FMCG INDUSTRY

EXECUTIVE SUMMARY

This report provides an analysis and evaluation of the current and prospective profitability and
financial performance of FMCG Industry mainly in India. We look into the five major FMCG
players in India, namely: ITC, HUL, Marico, Dabur, Nestle, Britannia and Colgate-Palmolive. We
get an insight into their sales, product segment, profitability, flexibility, brand loyalty as well as
consumer’s awareness. The report consist of all the acquisition and mergers respective company
have done. PEST analysis of the FMCG industry talks about the basic Political, Social, Economical
and Technological of the respective FMCG industry. PEST analysis helps the respective industry to
overcome the future challenges. The method of data collection is done in terms of the net sail, R$D,
Ad expenditure, Fund flow, and PBITM. We have also analyzed the data with the help of hypothesis
testing. As there are more than two companies, we have taken ANOVA test to compare the
profitability of the respective FMCG Companies in India. We have also compared the FMCG
analysis of India with other BRICS nation. We have also looked in to the future outlook and
opportunities of the industry as a whole

The report draws attention to the facts that getting inside the FMCG Industry is quite easy but
sustaining in the market is the big challenge. In order to obtain sustainability, they need to build a
brand value inside the mind of consumers. Moreover, the result of data analysis shows that different
FMCG companies have different level of profitability as well as brand value. Their net sales,
operating profit and PBIT also differs as per the company and years. ITC is the leading company
among these five FMCG players.

As we know, a business starts with the customers and ends with the customers, company should
focus on the needs and wants of the consumers and try to provide value-added service and products.
They should try to differentiate themselves from their competitors. Differentiating the products in
FMCG industry can only be done by creating the brand value among the consumers.

Recommendations discussed includes:

In order to make their business more profitable and to satisfy their customer as far as possible they
need to carry out different approach towards different products. They should now focus more into the
rural areas. The main reason is because targeting rural areas will be lucrative for them. FMCG
players have already covered urban areas.

Moreover, as the profitability of different FMCG industries varies, they need to focus on promotional
activities in order to increase their sale. Other option is trying to increase their amount of sales in
other countries that is by increasing export.

FMCG players should try to provide products that are different from other companies that will help
to differentiate from others and also help to create a brand value as well as loyalty.

1|Page
FMCG INDUSTRY

CHAPTER 1

2|Page
FMCG INDUSTRY

1.1 INTRODUCTION

Fast-moving consumer goods (FMCG) are also termed as consumer packaged goods (CPG). The
meaning of this goods can be clearly extracted from the word FMCG itself. These products are sold
in a fast space and the prices of these goods are relatively low. The perfect examples can be non-
durable products such as soft drinks, fast food/processed foods, medicines, cosmetic products and
many more consumable products. Further explaining the term non-durable, it includes all the goods
that should be used within three years and less. Because of this very fact, FMCG has a really short
shelf life that may be because of its demand or may be because of its non- durable nature.

FMCG are sold in a huge quantities but the profit margin is relatively low for the producers as
compared to the retailers. But as the products are sold in large quantities, the aggregate profit will be
enough to sustain the business.

The natures of FMCG are as follows:

 Low price
 Low involvement of buyers
 Repeated purchase
 Large quantities
 Easily Available
 High stock turnover

1.2 OVERVIEW OF INDUSTRY

FMCG companies are one of the most versatile business houses. It stands out as the biggest
industry in the world itself.

 FMCG companies are known for their brand name: Everyone around the global
knows the brand of FMCG, as they will be using it all the time. People recognize these
brands from their trip to supermarket or from the various sources of advisement. In ever
part of the home, you will find various brand of FMCG.

3|Page
FMCG INDUSTRY

 FMCG firms are flexible in nature: In FMCG industry there is never a dull moment as
it keeps changing as per the time and environment. The basic reason for its constant
evolution is change in demand of people and creating an urge for consumer to buy that
product. It keeps creating various needs for consumer. Another aspect is that the FMCG
moves really fast from the time they are bought in the store to the time the shelves are
being emptied to the time next stock is refilled.

 FMCG companies put efforts in employee and customer retention: Sustainability is

determined by the loyalty of the customer and its employee. FMCG focuses to retain its
customer in order to go strong and to earn profit. Moreover, it also focuses on keeping its
employee merry as satisfied employee equals to satisfied customer.
 FMCG firms are resistant to the recession: No matter how much fluctuation is in the
economy, FMCG firms are least affected. Consumers need to buy FMCG products, as
these are the basic necessity and essential commodities for them.

 FMCG industries focus on two “B “, Bigger and Better: This industry is getting bigger
as many brands are entering in the market and giving absolute competition. Moreover,
FMCG companies always focus on innovative ideas and technology to provide better
products to the customers.

 FMCG ultimate objective is to deliver what the consumers want: This industry has
been satisfying the everyday needs and wants of customer. It keeps the ends of the
customer in first place and tries its level best to deliver and fulfil their expectation and
necessity.

In context of the world, the top 10 FMCG companies (2014) are as follows:

 Nestle S.A.
 The Procter & Gamble Company
 Anheuser-Busch InBev
 Philip Morris International Inc.
 Coca-Cola Company
 Pepsico Inc.
 Unilever

4|Page
FMCG INDUSTRY

 British American Tobacco

 L'oreal 
 Mondelez International, Inc

1.3 SCENARIO OF FMCG IN INDIA

India is one of the countries that cover large population of the world and more over; the GDP of
India is expected to increase in the nearby future. Because of this very factor, India has been in the
limelight for many FMCG companies. However, from 1950’s to the 80’s there were little
investments in the FMCG industries because the purchasing power of the people in India were really
low and moreover, the government of India was also in support of small scale sectors. The only
company that was able to sustain in this environment was Hindustan Unilever Limited, previously
known as Hindustan Lever Limited. This MNC Company had its manufacturing base in India.

HUL had been the main player till then. It was carrying out their business in a urbane manner.
Consumers however were limited to few choices but the entry of Nirma detergent powder bought a
change in the FMCG industry as a whole. This company focused on “value for money” approach and
made detergent affordable to low segment of people, which drastically changed the lifestyle of
Indian people. This opened the gate to many FMCG companies in India.

FMCG was no longer viewed as luxury products that were just targeted for the elite class of people.
It was regarded more as a day-to-day necessity for the masses in affordable price.

There were many global FMCG in the country for many decades but in the last ten years, many
domestic FMCG companies have entered the market such as Godrej, Dabur, Nirma, Emami,
CavinKare and more.

In the current scenario, FMCG sector is one of the important contributor to the India’s GDP and
more over it is the fourth largest sector of the economy in India. The most used products from the list
are toilet soaps, toothpaste, detergents, and shampoos, shaving goods, shoe polish, packaged food
items and household products. In this market about 2 trillion is covered by rural India in terms of its
revenue.

5|Page
FMCG INDUSTRY

The major FMCG market Industry in India mainly comprises of;

Household
Care

FMCG Personal
Care

Food and
Beverages

Figure 1: Product Segment

1.3.1 HOUSEHOLD CARE

The demand for household care in India has been growing rapidly. In the past five years, there has
been a annual growth rate of 10% to 11%. In the urban area, consumer prefers washing powder and
detergents to bars, as there is increase use of washing machines and purchasing power and aggressive
advertising as well. While in the rural areas, consumers are still using bars. Incase of detergents,
small and unorganized player’s holds majority of share. Vim bars, of HUL lead the market by
pleasing its customer. It provides superior product and performance and constantly comes with new
offering such as Anti-Germ Bar and Monthly Tub Pack. Vim liquid dish wash is one of the hit
products among many other dishwashing brands. Domex, again of HUL,on the other hand is the
leading FMCG product in the toiletries categories.

6|Page
FMCG INDUSTRY

1.3.2 PERSONAL CARE

In India, personal care products are estimated to be USD 4 billion (25144 crore) p.a. The key
products include hair care, skin care, colour cosmetics, bath/shower products and fragrances.
Different segments have different trends. Bar soaps dominates the largest segment of this products
and second largest is the hair care products. Bar soaps is being growing at 5% per annum over the
last five years where as in the case of hair care products, its 9-10% per annum during the same
period.
 In the case of hair care, coconut oil holds 72% share in the India’s hair oil market.
 The skin care market is in the initial stage in India. People are becoming more aware of it as
there is change in lifestyle, rise in income, more choices and ease in availability.
 Oral care, which is also the important part of personal care, can be segmented into toothpaste,
toothpowder and toothbrushes that holds 60%, 23% and 17% of market share respectively.

