capabilities. It
avoided spreading their management thinly. For example: HUL first made its sales
and distribution channel & supply chain management in manufacturing and selling
wheat flour and utilized it into the selling breads produced by wheat flour.
 HUL is more focused on the innovations Example: In 1995 launched KISSAN
ANNAPURNA staple foods with the message “staple food including iodized salt”
Serving Rural population: In 2000 the 32% of the sales were from rural sector but in
2010 it is more than 50%.

 It follows direct communication from the customers.

 It believes in expanding the portfolio.

 Each category has a different set of supply chain, production and consumer decision
making process issuing associated with it.

Strategic Shifts In the past 10 years, HUL has made four shifts in its business strategy,
targeted at boosting growth and reach
POWER BRANDS: Strategy in 2000. Focusing on fewer brands, 30 of them, and
showering marketing attention on them.

MASSTIGE: Strategy in 2005-06. Making premium brands (prestige) attainable for a

larger section of consumers (mass).

ONE UNILEVER: Strategy in 2007. Building leadership position in fast-growing

markets.

PUMP UP THE VOLUMES: Strategy in 2010. Global CEO Paul Polman is pushing the
Indian operations chasing value growth to deliver on the volumes as well

Strengths
• CPIL and HUL are projected to share a
substantial combined market share of
nearly80% of India’s toothpaste segment
(in 2009).
• Has the highest total revenue and net
Weaknesses
Engaged in price war with P&G - HUL’s
stock was downgraded by a majority of
brokerage firms in March 2010 as analysts
estimated that its detergent segment could
be rendered
profit of INR21,059.20cr and if the detergent price war intensifies.
INR2,504.51cr respectively among India’s • Current operating margin of 14% is
top 5 FMCG companies. lower
• Its shampoo segment has powerful brand than its peak operating margin of 18% in
portfolio that accommodates consumers’ 2002.
needs from different income group -
Clinic is a mass market brand, Sunsilk
falls into to the mid-price market while
Dove is in the
premium segment.
• Issued bonus debentures with face value
of INR6 (with annual interest rate of 9%
payable annually).
• HUL’s INR1cr challenge advertising
campaign aims to promote Rin’s superior
value to its consumers
Opportunities Threats
• Its Fair & Lovely brand is the leader in Competes with P&G in the detergent
India’s whitening cream segment and segment, in which this segment accounts
serves 250mn consumers across 30 for 10-12% of the company’s earnings
countries. This product was also rated as before income tax.
the 12th Most Trusted Brand in India by • Detergent price war with its rival P&G
ACNielsen ORG-MARG in will erode profit margins.
2003. • Small players like Dabur is chipping
away HUL’s market share in the oral care,
hair care, soaps segment. During April-
June 2009, Dabur’s shampoo segment
grew by 7.3% while HUL’s share with
Sunsilk brand fell 50% (45.4% in value
terms).
• HUL’s share in the toothpaste segment
 fell from 29.6% to 28% during April-June
2008
while Dabur’s share increased from 9.3%
to 10% and CPIL’s share grew from
47.7% to 49.5%.
• Calcutta High Court passed an interim
order that restrains HUL’s television
commercial that directly compares the
performance of its Rin with P&G’s Tide

Procter & Gamble Hygiene & Health Care Limited (P&G)

Procter & Gamble was founded in 1837 by William Procter, a British citizen who
immigrated to the United States. The company first sold candles. Procter & Gamble Co.
(P&G, NYSE: PG ) is a Fortune 500 American multinational corporation headquartered
in Downtown Cincinnati, Ohio that manufactures a wide range of consumer goods. As of
mid 2010, P&G is the 6th most profitable corporation in the world, and the 5th largest
corporation in the United States by market capitalization, surpassed only by Apple,
Exxon Mobil, Microsoft, and Wal-Mart. It is 6th in Fortune's Most Admired Companies
2010 list P&G is credited with many business innovations including brand management
and the soap opera.
According to the Nielsen Company, in 2007 P&G spent more on U.S. advertising than
any other company; the $2.62 billion spent by P&G is almost twice as much as that spent
by General Motors, the next company on the Nielsen list. P&G was named 2008
Advertiser of the Year by Cannes International Advertising Festival. Proctor & Gamble
is a leading member of the U.S. Global Leadership Coalition, a Washington D.C.-based
coalition of over 400 major companies and NGOs that advocates for a larger International
Affairs Budget, which funds American diplomatic and development efforts abroad.
Major products of P&G Coconut-based cleaning and Laundry and personal cleansing
food products products
Purico Tide
Star DariCreme
Perla Primex
Sunshine Safeguard
Camay Ariel
Mayon Gain
PMC Bonus
Victor Daz
Ola Lava
Agro Mr. Clean
Fresco Prell
Health care Crest
Vicks Zest
Fibresure Moncler
Thermacare Ivory
Pepto Bismol Laundry, personal care and hair
care
Hair care and laundry categories Secret
Pampers Safeguard
Whisper Ascend
Rejoice Ariel
Tide Old Spice
Max Factor Zest
Vidal Sassoon Clairol
Ivory Nice n Easy
Pantene Wella
Dishwashing, fabric care and food categories Camay
Joy
Mr. Clean
Downy
Alldays
Pringles

STRATEGIES OF P&G
Consumer Understanding
No company in the world has invested more in consumer and market research than P&G.
We interact with more than five million consumers each year in nearly 60 countries
around the world. P&G invest more than $350 million a year in consumer understanding.
This results in insights that tell us where the innovation opportunities are and how to
serve and communicate with consumers.

Innovation
P&G is the innovation leader in this industry. Virtually all the organic sales growth
delivered in the past nine years has come from new brands and new or improved product
innovation. We continually strengthen our innovation capability and pipeline by investing
two times more, on average, than our major competitors. In addition, we multiply our
internal innovation capability with a global network of innovation partners outside P&G.
More than half of all product innovation coming from P&G today includes at least one
major component from an external partner. The IRI New Product Pacesetter Report ranks
the best-selling new products in our industry in the U.S. every year. Over the past 14
years, P&G has had 114 top 25 Pacesetters—more than our six largest competitors
combined. In the last year alone, P&G had five of the top 10 new product launches in the
U.S. and 10 of the top 25.

Brand-Building
P&G is the brand-building leader of this industry. It has built the strongest portfolio of
brands in the industry with 22 billion-dollar brands and 20 half-billion-dollar brands.
Eleven of the billion-dollar brands are the #1 global market share leaders of their
categories. The majority of the balances are #2.

Go-to-Market Capabilities
It has established industry-leading go-to-market capabilities. P&G is consistently ranked
by leading retailers in industry surveys as a preferred supplier and as the industry leader
in a wide range of capabilities including clearest company strategy, brands most
important to retailers, strong business fundamentals and innovative marketing programs

Scale
Over the decades, we have also established significant scale advantages as a total
company and in individual categories, countries and retail channels. P&G’s scale
advantage is driven as much by knowledge-sharing, common systems and processes, and
best practices as it is by size and scope. These scale benefits enable us to deliver
consistently superior consumer and shareholder value.
P&G follows Connect + Develop strategy which enables to bring innovations to life
faster, more economically and more sustainably.

• The Company has 21 product categories out of which only 8 product have presence in
India. The company is planning to launch the rest 13 product in India. The company
expects to see a growth in other categories.

• 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, Russia, India, and China (BRIC) nations.

• Whisper which is one of the company’s power brands has recorded 50

per cent market share in urban India.

Strength
Diversification: Product diversification
with about 300 products.
Research and development: P&G invests 3
- 4 % of Net outside Sales in research and
development (R&D). This amount easily
exceeds their leading competitors, among
consumer products companies.
Strong brands: P&G has 13 Billion-Dollar
Sales Brands such as: Always, Ariel,
Bounty, Charmin, Crest, Downy/Lenor,
Weaknesses:
Non-profitable products: Running products
which may not be profitable but still had to
do it because of keeping up with the market
presence strategy. Few such products are
Crest as toothpaste, Always hygiene pads,
Dawn dishwashing bar.
Inadequate quality control: With large
number of product profile, the quality
control of all the products has deteriorated.
· Mass appeal products at premium price:
Some mass appeal products like Pringles
Folgers, Iams, Pampers, Pantene, Pringle's are priced very high as compared to its
and Tide. The total sales of these thirteen competitor’s products.
‘billion dollar brands’ taken together,
would make a Fortune 100 company in
itself.