1.3.3 FOOD AND BEVERAGES

In India, food and Beverages come in fifth in terms of production, growth, consumption and export.
The packaged food segment is estimated to grow at 9% annually to become a 6-lakh crore industry
by the end of 2030. Ready to drink tea and coffee segment is estimated to be 2200 crore in the next
three years. The total soft drink that includes both carbonated beverages and juices segment is
expected to touch USD 1 billion. Coca cola and Pepsi are the leaders in the Indian soft drink market.

7|Page
FMCG INDUSTRY

The following figure shows us the market segment of people in India in different category of FMCG
products.

Market Segment of FMCG

Baby Care 2%
Fabric Care 12%
Food Products 43%
Hair Care 8%
Household 4%
OTC Products 4%
Others 5%
Personal Care 22%

Figure 2: Market Segment of FMCG in India

As per the data from 2013, the food products occupy the majority of portion in FMCG followed by
personal care, fabric care, hair care, households, OTC products and baby care respectively.

Many companies influence the customers through heavy advertising, marketing, packaging, low
price strategy and more. Both rural and urban areas contribute the growth of this sector. Foreign
FMCG players are also willing to enter the market of India, as there are many growth opportunities
for them.

The main factors or the drivers for the growth of FMCG sectors in India are;

 Per Capita Income

 Increase population
 Changing life style of people
 Support from Foreign Direct Investment (FDI)
 Low labour cost
 Availability of raw materials

8|Page
FMCG INDUSTRY

The following figure shows the revenue growth pattern of overall FMCG Industry in India.

Growth Pattern
50
44.9
45 41.1
40 34.8
35 30.2
Revenue ( billions)

30
24.2
25 21.3
17.8
20 15.7
15
10
5
0
2015 2016 2017 2018 2019 2020 2021 2022

Figure 3: Growth Pattern of FMCG in India

From the year 2015, revenue in FMCG has been increasing from 15.7 billion to 17.8 billion and
likewise. In the year 2016, revenue had reached to 44.9 billion. FMCG sector in India has grown
with compound annual growth rate (CAGR) of 16.2% during the year 2015-2021. This revenue and
growth pattern places FMCG Industry in the fourth largest position in India. There are various
reasons behind this such as increase in consumption pattern, change in lifestyle and high purchasing
power. But in the year 2021, there was a moderate growth rate of 9.24% because of high inflation
and reduced GDP growth.

In India, there are plenty of FMCG companies. As per a study conducted by Nielsen, 62 of the top
100 brands are owned by MNCs and the rest by Indian companies. Among these 62 brands,
Hindustan Unilever owns 27.
The top 10 FMCG companies (2022) in India are namely;
1. ITC Limited
2. Hindustan Unilever Limited
3. Nestle India
4. Dabur India

9|Page
FMCG INDUSTRY

5. Godrej Consumer Care private Limited

6. Colgate-Palmolive Company
7. Marico
8. Procter & Gamble
9. Britannia Industries
10. Emami

These leading companies are providing food to household care and beauty to personal care products.

1.4 ANALYSIS OF FMCG INDUSTRIES

In this report, we will be doing an industry analysis on 5 major FMCG companies of India. Namely:
1) ITC Limited
2) Hindustan Unilever Limited
3) Dabur India Limited
4) Godrej Consumer Products Limited
5) Procter & Gamble

1.4.1 Reason for choosing these Industries

 These Industries holds maximum number of shares

 These Industries covers 70% of the total FMCG market.
 Major of Indian people are using products from these brands.
 Consumers of India are more aware about these companies.
 Advertisement and promotion of these companies are hardcore in India.
Let’s take a glimpse into the background of each FMCG companies that we are going to analyse
upon.

1.4.2 ITC Ltd:

ITC was established in 1910 as the Imperial Tobacco Company of India Limited but later in the year
1970, it was renamed as Indian Tobacco Company and further in the year 1974, it was named as
I.T.C Ltd. In 2001, periods were removed from the name.

10 | P a g e
FMCG INDUSTRY

It is an Indian conglomerate headquartered in Kolkata, West Bengal. Its businesses include mainly

five segments: FMCG, Hotels, Paperboards & Packaging, Agri Business & Information Technology.

It employs more than 25000 people at more than 60 locations all across India.

1.4.3 Hindustan Unilever Limited:

HUL was established in the year 1933 as Lever Brothers but in the year 1956, it renamed as
Hindustan Lever Limited as there was a merger between the Lever brothers, Hindustan Vanaspati
Manufacturing Company Limited and United Traders Ltd. Later in June 2007, it was again renamed
as Hindustan Unilever Limited. It is based in Mumbai.

It employs more than 16,500 workers in India and indirectly helps to assist the employment of more
than 65,000 people.

As per the research conducted by Nielsen, two out of three people use the products of HUL in India.
Moreover, HUL has more than 2 million direct retail store all across India and its products are
available in more than 6.5 million outlets in the country.

1.4.4 Dabur India Ltd:

Dabur is derived from the word “ Daktar Burman”. Dabur India was established in the year 1884 by
a physician names as Dr.SK Burman. This company is the India’s largest Ayurvedic medicine related
manufacturer. In June 2008, Fresenius SE, a German company bought 73.27% equity stake in Dabur
at a price of Rs.76.50 per share. Moreover, the same company also bought another 17.62% shares
through an open letter at the same price.

Dr.SK Burman produced Ayurvedic medicine for various diseases such as malaria and cholera. In
the Ayurvedic Specialities Divison of Dabur, there is more than 260 medicines treating various
health related problems such as common cold to chronic paralysis.

1.4.5 Godrej Consumer Products Limited:

Godrej Consumer Products Limited was founded in 2001. Its headquarter is in Mumbai,
Maharashtra. Its subsidiaries are;

11 | P a g e
FMCG INDUSTRY

 Essence Consumer Care Products Pvt. Ltd

 Naturesse Consumer Care Products Pvt. Ltd
 Godrej Hygiene Products Ltd.
 Godrej Netherlands B.V.

GCPL products can be categorized into personal care and household care segment.

It provides toilet soaps, hair color, liquid detergent, air fresheners, household insecticides and many
more.

It provides jobs to more than 1300 full time employees in India and moreover, it’s involved in many
social awareness activities as well.

1.4.6 Procter & Gamble:

P&G, a multinational company, was established in the year 1837 in Ohio, America. In India, it was
founded in the year 1964 and now it serves more than 650 million consumers in the India. Its
headquarter is in Mumbai. It’s one of the renowned brands not just in India but also all across the
world. P&G is one of the major leaders in FMCG industry and the main reason behind their success
is superior product propositions and innovation in terms of technology.

In India, P&G operates under three entities; 1837

 “ Procter & Gamble Hygiene and Health Care Limited ”

 “ Gillette India Limited ”
 “ Procter & Gamble Home Products “

P&G provides jobs to more than 26,000 workers both directly and indirectly. In addition to this, it is
dedicated to sustainable growth in India. It also focuses on Environmental Protection and Social
Responsibility in the places it operates.

12 | P a g e
FMCG INDUSTRY

The products offered by selected company with respect to their sales are clearly given below

Company Food& Beverages Personal Care Homecare Healthcare

ITC Ltd. Sunfeast, Vivel, Essenza

Aashirvaad, Di Wills, Fiama
Bingo, Kitchen of Di Wills,
India,mint-o, Superia,
candyman, Engage,
Gumon
Hindustan Fair & lovely, Comfort, Surf
Unilever Ponds, Lakme, Excel, Rin,
Limited Dove, Pears, Vim, Wheel,
Pepsodent, Domex,
LUX, Clinic Sunlight Color
Plus, Axe, guard, Cif, New
Aviance, Magic
Lifebuoy,
Closeup,
Sunsilk,
ELLE18,
Vaseline,
Tresemme,
Hamam. Clear,
Rexona, Ayush,
Liril, Breeze,
Tigi, Sure,
Toni&Guy
Dabur Real, Activ, Amla Oil, Sani Fresh Hajmola,
India Burrst, Vatika Shine, Odonil, Nature
Homemade, Shampoo, Odomos, Care, Pudin
Lemoneez, Vatika Oil, Odopic Hara,
Capsico Babool Chyawanpra
Toothpaste, sh,
Red

13 | P a g e
FMCG INDUSTRY

Toothpaste,
Gulabari
Range, Fem
Range, Uveda
Range
Marico, No. 1 soap, Good Knight,
Colgate- Cinthol, HIT, Goorej aer,
Palmolive Protekt, Mitu, Goorej Ezee,
Goorej Expert, Air Rreshener
Goorej renew, Stella,
Goorej Nupur
Henna
Nestle, Gillette, Head Ambi Pur,
Britannia & Shoulders, Ariel, Duracell,
Olay, Oral- B, Tide
Pampers,
Pantene, Vicks,
Wella, Whisper

Table 1: Products offering of FMCG Players

The following shows the financial performance of the FMCG companies:

14 | P a g e
FMCG INDUSTRY

Company Year Sales EBITDA NPM ROA ROE EPS BVPS

Ended (Billion) Margin (%) (%) (%) (Rs) (Rs)
(%)
ITC Mar’12 265.5 35.2 23.6 30.7 32.2 8.0 24.9
Mar’13 316.3 35.7 24.1 31.7 32.9 9.6 29.3

Hindustan Mar’12 236.9 14.9 11.8 28.5 75.8 12.9 17.0

Unilever Mar’13 275.4 15.6 13.9 32.7 133.7 17.7 13.2
Dabur Mar’12 53.05 16.80 12.16 24.06 37.56 3.70 9.86
India Mar’13 61.76 16.70 12.36 27.64 35.94 4.38 12.19
Godrej Mar’12 48.66 17.60 14.78 13.98 18.14 16.18 89.25
Consumer Mar’13 64.07 15.90 12.29 12.64 18.94 19.61 103.51
Products
Limited
Procter & Jun’11 10.38 19.16 14.53 17.19 4.64 10.00 18.50
Gamble Jun’12 13.48 18.63 13.45 16.50 5.58 10.00 21.47

Table 2: Financial Performance of FMCG companies

15 | P a g e
FMCG INDUSTRY

CHAPTER 2

16 | P a g e
FMCG INDUSTRY

2.1 LITERATURE REVIEW

For gaining the insight about the study a brief review of the literature is required for a researcher,
reader and other scholars. Literature review of the cane be explained on the basis of the following.

1) Johnson, et.al (2019) stated that this review of the scholarly and applied literature was
undertaken with 2 goals:  To recognize what is known about arts and culture, innovation,
creativity, and entrepreneurship in rural areas, and how these concepts work distinctively in
rural and urban areas, and  To recognize issues that is not known about these concepts in
rural settings and to help build up a powerful research agenda for the future.
2) Wojan and Nichols (2018) reported the results of an analysis utilizing a new and novel data
source, the 2014 Rural Establishment Innovation Survey (REIS), which created unique data
on the role of innovation & design orientation of rural businesses. The investigation looked
for correlations between arts in the community, the degree to which design was coordinated
into the production processes of firms, and the economic performance of the region. The
researchers discovered tantalizing support for the hypothesis that “the local arts scene is
emphatically connected with design orientation.” They additionally found an association
between locations with more design-oriented firms and higher paces of job growth and wage
increments. More research is expected to affirm causality and to better comprehend the
underlying procedures included.
3) Kelliher, et al. (2018) studied the role of trust in formal systems of micro-firms in rural
communities in Canada, Ireland, and the US. They found that trust was a developing asset
and fundamental to the sustainability of formal networks. Bridging capital between
individuals of the local network and outside resources was particularly important to network
members in small communities.
4) The National Endowment for the Arts (Wojan and Nichols 2018; Nichols et al. 2017) has
recently mined another data source, the Rural Establishment Innovation Survey (REIS), to
investigate the distinctions in innovation in performing arts organizations. The consequences
of the project are also summarized in a series of research briefs (NEA 2017a, 2017b, 2017c).
The investigation uncovered several statistically significant differences between rural and
urban establishments. The researchers found, for instance, that nature parks represent for a
much larger portion of rural arts organizations than of urban arts organizations, & that

17 | P a g e
FMCG INDUSTRY

performing arts organizations are progressively basic in rural counties with greater levels of
natural amenities. Strikingly, while rural non-arts performing enterprises are altogether more
averse to be substantive innovators than their urban counterparts, performing arts
organizations are similarly innovative in rural and urban settings. The researchers also
discovered that rural performing arts organizations attract non-local audiences at greater rates
than their urban counterparts, and a greater proportion of rural arts establishments revealed
that they give “a lot” of civic leadership to their communities. At last, this research found a
positive relationship between the number of performing arts organizations and the extent of
businesses categorized as substantive innovators and/or design integrated establishments in
rural districts.
5) In its recent report on rural arts, the NEA (2017a) reported that “while 36 % of rural
arts/cultural organizations say they give ‘a lot’ of civic leadership to their communities, only
24 % of urban arts/cultural organizations give that selfreported level of community support”
(p. 2). Research is required to see if and how this civic leadership leads to larger social
innovation in rural communities.
6) Sarkar, et.al (2016) has analyzed the variations in rural marketing concepts and presented
definitions relating to these varying concepts. Nonetheless, there seems to be a general
disagreement about the aspects which should be involved in rural marketing. This article
considers the contents of various definitions of rural marketing utilizing quantitative
techniques in order to determine the probable conceptual expansion of rural marketing. Just
definitions of the term ‘rural marketing’ (not just a mention of ‘rural marketing’) are
considered for the present examination. Dimension reduction technique and frequency
tabulations are utilized for the content analysis. Apart from giving a definition of rural
marketing utilizing the results of the content analysis, the present study additionally found a
strong relationship between developmental marketing and the requirement for rural marketers
to encourage demand through developmental activities such as appointing local inhabitants as
wholesalers, distributors, and retailers of their products; or by utilizing local manpower in
other operations such as trade marketing, obtainment of raw materials and selling and
dispersing information on the marketer’s products directly to rural consumers.
7) Essig (2016) perceives that entrepreneurs joined formal business networks to share resources
and information, and to impact legislation that influences their businesses (Miller, Besser,
and Malshe 2007, p. 637). Essig cites MacGregor (2004), Pittaway et al. (2004), and Nijkamp
(2003) as additional proof that formal networks are especially significant for businesses as
indicated by Essig “outside of urban centers where density naturally leads to informal

18 | P a g e
FMCG INDUSTRY

networking. Watson (2012) discovers, like others, that having multiple formal and informal
networks is related with business sustainability, but only formal networks are related with
growth” (p. 5).
8) Kaushal (2016) stated that rural India is becoming one of the attractive markets for the
corporates in the recent times. Urban markets are overwhelmed with many different
consumer products, in this way marketers now find it hard to create heavy income flows from
these markets. On the other hand rural income graph is on an ascent, which has given huge
scope to the corporates to tap this market where 70 per cent of India dwells. The study
intends to give information on how the corporates carry out the marketing process and the
causes for the paradigm shift from Urban to Rural markets. The investigation likewise
uncovers the challenges faced by the corporates while marketing their items in rural areas.
9) Renugadevi (2015) stated that the majority of Indian population undoubtedly lives in rural
parts of the country. This huge size, high market potential population is often neglected and
stays unexplored contrasting with its counter urban population. The present rural populace
draws multinational companies to market their products that records positive metamorphosis
demanding numerous issues to be handled in rural marketing. The concept of rural market in
India is still fit as a fiddle and the sector presents variety of challenges. The present paper will
feature the structure of rural marketing environment in order to recognize the challenges that
would be looked by the marketers in rural area. The respondents from various income groups
rank the issue of purchase and their consensus is analyzed in detail.
10) Anwar-McHenry (2011) reports the outcomes of one of the few statistical analyses observing
at the potential role of the arts and culture in stimulating a sense of place and community
cohesion in rural communities. She reviewed a rural community in Western Australia,
gathering different kinds of demographic data and scores (on a 0 to 10 Likert scale) showing
the personal value that respondents placed on the arts, self-rated life satisfaction, the
perceived value of the arts to the community, and community satisfaction (direct cognitive
well-being). AnwarMcHenry then utilized simple regression analysis to gauge the connection
between community satisfaction and other indicators and demographic variables (such as age,
gender, and region type—i.e., coastal, agricultural, or mining/pastoral). None of the
demographic variables were critical nor was the personal value placed on the arts.
Nonetheless, community satisfaction was positively correlated to value of the arts to the
community and self-rated life satisfaction.
11) Acikgöz (2018) stated that deciding on the right products to offer to the target market is a
demanding and crucial task that requires comprehension and knowledge into the customer’s