Wide distribution network: P&G markets

its products in 160 countries with
manufacturing capacities in 40 countries.
Leading market position: P&G is the
world's largest consumer products
company. P&G is the global leader in all its
5 broad business segments.
Opportunity: Threat
Developing markets: The economies of Small players like Dabur is chipping away
China and India are growing at a very fast p&g market share in the oral care, hair
pace. The company currently competes in care, soaps segment.
only about 10 of its top 25 categories in
most developing countries. This provides Large no of competitors are entering
P&G with an opportunity to enhance its FMCG secot
market share as well as expand its presence
in other categories.

flavored or unflavored water from their

home water filter. P&G could leverage its
position in the bottled water segment to
capitalize on the growing demand for
packaged and flavored water.

· Changing consumer preference: With the

consumer preferences and choices, P&G
because of its huge R&D base and Connect
+ Develop program is well placed to come
up with new and innovative products that
may suit the customer needs.

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.
After the transaction, the Joint Venture which owns the ‘Snuggy’ brand of baby diapers
will become a 100 per cent subsidiary of GCPL.
• Godrej Consumer Products Limited has acquired 100 per cent stake in the Kinky Group
Limited, South Africa. Kinky is among one of the largest brand into hair segment with
product portfolio.

Jan,
CHANGING TRENDS IN FMCG INDUSTRY

Introduction
Recent trends seen:
Food Inflation
As a result of the 2010 food price crisis, international food prices reached its peak in
2010 but fell drastically a year later. Developing countries were largely affected
by the hike in food prices, where share of expenditure on food accounts for a large
proportion of total consumer spending. According to Chart 3, developing countries such
as Indonesia, India and China each spent 41.9%, 34.9% and 33.0% of their
consumer spending on food in 2010. In 2010, due to speculation that the Indian
central bank may hike interest rates after instructing banks to raise more cash
reserves, the nation’s food prices inflated for a second week. An index that measures
wholesales prices of lentils, rice, vegetables and other food products jumped 17.56% in
the week to January 23 over the previous year. In addition, food inflation hiked 19.95%
in the week to December 5, 2009, indicating the most significant increase since
December 1998. Inevitably, high food inflation could restrict consumers’ demand and
pricing flexibility for FMCG while lowering consumers’ purchasing power that
diverts purchases away from certain FMCG.

Health Food
People are becoming conscious about health and hygienic. There is a change in
the mind set of the Consumer and now looking at “Money for Value” rather
than “Value for Money”. We have seen willingness in consumers to move to
evolved products/ brands, because of changing lifestyles, rising disposable
income etc. Consumers are switching from economy to premium product even
we have witnessed a sharp increase in the sales of packaged water and water
purifier.

FMCG companies forayed into India’s growing branded health food sector. Hindustan
Unilever Ltd’s (HUL) health food brand - Kissan Amaze is being marketed on
a trial basis in three southern states in India. Meanwhile, joint venture partnership
between Godrej Food & Beverages Ltd and Hershey Company - Godrej Hershey Foods
& Beverages Ltd (GHFBL) has plans to introduce several brands from its
international portfolio into the Indian branded health food sector.

Household Care
As a result of rapid urbanisation and emergence of small packs and sachets, this
segment saw high level of penetration, in which it is projected to grow at a CAGR of
2% from 2005 to 2010. Detergent production in India expanded 66.92% from 639,472
tonnes in 1999 to 1,067,415 tonnes in 2007 before contracting 6.18% to 1,001,454
tonnes a year later. In 2010, Procter & Gamble (P&G) and HUL were engaged in a price
war. With the lower priced version of Tide introduced by P&G, HUL retaliated by
slashing prices by 10-30% for its detergent products, namely Rin and
Surf where HUL cut the price for Rin from INR70 to INR50 per pack. As for Surf Excel
Blue, prices were brought down from INR91 to INR82 for a 500gm pack. Contributing
close to one-fourth (in FY2009) of its total sales, the detergent segment remains a key
market for HUL. With P&G’s new urgency in this segment, the company promoted Tide
Natural with smart advertising as well as through volume discounts.