19 | P a g e
FMCG INDUSTRY

needs, wants and demands. Thusly, the continuous development of new product strategies
can be a significant determinant of sustained company performance. Product strategies
include - apart from product mix decisions - product life-cycle strategies & market
introduction of new-product developments (NPD). Since product strategies are a basic part of
companies’ marketing mix, there has been attempted a lot of conceptual and empirical
research to recognize the proper product strategies for critical success of industrial products.
This paper analyses the discoveries of empirical work into the strategies developed for and by
industrial FMCG companies for their products. It is the prime target of this work to condense
the most significant discoveries in a compact and structured way and also to give theoretical
insight as to how these product strategies are arranged, implemented and controlled.
12) Chakrabortyet.al (2015) stated that Indian Fast-Moving Consumer Goods (FMCG) sector
with a market share of $13.1 bn has currently proved itself as the 4th largest sector in the
Indian economy. Actually, rural India with more than 70 per cent share of the total Indian
populace has developed as the most significant FMCG market. During the last 2 decades,
deregulation, globalization and liberalization measures approved by the central government
have made a worldview change in the FMCG sector. Both the foreign direct & portfolio
investments in Indian FMCG sector in the post-reform period have remarkably impacted the
financial performance of the companies belonging to this sector. In addition, the expanding
presence of MNCs in the Indian market has constrained the existing domestic companies in
the FMCG sector to reorient their financial strategies so as to endure. Against this backdrop,
the present investigation seeks to measure the changing status of the overall financial
performance of sixteen selected companies in the Indian FMCG sector during the period
1993-94 to 2020-21 The paper is sorted out as follows: it reviews the existing literature
relating to the financial performance of Indian FMCG sector, trailed by a depiction of the
objectives and the methodology adopted to pursue them. In this way, the discoveries of the
study are discussed, and lastly, the conclusion is offered.
13) Qasim, et.al (2015) stated that the aim of this research work is to study the consumers’
attitude towards Non Alcoholic Beverages. The data for the investigation has been gathered
by performing face-toface interview with the respondents with the help of questionnaire. This
study gathers data from 400 consumers across Delhi NCR. This study is begun with
objectives of examining socio-economic background of respondents, inspecting the factors
influencing consumer preferences towards selected FMCG products that are Non- Alcoholic
Beverages, checking the degree of satisfaction of consumers and knowing expectancy of the

20 | P a g e
FMCG INDUSTRY

consumers. This investigation uncovers that consumer preferences are generally influenced
by age, place, sex, product, price, psychological, availability, people and brand influences.
14) Malhotra (2014) stated that the paper focuses on marketing of fast moving consumer goods.
FMCG are generally low profit margin products and therefore sold in large quantities.
Subsequently, it is imperative to concentrate on how to improve brand value for the
customers as many brands are accessible for the same categories of products. Another area
focussed in the paper is how recession influences the demand for fast moving Consumer
Goods and what are the causes for these changes. In such a circumstance, it becomes
necessary for the producers or the companies to expand the investments in these brands and
items so that consumers are attracted towards them. In order to support these observations
Dove’s Real Beauty Campaign has been intricately discussed and the points which lead to the
achievement of this campaign have been highlighted. Unilever was able to make a brand
value for Dove by roping in regular consumers in its advertisements rather than professionals
or celebrities. Normal consumer women became its brand ambassadors instead of celebrities.
In such a way it was able to relate and connect better with the customers and the public at
large in different companies where it was actualized. Although it suffered from different
points of criticisms, Unilever was highly successful in creating a brand value for its products
in the minds of the consumers.
15) Agarwal (2014) suggested that consumer behaviour research is the scientific investigations of
the processes consumers use to select, secure, utilize and dispose of products and services
that fulfil their needs.
16) Firms can satisfy those requirements only to the extent they comprehend their customers. The
main objective of this article was to study the demographic differences in the consumers
buying behaviour of people living in Madhya Pradesh and when they purchase FMCG
products. To attain this objective a survey was developed and directed over some part of
Madhya Pradesh. The discoveries affirm the components impacting consumer buying
behaviour for tooth paste brands accessible in the market.
17) Mahalingam, et.al (2012) concluded that the consumer behaviour plays a significant role in
marketing. This is affected by different factors. In the changing global scenario authors find
that consumers wants and needs to purchase a product also changes with it. In this study titled
"A Study on Consumer Behaviour towards Selected FMCG in Coimbatore City" the
researcher has evaluated the socioeconomic profile, shopping pattern of consumers and
discovered the factors affecting the consumer to buy the selected FMCG products. The
primary data required for the study was gathered through questionnaire which was distributed

21 | P a g e
FMCG INDUSTRY

to 400 samples chosen from Coimbatore city .The tools utilized for analysis are percentage
analysis, Garrett ranking and chi-square. From this investigation it was discovered that most
of the consumers are impacted by brand and quality in purchase of FMCG products. There by
the researcher has recommended improving the quality in FMCG product through product
development and external monitoring.
18) Ullah, et.al (2012) depicted that Fast Moving Consumer Goods sector is one of the biggest
sectors in the economy of Bangladesh. In the last few years, the FMCG industry in
Bangladesh has encountered a dramatic growth; both qualitative and quantitative
improvements have occurred in the consumer durables segment. FMCG in marketing context
means convenience and lesser involvement products like, pens, salt, flours, chocolates, etc. In
last few years, the FMCG industry globally has encountered a difficult market condition. In
certainsegments, formerly popular brands were either been squeezed or deleted between the
category leaders and low-cost competitors. The study has identified 8 primary factors that
impact consumers' purchase decision of FMCG products in Bangladesh. These factors are
sales promotion, time constraint, unavailability of brand, in-store TVC, product features,
variety-seeking behaviour, end of aisle display and product convenience. This study
prescribes concentrating on 3 important factors, i.e., time constraints, sales promotion and
nonavailability of a brand to facilitate the progress of FMCG industry in Bangladesh. The
FMCG industry will discover better development opportunities, if the discoveries of this
examination are utilized as an input in its strategic decision making. 8) Deliya (2012)
considered the importance of bundling plan as a vehicle for correspondence for bundled
FMCG items. This examination utilized a center gathering approach to fathom shopper
conduct towards such items. The test for analysts is to consolidate bundling into a compelling
buying choice model, by understanding Consumer's conduct towards the bundling of FMCG
things. At the point when buyers chase for the cycle data coming up, the item's bundle can
contain relevant and significant information for the shopper. Item bundling structures the
finish of the 'advancement chain' and is close so as to the genuine buy and may thus expect a
critical function in foreseeing buyer results. Bundles similarly convey brand ID and mark
data like use rules, substance, and rundown of fixings or crude materials, advices for use and
mandates for care of item.
19) Tauseef (2011) endeavoured to discover the factors/factors that impact client hasty
purchasing conduct in FMCG area considering retail market in India. The impact of different
drive purchasing factors like arrangement of items, deals and advancements, successful value
procedure ,window promoting, and so on, on client purchasing conduct have been examined.

22 | P a g e
FMCG INDUSTRY

A speculative model was made in this paper, which had been thought about for our
examination chip away at drive purchasing conduct of shoppers. The investigation depends
on the essential information accumulated from shopping centres, Handlooms and stores from
the territory of Jodhpur with the help of organized survey on Likert scale. Information
examination has been finished using SPSS programming. The factual examination strategy
used in this investigation was Factor Analysis. After the intensive examination of the
available information it was discovered that since pay of every individual is growing and an
ever increasing number of individuals are moving towards western culture in eating, in
dressing sense, and so forth, so the buying intensity of people has really gone up and thus the
rash purchasing of items is on a high pattern fundamentally in view of estimating techniques
of retail players and full celebration offers consistently.
20) Leahy (2008) suggested that this paper analyzes the idea of brand dependability in Fast
Moving Consumer Good (FMCG) markets. The essential goal of the examination was to
investigate why dependability fills in FMCG markets from the customers viewpoint. What's
more, this examination found the customer's viewpoint on the sorts of securities that exist in
FMCG markets and the function of securities in the development of brand dependability. The
predominant end ascending from this examination is that brand unwaveringness exists in
FMCG markets for both enthusiastic and psychological reasons. Fundamentally this
examination established that the improvement of brand steadfastness depends on the
advancement of client brand securities. This exploration presumes that the test for advertisers
is to develop and support the bonds that lead to and that can strengthen brand reliability. The
examination additionally infers that brand dependability concentrates later on should focus on
both psychological and enthusiastic purposes behind brand steadfastness and the function of
securities in that. Investigating brand dependability in

2.1.1 Brand Equity

Every consumer has some perception about the respective product the commercial value that drives
the consumer perception about the brand name of a particular product or service rather than the
product or the service itself. A company can build its brand equity for their respective product by
making the product memorable or easily recognizable and superior in the quality and reliability.
Various marketing campaigns or mass marketing campaign can help an industry to create its brand
equity. If the consumers are willing to pay more for a generic product than from a branded product

23 | P a g e
FMCG INDUSTRY

then the brand however is said to have negative brand equity. In different researchers view the brand
equity in variety of the perspectives.

According to the researcher Farquhar in 1989, he wrote in his article that brand equity can be viewed
in three perspectives, first firm perspective second trade perspective and the third consumer
perspectives. Another researchers Srivastava and Shocker in the year 1991 that the definition of the
brand equity is categorized in the other group of the definitions in which the brand equity consist of
both the financial and consumer perspectives. According to both of them brand equity comprises of
brand strength and brand values. According to one more researcher Keller in the year 1993 there are
two motives for studying the brand equity. First: to estimate the financial base motivation of the
financial value of the brand more precisely for the accounting purpose or for the merger. Although
financial approach may provide a brand more precise insight about the valuation of the brand. For a
brand manager it may not be useful to establish marketing strategies because financial approach is
limited with the estimation of the brand values. Second: to improve marketing productivity
motivation arises from strategy based motivation.

Researcher Lassar, Mittal and sharma in 1995 discussed the two perspectives of the brand equity
which are based on financial (Discussed above by Simon and Sullivan 1993) and customer based.
Promoter or adherent of financial perspectives considers brand equity as a separate asset which can
be sold separately to the consumer. According to the Simon and Sullivan in the year 1993 brand
equity can be defined as the incremental cash flow which accrue in the case of the branded product
over the unbranded products. Brand equity of the customer emphasizes the customer’s mind-set.

Another researchers Capon, Berthon, Hulbert and Pitt in the year 2001 further suggested that there
are two types of the brand equity that is original brand equity and the customer brand equity. The
brand equity can be examined from two important perspectives that is financial and customer based.
The financial base approach or measures the brand value by the net additional cash flow created by
the brand. The additional cash flow results the customer willingness to buy the respective brand more
than its competitors even after another brand is cheaper because customer is willing to pay more
because of the benefits and the brand that create the believe throughout in their minds of the
customer while marketing of the respective brand.

2.1.2 Customer Based Brand Equity

24 | P a g e
FMCG INDUSTRY

For a particular brand to have value it must be valued by the customer. For a particular or any brand
the power lies in what the customer have learned, felt, seen and heard about the brand the brand as a
result of over time experience while using the product said by the researcher Keller in the year 2003.
In the year 1995 Keller and in the year 1995 Cobb-Walgren and Ruble told that brand has no
meaning to the customer nor the other perspectives of brand equity are meaningful. Researcher
Cobb-Walgren In 1995 told that the value can only be created among the investor, the manufacturer
and the retailer if only if it create value to the respective consumer. Conceptualizing the brand equity
from the customer perspective is useful because if suggests both the specific guidelines for marketing
strategies. In the year 1993 Keller found out that the source of the brand equity is all about the
customer perception, so it is really important for a manager to measure and track the brand equity
come across in more practical. As the respective information offers a customer behaviour in strategic
vision and the managers can develop different strategies accordingly. In the year 1996 Dyson found
out that in the mind of a potential customer brand exist and it totally depend on that customer what
he/she thinks for that particular brand and which help in determining the value. He also told that
foundation of a brand composed of the peoples how he or she is mentally attached toward the
respective brand.

2.1.3 Dimensions of Customer based Brand Equity

There are two main frame workers in the brand equity literature which conceptualize based brand
equity. Keller In the year 1993 considers the brand equity for being the differential effect of brand
knowledge on customer response to the marketing of the respective brand. How can the customer
based brand equity can be constructed or measured or managed for better understanding Keller in the
year 1998 described all total conceptualization of the brand knowledge. Brand knowledge can be
defined as the perceptions about a particular brand which is reflect in the memory of the customer
about the respective brand.

Aaker in the year 1991 have proposed the definition of the brand equity which was one of the most
generally accepted and comprehensive. Aaker in the year 1991 and 1996 consider the brand equity as
the set of the brand assets and the liabilities which are linked with the brand it may be its name or the
symbols that add or subtract to the value provided by the respective product or the service to the
particular industry or the firm by the consumers. According to him set of assets and liabilities are
grouped into the five categories which are as per the brand loyalty or the brand name awareness or
for brand quality or brand association or other proprietary brand assets. According to Yoo and

25 | P a g e
FMCG INDUSTRY

Bonthu in 2001 other brand assets include the patents, trademarks and channel relationship. The fifth
component of the other brand assets is not relevant to the consumer perceptions therefore the first
four component should be accepted as the customer based brand equity.

The total concept of the customer based brand equity can be visualised in two angles which involve
consumer perceptions or cognitive approach and also include involving consumer behaviour
awareness, brand associations and perceived quality. Based on the definition given above Kamakura
and Russel in the year 1991 given that there are five important considerations to the definition to the
brand equity. At first the brand equity refers to the consumer perceptions rather than the indicators.
Second he refer brand equity to the global value associated with the particular brand. Third he told
that the global value is associated with the brand stem from brand name not only from the physical
aspects of the brand. Forth brand equity is not absolute but it is relative to the competition. Finally
according to him the brand equity have positive influence on the financial performance.

2.2 ACQUISITION AND MERGERS

Acquisition or mergers is the combination of the two companies in which one corporation is totally
absorbed by another corporation. In merger and acquisition basically the company which is less
important loses its identity and have to become a part of the more important corporation. Some of the
important mergers and acquisition which happened in the FMCG industry are as fallows.

1. Godrej: Godrej Consumer Products limited (GCPL) is one of the consumer goods company
based in the Mumbai India. Godrej consumer Product Ltd acquired Africa’s Frika hair for
estimated around Rs 75-80 crores. This was the fifth acquisition of the Godrej in Africa since
entered the continent.
2. ITC acquisition and Mergers are as follows:
a. ITC Ltd have acquire Savlon and Shower to shower trademarks and other intellectual
property frm Johnson and Johnson Pte. Ltd.
b. ITC Limited is also looking forward to acquire Century Textiles And Industries Ltd
c. ITC Hotels Limited has formed the joint venture with Espirit Hotels. Looking forward
to buld luxury hotel in Hyderabad. ITC have 26% Stake in the JV for Rs 45 Crore
d. ITC Infotech is planning to acquire targets in North America and Europe as its seeks
to become a billion dollar business

26 | P a g e
FMCG INDUSTRY

3. Dabur India Ltd is looking forward for possible acquisition target in both India and abroad
and has bought Turkey based Hobi Kozmethik in 2010 and US based Namaste Group in
2011.
4. HUL acquisition and Mergers are as follows:
a. Hindustan Unilever Ltd one of the FMCG giant acquire another 75% stake in
Bhavishya Alliance Child Nutrition Initiatives.
b. HUL is planning to acquire the remaining 74% Stake in Aquagel Chemicals Pvt Ltd.
Now HUL is holding 26% Stake currently
5. Hindustan Unilever is set to acquire the remaining 74% stake in Aquagel Chemicals Pvt. Ltd.

Holding 26% currently, the buy would make Aquagel its wholly owned subsidiary. FMCG giant,
Hindustan Unilever Ltd is acquiring another 75% stake in Bhavishya Alliance Child Nutrition
Initiatives (Bhavishya Alliance), a Not for Profit Company.

27 | P a g e
FMCG INDUSTRY

CHAPTER 3

3.1 PEST ANALYSIS OF FMCG INDUSTRY

3.1.1 POLITICAL

 Tax Structure

There is pretty complicated tax structure and there is high indirect tax. As far as uniformity is
concerned there is lack of uniformity also. Octroi is also high. There is entry tax and changing tax
policy.

 Infrastructure Issues
28 | P a g e
FMCG INDUSTRY

The effectivity of FMCG depends on the fact that how much government spends on the agricultural
infrastructure. It also depends on the power and transportation infrastructure a lot.

 Regulatory Constraints

There is requirement for multiplicity of permits and licenses for various states. There is outdated
labour law. The export procedure is very tiresome. The subsidy available is very confusing and time
consuming.

 Policy framework

Approval concerned to investment of FDI into Retail sector (single-brand retail &multi-brand retail,
License rules in setting up of Industry, Changes in Statutory Minimum Price (SMP) of commodities
and Priority sector classification of industry.