personal care segment

The key trend in the personal care segmentis moving away from health products towards
beauty products, hence consumers are switching demand from basic products (such
as soaps, shampoos, hair oils and etc.) to specialized products (such as skin whitening
cream, anti-ageing products, sun block lotions and etc.). With rising disposable
income from USD2,720 in 2008 to an estimated USD3,482 in 2012 as well as
growing female population (2008: 178mn; 2012: estimated 191mn) between the age
group 25-44 years will definitely boost this market segment.
Sales of whitening cream outpaced those of Coca-Cola and tea in India as most Indians
consider having fair-complexions an asset.

With increase in disposable incomes,

growth in rural demand is expected to increase because consumers are
moving up towards premium products. However, in the recent past there has
not been much change in the volume of premium soaps in proportion to
economy soaps, because increase in prices has led some consumers to look for
cheaper substitutes.

Outsourcing
Outsourcing the manufacturing or processing of certain range of products to small
vendors is gaining importance among FMCG players. With such initiatives, the
companies can focus on front-end marketing initiatives more effectively

Reducing carbon footprint

Of the energy used in PepsiCo India’s beverage business, 38 per cent comes from
renewable resources. Dabur has 30 per cent of its steam generation fired by renewable
resources. Hindustan Unilever Limited and ITC have earned Voluntary Emission
Reduction (VER) and Certified Emission Reduction (CER) credits for their work,
respectively. HUL was awarded 52,000 VER credits for developing a new soap-making
process called Plough Share Mixer, which eliminates the need for steam altogether

Ready to Eat
Becasue of changing lifestyles, busy jobs etc marketers are coming up with Jet Age
consumer products.
Ready to Eat
a) Con Flakes/ Oats
b) Pastas
c) Biscuits
d) Noodles
e) Pizzas
f) Burgers
Ready to Drink
a) Energy Drinks
b) Non-Cola Drinks (Juices)
Ready to Cook
a) Cut Vegetables
b) Soups
c) Paranthas/ Rotis
d) Snacks

Evolved Product Forms: 20 years back consumers had limited choices to pick from.
The days of Tortoise Mosquito repellent coils are gone. This is the age of aerosols with
value added functionality. I have picked up some examples, were we have seen a change
in the product forms. Here is the list:
Dish Wash: Powder to Bar to Liquid
Shaving: Creams to Foams/ Gels
Repellents: Coils to Aerosols/ Body Creams/ Gels
Air Freshners: Sprays to Electric
Toilet Cleaner: Acid to Harpic to In-Cistern

With rapid urbanization, emergence of small pack size and

sachets, the demand for the household care products is flourishing. The
demand for detergents has been growing but the regional and small
unorganized Particulars Respondents players account for a major share
Yes 28
of the total volume of the
No 22
detergent market.

Data Analysis
CONSUMERS
1. Do you buy same brand for any specific product?

30 28

25 22
20
15 Series1
10
5
0
yes no
Series1 28 22
 particular respondent
Route 4
More than once a week 4
Weekly 12
Fortnightly 6
Monthly 23
Less than once a month 1
Interpretation:

The objective behind the formation of this question is to know the level of brand
loyalty of the consumers towards the brands available in the market. The above figure
shows that on 56% of the respondents are loyal to their brands of detergent/soap. FMCG
are such a market where the level of loyalty remains low and this is because of many
reasons.

2. How often do you carry out your main grocery shopping i.e.excluding short
visits for top-up groceries?

respondent

23
25
20
15 12
10 4 4 6
5 1
0
Route More than Weekly Fortnightly Monthly Less than
once a once a
week month
Interpretation:
With increase in urbanization, and increase in economic growth, monthly income of
consumer is increase; therefore there is increase in disposable income. thus
consumer are ready to spend more . Also the buying behavior of consumer has
changed over time. Over a period of time it has been seen that in urban area, there is
increase in consumer buying FMCG products weekly, fortnightly.