3.1.2 Economical

 GDP Growth

Growth of the industry is pretty consistent with the Indian economy.

 Inflation

Inflationary pressures decreases the purchasing power of money to a great extent. And the concept
of inflation has a substantial impact on the spending power of consumer. This has direct impact on
business investment

 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 leading good growth for the FMCG sector.

 Private Consumption

The Indian economy, unlike other economies, has a very high rate of private consumption (61%)

29 | P a g e
FMCG INDUSTRY

 Urbanization

In India if we talk about rural areas, seventy % of its population lives in rural areas. And with the
rising concept of urbanization more people are getting exposed to the modern products and brands.
And there is a shift to branded and packaged goods and products.

3.1.3 Social

 Change in consumer Profile

As there is rapid urbanization and increased literacy and per capita income is also increasing, have
all caused rapid growth. There is change in demand also. It leads to a great demand opportunities. As
a matter of fact around 45 % of the population in India is below the age of 20 years.

 Change in Lifestyle

Changing Lifestyle of Indian consumers has led to focus on premium products among Indian FMCG
players. These days the market is very volatile and the lifestyle is changing with a great pace. Earlier
people used to be very traditional and they were not willing to change to a great extent, they were
like if they use a product then they cannot change their product. Today there are couple with single
income and couple with double income. Both have different lifestyle. Their purchasing power varies
to a great extent

 Rural focus

As market is getting saturated, companies are focusing on rural area for penetration, by providing
consumers with small-sized or single-use packs. These days’ companies are focusing more on the
rural areas a lot. They want to expand a lot in this segment to a great extent.

3.1.4 Technology

Adoption of ERP (like SAP and the like.), Supply Chain Optimization tools and Business
Intelligence Tools will help FMCG companies to integrate business processes across the enterprise,
suppliers and customer’s .And with this higher productivity can be achieved to a great extent. With
the level of competition and sluggish growth most FMCG corporates are looking at IT to reduce
money in the supply chain, and flattenthe bottom line Marketing and advertising through mobile and

30 | P a g e
FMCG INDUSTRY

social media platforms. These days social network, yes social network, companies are using this
social network to a great extent as an advertisement tool and it is very much effective. But right now
from cost point of view, the cost is pretty high in this ad tool.

31 | P a g e
FMCG INDUSTRY

CHAPTER 4

4.1 DATA ANALYSIS

4.1.1 Net Sales

Mar-2022 Mar-2021 Mar- Mar-2019 Mar-2018

2020
ITC LTD.; NET 33,238.60 29,901.27 25,147.4 21,458.98 18,153.19
SALES 6
HUL,; NET 28,019.13 25,810.21 22,116.3 19,735.51 17,501.68
SALES 7
DABUR,; NET 4,870.08 4,349.39 3,757.54 3,264.98 2,855.96
SALES
GODREJ,; NET 4,079.84 3,581.02 2,980.08 2,468.90 1,267.80

32 | P a g e
FMCG INDUSTRY

SALES
P&G,; NET 5,381.11 4,831.33 3,930.39 2,852.74 2,104.17
SALES
Table 3: Net sales

Chart Title
35,000.00

30,000.00

25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00
ITC LTD.; HUL,; DABUR,; GODREJ, P&G,;
NET NET NET ; NET NET
SALES SALES SALES SALES SALES

Mar-14 Mar-13 Mar-12 Mar-11 Mar-10

Figure 4: Net Sales

Interpretation:

ITC: In the year 2018 the net sales was 17500.00. In the year 2019, 21000.00 there is increase in
this year. In the year 2020, net sales was 25000.00 again increased. In the year 2021 again increase
was seen in the form of 30,000. In the 2022 it went to 33,000.00.

HUL: In the year 2018, 17000.00 sales was seen. In the year 2019, 19000.00 sales was seen. In the
year 2020 , 22000.00 was seen. In 2021, 26000.00 sales was seen. In the year 2022, 27000.00 sales
was seen.

DABUR: It can easily be seen that there is no substantial growth in this company comparatively to
the other two company like ITC, and HUL.

GODREJ & P&G: comparatively low.

33 | P a g e
FMCG INDUSTRY

4.1.2 R & D

2018 2019 2020 2021 2022

ITC LTD.; 137.28 123.37 100.97 115.06 85.83
HUL 90.94 112.46 161.23 99.36 89.12
DABUR, 21.56 4.16 5.05 7.01 2.31
GODREJ, 9.5 8.4 7.9 4.9
P&G,
Table 4: R&D

Chart Title
180

160

140

120

100

80

60

40

20

0
ITC LTD.; HUL DABUR, GODREJ, P&G,

Figure 5: R&D of FMCG Companies

Interpretation:

HUL: HUL did a great job in the year 2021. They invested a lot. If we compare it from the year 2018
to 2022.

ITC LTD.: In the term of R & D, ITC invested less in the year 2022. But in the other years HUL
AND ITC are bit comparable.

34 | P a g e
FMCG INDUSTRY

DABUR: not substantial

4.1.3 Ad Expenditure

2018 2019 2020 2021 2022

ITC LTD.; 795.89 806.65 706.12 623.59 511.97
HUL 6,026.9 5,370.27 4,584.7 4,608.33 3,898.69
1 3
DABUR, 865.26 751.65 606.4 581.93 566.4
GODREJ, 919.96 766.36 587.71 501.94 267.19
P&G, 1,832.1 1,920.60 1,503.6 1,046.82 669.78
9 9
Table 5: Ad Expenditure

7000
Chart Title
6000

5000

4000

3000

2000

1000

0
ITC LTD.; HUL DABUR, GODREJ, P&G,

2014 2013 2012 2011 2010

Figure 6: Ad Expenditure

Interpretation:

35 | P a g e
FMCG INDUSTRY

HUL: In this segment HUL is the king in term of ad expenditure. In the year 2022 it went to 6000.
No industry can match in this segment.

ITC: ITC LTD lag behind in this segment of ad expenditure.

DABUR, GODREJ AND P & G: They put less money in this segment of ad expenditure.

4.1.4 Fund Flow

2018 2019 2020 2021 2022

ITC LTD.; 9587.44 8334.6 6981.61 6253.27 7981.98
HUL 4505.81 4958.39 3015.73 3363.14 3535.73
DABUR, 718.2 915.96 721.74 1101.97 594
GODREJ, 990.51 806.1 1216.42 1426.57 605.94
P&G, 881.21 1110.57 994.99 605.36 240.11
Table 6: Fund Flow

36 | P a g e
FMCG INDUSTRY

Chart Title
12000

10000

8000

6000

4000

2000

0
ITC LTD.; HUL DABUR, GODREJ, P&G,

2014 2013 2012 2011 2010 2010

Figure 7: Fund Flow

Interpretation:

ITC: fund flow in ITC is pretty higher in the year 2022 it went to 9000. In year like 2018 to 2020
fund flow was comparable a bit.

HUL: fund flow in HUL is not that much higher, in the year 2020 it was merely 5000.

DABUR: not very high

GODREJ: In the year 2021 it went a bit high but again came down.

P & G: fund flow is not very high in comparison with the other companies like ITC, HUL, DABUR,
and GODREJ.

4.1.5 PBITM

2018 2019 2020 2021 2022

ITC LTD.; 26.95 25.63 25.54 23.87 23.25
HUL 17.13 15.34 14.97 14.23 15.53
DABUR, 17.88 17.46 15.83 18.45 18.77
GODREJ, 17.51 17.18 19.02 21.7 23.39

37 | P a g e
FMCG INDUSTRY

P&G, 0.78 -8.37 -7.37 -10.73 12.31

Table 7: PBITM

Chart Title
30

25

20

15

10

0
ITC LTD.; HUL DABUR, GODREJ, P&G,
-5

-10

-15

2014 2013 2012 2011 2010

Figure 8: PBITM
Interpretation:

ITC: The variation is not very high in PBITM, in year 2022 it went a bit.

HUL: In 2021 it went 16. There was growth if we look from 2018 to 2022.

DABUR: Almost a kind of constant graph could be seen for dabur.

GODREJ: In the year 2022 it went a bit higher and again started decreasing till 2018.

P & G: There is negative PBIT, you can easily see it from the graph itself.

38 | P a g e
FMCG INDUSTRY

CHAPTER 5

39 | P a g e
FMCG INDUSTRY

5.1 Research Hypothesis

When we talk about science, hypothesis is an explanation or idea that we test by conducting a proper
study and experimentation. But when we go beyond science, then it’s a theory or assumption.