3. While Buying a product which factor influences the most

Particular Response
Brand 21
Price 29

Response

35
29
30
25 21
20
Response
15
10
5
0
Brand Price

Interpretation:
The objective behind this question is to know the effect of influencing factors in the
purchase decision of the soaps and detergent powders. It mainly contains the factors like,
quality which players an important role in the purchase decision of the soaps and
detergents both.
If we look at the graph it shows price as the most influencing factors in the purchase
decision while quality is also an important for purchase decision

4. Do you consider promotional scheme while purchasing any product?

Particular Response
Yes 39
No 11

Response

50
39
40
30
Response
20
11
10
0
Yes No

Interpretation:

Answer of this question will give idea about the effect of promotional schemes in
the purchase decisions. Such types of schemes always attract more and more consumers
towards particular brand. Simultaneously it gives idea about the factors which consumers
look most in the product before they make final decision.
Here as the graph shows that 39 out of 50 consumers are looking for such
schemes before they make purchase.

5. Which promotional Schemes attract you the most?

Particular Response
Coupon 8
Priceoff 42
Freebies 12
Scratch Card 6
 Luckydraw 5
Bundling 15
Extraquantity 22

Particular Response
Normal 27
Response
Multigrain 23
50 42
40
30 22
20 12 15
8 6 5
10
0
n ff s d g it y
po eo bi
e ar aw in nt
u c C yd
r dl a
Co Pr
i ee ch k n
qu
Fr at
c Bu tra
r Lu
Sc Ex

Interpretation:

The above stated question clearly states the awareness of promotional schemes offered in
the market by the marketers to attract more and more consumers.
The results show that price off and extra quantity is the two main offers/schemes which
consumers have came across at the time of purchase. It will help the manufacturers and
marketers too how too launch their new products in the market with which schemes

6. Which sought of pasta/ buiscuit would you prefer

Response

28 27
26

24 23
22

20
Normal Multigrain
Interpretation:
The above stated question clearly indicate the increasing percentage of consumer
towards healthy food product over normal food product.With more income in their
hands consumer are moving toward healthy food product.

7. Do you buy:-
Particular Response
§       Different variety of product for each family member. 28
§       Same product for whole family. 22

Response

28
30
25 22
20
15
10
5
Interpretation:
0
§       Different variety of §       Same product for whole
companies are not leaving anyfor
product opportunity
each familyto micro segmentfamily.
the market. I can forsee
that we are here to see furthermember.
segments in different categories. Here are some
examples:
Age
a) Junior Horlicks
b) Junior Chyawanprash
c) Pepsodent Barbie for Kids/ Colgate Strawberry
Sex
a) Women’s Horlicks
 b) Male fairness cream
Specialized Household Cleaners
a) Kitchen Cleaner: Mr. Muscle
b) Power Cleaner (Rust): Easy Off Bang

8. What is the frequency to buy Ready to Eat products:-

Particular Response
regularly 12
Irregularly 38

Response

38
40

30

20
12
10

0
regularly Irregularly

Interpretation:
Although the number of respondent having ready to eat product is low, but, Becasue of
changing lifestyles, busy jobs etc marketers are coming up with Jet Age consumer
products.

9. Does product packaging influence your buying behavior?

Particular Response Response

Yes 16
40 No 34
34
30

20 16

10

0
Yes No
Interpretation:
Packaging is the not influencing factors in the purchase decision. Consumer is more
oriented towards quality.

10. Does age anxiety effect your buying behaviour?

Particular Response
Yes 34
No 16

Response

40 34
30

20 16

10

0
Yes No

Interpretation:
The above graph shows that age anxiety plays a crucial role in buying decion.consumer
while purchasing a personal product become more conciousness of such factors. “No”
respondent mainly include teenagers. companies are not leaving any opportunity to micro
segment the market. Here are some examples:Age:Junior Horlicks, Junior Chyawanprash,
Pepsodent Barbie for Kids/ Colgate Strawberry. Sex a) Women’s Horlicks b) Male
fairness cream

11. Does celebrity endorsement effect the buying decision of product?

Particular Response
Yes 15
No 35

Response

40 35

30

20 15
10

0
Yes No

Interpretation:
This question gives stress on the media habit of the people and through which the product
should be launch or they think it would be better than other Medias.
It has been seen that TV as the best media to market the product which will cover
majority of the viewer ship. On the second place it shows news papers as the media to
promote the product in the market. In media large number of consumer says that
celebrity endorsement doesn’t effect their buying decision, it is the quality of product that
matters.