Hypothesis falls between a wild guess and a well-established theory. In science, a hypothesis
goes through series of testing and then only it is termed as a theory. But in contrary, hypothesis is
more like making an assumption.

In hypothesis testing, the alternative hypothesis H1 and the null hypothesis Ho are the two
rival hypothesis. These two opposite hypothesis are compared by using statistical hypothesis test.

For FMCG Industry, we have developed the hypothesis as follows:

Ho: There is no significant difference in the mean variance of profitability of FMCG Industry in
India.

H1: There is a significant difference in the mean variance of profitability of FMCG Industry in India.

- With 95% confidence level and 5% as level of significance.

Ho as a null hypothesis indicates that there is no statistical significance in the FMCG Industry
in India. It attempts to articulate that there is no existence of variation between the variables
such as cash profit, net operating profit ratio, net profit margin and profit before interest and
tax (PBIT) of 7 years of 5 major FMCG companies namely: ITC, HUL, Marico, Dabur,
Nestle, Britannia and Colgate-Palmolive.

H1 as an alternative hypothesis shows that there is statistical significance in the FMCG

Industry in India. This is contrary of null hypothesis.

So, in order to test the hypothesis, in our project report, we have taken 7 years of data of five
major FMCG Industry namely: ITC, HUL, Marico, Dabur, Nestle, Britannia and Colgate-
Palmolive. Extracted data are cash profit, net operating profit ratio, net profit margin and
profit before interest and tax (PBIT) which we have considered as a variables.

40 | P a g e
FMCG INDUSTRY

In order to test the hypothesis of five FMCG Industry we have to conduct ANOVA Test.
ANOVA test is analysis of variance. It is a statistical analysis tool which is used to test the
degree to which two or more group vary or differ. It basically determines the impact of
independent variables have on the dependent variable.

The data are as follows:

Cash Profit as % of Net Worth

Year HUL DABUR ITC GODREJ P&G

2015 13.56 16.16 23.45 19.22 22.13
2016 12.29 15.97 24.22 15.53 23.58
2017 12.76 15.88 23.98 19.71 22.77
2018 11.59 15.58 25.6 17.17 17.05
2019 12.46 14.9 26.38 15.14 15.52
2020 12.96 14.97 26.63 14.95 13.37
2021 13.61 14.59 28.19 14.57 15.82
Total 89.23 108.05 178.45 116.29 30.24
Mean 12.74714 15.43571 25.49286 16.61286 18.60571
Combined 17.77886
Mean
Table 8: Cash Profit Data of FMCG
ANOVA: Two factor without replication

Source of variation SS df MS F P-value F crit

Rows 28.37863 6 4.729772 0.922893 0.4961 2.508189
Columns 646.5026 4 161.6256 31.53709 3.08E-09 2.776289
Error 122.9985 24 5.124939
Total 797.8798 34
Table 9: ANOVA Test of Cash Profit

41 | P a g e
FMCG INDUSTRY

Interpretation:
Rows indicate the comparison between the companies with data of 7 years where F cal value
is 0.922893 and F critical is 2.508189 so as F cal is not greater than F critical, we cannot
reject Ho.
Columns indicate the comparison within the company itself for 7 years where F cal is
31.53709 and F critical is 2.776289 so as F cal is greater than F critical, we reject Ho.

Net Operating Profit Ratio

Year HUL DABUR ITC GODREJ P&G

2015 14.95 18.6 31.57 22.27 27.75
2016 14.46 18.33 32.84 15.54 27.75
2017 15.74 19.17 33.02 21.47 26.21
2018 13.57 17.06 34.54 19.05 16.64
2019 14.88 17.54 35.15 19.29 15.43
2020 15.51 17.34 35.54 17.59 14.85
2021 15.97 16.95 37.47 18.31 20.51
Total 105.08 126.99 240.13 133.52 149.14
Mean 15.01143 18.14143 34.30429 19.07429 21.30571
Combined 21.56743
Mean
Table 10: Net Operating profit ratio Data of FMCG

ANOVA: Two factor without replication

Source of variation SS Df MS F P-value F crit

Rows 20.364 4 5.091 2.566675 0.119498 3.837853
Columns 612.785 2 306.3927 154.4707 4.06E-07 4.45897
3

42 | P a g e
FMCG INDUSTRY

Error 15.868 8 1.9835

Total 649.017 14
3
Table 11: ANOVA of Net Operating profit ratio Data of FMCG

Interpretation:
Rows indicate the comparison between the companies with data of 7 years where F cal value
is 2.566675 and F critical is 3.837835 so as F cal is not greater than F critical, we cannot
reject Ho.
Columns indicate the comparison within the company itself for 7 years where F cal 154.4707
is F critical is 4.45897 so as F cal is greater than F critical, we reject Ho.

Net Profit margin Ratio

Year HUL DABUR ITC GODREJ P&G

2015 12.58 15.06 21.5 16.5 19.89
2016 12.09 15.44 21.18 14.22 22.36
2017 12.29 15.03 21.3 18.87 19.31
2018 11.52 14.27 22.63 17.58 14.54
2019 12.01 12.17 23.7 19.93 13.44
2020 14.37 13.32 24.05 14.06 11.58
2021 13.5 13.49 25.57 13.71 14.17
Total 88.36 98.78 159.93 114.87 115.29
Mean 12.62286 14.11143 22.84714 16.41 16.47
Combined 16.49229
Mean
Table 12: Net Profit Margin Ratio Data of FMCG

ANOVA: Two factor without replication

Source of variation SS Df MS F P-value F crit

Rows 14.26134 6 2.37689 0.379096 0.885052 2.508189

43 | P a g e
FMCG INDUSTRY

Columns 427.227 4 106.8062 17.03488 9.63E-07 2.776289

Error 150.4772 24 6.269885
Total 591.9656 34
Table 13: ANOVA of Net Profit Margin Ratio

Interpretation:
Rows indicate the comparison between the companies with data of 7 years where F cal value
is 0.379096 and F critical is 2.508189 so as F cal is not greater than F critical, we cannot
reject Ho.
Columns indicate the comparison within the company itself for 7 years where F cal is
17.03488 and F critical is 2.776289 so as F cal is greater than F critical, we reject Ho.

PBIT As % Of Net Worth

Year HUL DABUR ITC GODREJ P&G

2015 13.78 17.29 27.5 20.39 25.21
2016 13.39 17.11 28.37 13.73 25.02
2017 14.59 17.97 28.97 19.56 22.69
2018 12.28 17.76 30.65 17.55 13.93
2019 13.72 16.36 31.34 18.07 12.76
2020 14.26 15.35 31.88 16.46 12.5
2021 14.71 15.49 33.64 17.27 18.08
Total 96.73 117.33 212.35 123.23 130.19
Mean 13.81857 16.76143 30.33571 17.60429 18.59857
Combined 19.42371
Mean
Table 14: PBIT Data of FMCG

ANOVA: Two factor without replication

Source of SS df MS F P-value F crit

44 | P a g e
FMCG INDUSTRY

variation
Rows 28.80106 6 6.466843 0.692119 0.658156 2.508189
Columns 1130.978 4 282.7446 30.26097 4.64E-09 2.776289
Error 224.2449 24 9.343539
Total 1394.024 34
Table 15: ANOVA of PBIT

Interpretation:
Rows indicate the comparison between the companies with data of 7 years where F cal value
is 0.692119 and F critical is 2.508189 so as F cal is not greater than F critical, we cannot
reject Ho.
Columns indicate the comparison within the company itself for 7 years where F cal is
30.26097 and F critical is 2.776289 so as F cal is greater than F critical, we reject Ho.

45 | P a g e
FMCG INDUSTRY

CHAPTER 6

46 | P a g e
FMCG INDUSTRY

Foreign Direct Investment

Foreign direct investment (FDI) in its

classic definition is defined as a company
from one country making a physical
investment into building a factory in
another country. Its definition can be
extended to include investments made to
acquire lasting interest in enterprises
operating outside of the economy of the investor. The FDI relationship consists of a parent enterprise
and a foreign affiliate which together form a Multinational corporation (MNC).

FDI in India has increased over the years due to the efforts that have been made by the Indian
government. The increased flow of FDI in India has given a major boost to the country's economy
and so measures must be taken in order to ensure that the flow of FDI in India continues to grow.

Advantages of FDI in India:

The Indian government made several reforms in the economic policy of the country in the early
1990s. This helped in the liberalization and deregulation of the Indian economy and also opened the
country's markets to foreign direct investment.