12. During inflation(price hike), you go for

Particular Response
Sachet of same branded product
Response 38
Cheaper38substitute 12
40
30
20 12
10
0
Sachet of same branded Cheaper substitute
product
Interpretation:
The above graph clearly shows that even during inflation ,price hike consumer would go
for sachet of same branded product, rather than going for a cheaper substitute. this shows
quality, brand loyalty effect the mind of consumer the most. companies have come with
lower quantity SKUs and make consumers switch from higher to lower SKUs and not
from premium to popular brands (like Dove to Lux International). Just to give you an
example, Henkel instead of increasing the price of their Henkwl detergent from Rs. 46 to
Rs. 50, they have launched a new SKU of 400gms for Rs. 40. During the time of
inflation, people shift to sachets of their brands. Sales numbers of FMCG companies are
quite robust.
FMCG spend now comprises a smaller share of consumer’s wallet

13. If you get an attractive promotional offer in the product other than of your
choice will you switch over?
Particular Response
Yes 37
No 13

Response

40 37

30

20 13
10

0
Yes No
 Particulars Respondents
Yes 47
No 3
Interpretation:

It shows the level of brand loyalty among the consumers. The result clearly shows
that out of 50, 37 people are ready to switch over to another brand if they find better
promotional schemes which suits their budget means more qyt + less cost + quality.
Combination of all these schemes will run better in the market. when reason were ask for
the same it shows that extra quantity with less or same price, more satisfaction, quality
and other factors influence consumers to switch over too other brands.

14. Do you prefer to buy a product which is more eco friendly?

Response

47
50
40
30
20
10 3
0
Yes No
Interpretation:
It shows the level of aware of awareness among consumer toward environment.As more
consumer are oriented towards green products, carbon free products. Companies are also
moving towards carbon blueprint.

Findings of the report:

 FMCG are such a market where the level of loyalty remains low and this is
because of many reasons.

 Quality as the most influencing factors in the purchase decision while price is also
an important for purchase decision.
 Schemes always attract more and more consumers towards particular brand.
Simultaneously it gives idea about the factors which consumers look most in the
product before they make final decision

 Price off and extra quantity is the two main offers/schemes which consumers have
came across at the time of purchase

 People are not much aware of the schemes which continue in the market it may be
because of the present stock of the product at their place.
 1+1 or 2+1 or other free schemes are more demanded and more aware schemes in
the market.
 People are ready to switch over to another brand if they find better promotional
schemes which suits their budget means more qyt + less cost + quality.

 Extra quantity with less or same price, more satisfaction, quality and other factors
influence consumers to switch over too other brands.

 People are more quality and price oriented.

 Consumer remember that name of the product by the company name and also
from the past performance of that company

 Consumer remembers that name of the product by the company name and also
from the past performance of that company

 Customers are looking for any type of the promotions on the product before them
going to purchase.

 Price off, product bundling and extra quantity are more demanded by the
consumers over others schemes

Limitations of the study

 I considered only Preet Vihar region only because of limited time duration.

 Due to this, my sample size is only 50, which is not very large.

 All the respondents could not fill their questionnaire on their own due to language
problem and also problem of time and lack of positive behavior.

 Respondent may give biased answer due to some lack of information about other
brands.
  Findings of the study are based on the assumption that the respondents have given
correct information.

Bibliography
BOOKS

Ø Philip Kotler, “Marketing Management”, 11th edition, Pearson education Asia

Publication.
Ø C.R.Kothari, “Research Methodology methods & techniques”,New Age
International(p)ltd.publishers,2nd edition.

WEBSITES
 http://www.hul.co.in_files
 http://www.pg-india_files
 http://www.godrej_files
 http://fmcgmarketers.blogspot.com/