As a result of this, huge amounts of foreign direct investment came into India through non- resident
Indians, international companies, and various other foreign investors. The growth of FDI in India
boosted the economic growth of the country. Major advantages of FDI in India have been in terms of
-

 Increased capital flow.

 Improved technology.
 Management expertise.
 Access to international markets.

47 | P a g e
FMCG INDUSTRY

WHY INDIA

Large domestic market

India is one of the largest emerging markets, with a population of over one billion. India is one of the
largest economies in the world in terms of purchasing power and has a strong middle class base of
300 million.

Now India has two major sectors where the market can be spotted. Urban and Rural markets.

Around 70 per cent of the total households in India (188 million) reside in the rural areas. The total
number of rural households is expected to rise from 135 million in 2001-02 to 163 million in 2011-
12; this presents the largest potential market in the world. The annual size of the rural FMCG market
was estimated at around US$ 10.5 billion in 2001-02. With growing incomes at both the rural and the
urban level, the market potential is expected to expand further.
India - a large consumer goods spender.

An average Indian spends around 40 per cent of his income on grocery and 8 per cent on personal
care products. The large share of fast moving consumer goods (FMCG) in total individual spending
along with the large population base is another factor that makes India one of the largest FMCG
markets.

Consumption pie

48 | P a g e
FMCG INDUSTRY

EXPENDITURE

Consumer Durables
clothing
vacations
eating out
footwear
entertainment
accessories
books and music
grocery
personal care
home textiles
savings and investments

FMCG Category and products

Health care –

Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners,
floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish
and furniture polish).

49 | P a g e
FMCG INDUSTRY

Food and beverages –

Health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack
food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products;
bottled water; branded flour; branded rice; branded sugar; juices etc.
Personal care –
Oral care, hair care, skin care, personal wash (soaps); cosmetics and toiletries; deodorants;
perfumes; feminine hygiene; paper products.

Indian Competitiveness and Comparison with the World

Materials availability
India has a diverse agro-climatic condition due to which there exists a wide-ranging and large raw
material base suitable for food processing industries. India is the largest producer of livestock, milk,
sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits &
vegetables. India also has an ample supply of caustic soda and soda ash, the raw materials in the
production of soaps and detergents – India produced 1.6 million tonnes of caustic soda in 2003-04.

50 | P a g e
FMCG INDUSTRY

Tata Chemicals, one of the largest producers of synthetic soda ash in the world is located in India.
The availability of these raw materials gives India the locational advantage.

Cost competitiveness
Labour cost comparison

Labor Cost
25000

20000

15000 Labor Cost

10000

5000

0
China Indonasia India Malasia Korea Singapore

Apart from the advantage in terms of ample raw material availability, existence of low-cost labour
force also works in favour of India. Labour cost in India is amongst the lowest in Asian countries.
Easy raw material availability and low labour costs have resulted in a lower cost of production.
Many multi-nationals have set up large low cost production bases in India to outsource for domestic
as well as exports market.

The FDI Policy (Foreign Direct Investment)

Automatic investment approval (including foreign technology agreements within specified norms),
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, alcoholic
beverages and those reserved for small scale industries (SSI). 24 per cent foreign equity is permitted
in the small-scale sector. Temporary approvals for imports for test marketing can also be obtained
from the Director General of Foreign Trade. The evolution of a more liberal FDI policy environment
in India is clearly supported by the successful operation of some of the global majors like PepsiCo in
India.

51 | P a g e
FMCG INDUSTRY

Ex. PepsiCo's India experience

After a not so successful attempt to enter the Indian market in 1985, Pepsi re-entered in 1988 with a
joint venture of PepsiCo, Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and
Voltas India Limited. By 1994, Pepsi took advantage of the liberalized policies and took control of
Pepsi Foods by making an offer to both Voltas and PAIC to buy their equity. The Indian government
gave concessions to the company, Pepsi was allowed to increase its turnover of beverages
component to beyond 25 per cent and was no longer restricted by its commitment to export 50 per
cent of its turnover. The government approved more than US$ 400 million worth of investment of
which over US$ 330 million has already been invested. The government also allowed PepsiCo to set
up a new company in India called PepsiCo India Holdings Pvt Ltd, a wholly owned subsidiary of
PepsiCo International, which is engaged in beverage manufacturing, bottling and exports activities as
Pepsi Foods Ltd. Since then, the company has bought over bottlers in different parts of India along
with Dukes, a popular soft-drink brand in western India to consolidate its market share. This was
followed by an introduction of Tropicana juice in the New Delhi and Bangalore markets in 1999.

Currently, soft drink concentrate, snack foods and vegetable and food processing are the key
products of the company. Pepsi considers India, along with China, as one of the two largest and
fastest growing businesses outside North America. Pepsi has 19 company owned factories while their
Indian bottling partners own 21. The company has set up 8 Greenfield sites in backward regions of
different states. PepsiCo intends to expand its operations and is planning an investment of
approximately US$ 150 million in the next two – three years.

Removal of Quantitative Restrictions and Reservation Policy

The Indian government has abolished licensing for almost all food and agro-processing industries
except for some items like alcohol, cane sugar, hydrogenated animal fats and oils etc., and items
reserved for the exclusive manufacture in the small scale industry (SSI) sector. Quantitative
restrictions were removed in 2001 and Union Budget 2004-05 further identified 85 items that would
be taken out of the reserved list. This has resulted in a boom in the FMCG market through market
expansion and greater product opportunities.

52 | P a g e
FMCG INDUSTRY

Central and state

initiatives
Various states governments like
Himachal Pradesh, Uttaranchal and
Jammu & Kashmir have encouraged
companies to set up manufacturing
facilities in their regions through a
package of fiscal incentives. Jammu
and Kashmir offers incentives such as
allotment of land at concessional rates,
100 per cent subsidy on project reports
and 30 per cent capital investment
subsidy on fixed capital investment upto US$ 63,000. The Himachal Pradesh government offers
sales tax and power concessions, capital subsidies and other incentives for setting up a plant in its tax
free zones. Five-year tax holiday for new food processing units in fruits and vegetable processing
have also been extended in the Union Budget 2004-05. Wide-ranging fiscal policy changes have
been introduced progressively. Excise and import duty rates have been reduced substantially. Many
processed food items are totally exempt from excise duty. Customs duties have been substantially
reduced on plant and equipment, as well as on raw materials and intermediates, especially for export
production. Capital goods are also freely importable, including second hand ones in the food-
processing sector.

Food laws
Consumer protection against adulterated food has been brought to the fore by "The Prevention of
Food Adulteration Act (PFA), 1954", which applies to domestic and imported food commodities,
encompassing food color and preservatives, pesticide residues, packaging, labeling and regulation of
sales.

Worlds View and India

53 | P a g e
FMCG INDUSTRY

The structure

The Indian FMCG sector is the fourth largest sector in the economy and creates employment for
three million people in downstream activities. Within the FMCG sector, the Indian food processing
industry represented 6.3 per cent of GDP and accounted for 13 per cent of the country's exports in
2003-04. A distinct feature of the FMCG industry is the presence of most global players through
their subsidiaries (HLL, P&G, Nestle), which ensures new product launches in the Indian market
from the parent's portfolio.

 Critical operating rules in Indian FMCG sector

• Heavy launch costs on new products on launch advertisements, free samples and product
promotions.

• Majority of the product classes require very low investment in fixed assets

• Existence of contract manufacturing

• Marketing assumes a significant place in the brand building process

• Extensive distribution networks and logistics are key to achieving a high level of penetration in
both the urban and rural markets

• Factors like low entry barriers in terms of low capital investment, fiscal incentives from
government and low brand awareness in rural areas have led to the mushrooming of the unorganized
sector

• Providing good price points is the key to success.

54 | P a g e
FMCG INDUSTRY

Here are a few breakups of what Indian standards look like when compared with the other similar or
powerful countries. Few examples as to where our country stands…

Detergent per capita consumption

25

20

15 Detergent per capita con-

sumption

10

0
West europe USA Philipines India

Toothpaste per capita consumption

1.6

1.4

1.2

1 Toothpaste per capita con-

sumption
0.8

0.6

0.4

0.2

0
UK Brazil Thialand India

55 | P a g e
FMCG INDUSTRY

Tea Per capita consumption

3

2.5

2
Tea Per capita consumption
1.5

0.5

0
UK Pakistan India

Skincare per capita consumption

1000
900
800
700
600
Skincare per capita consumption
500
400
300
200
100
0
UK USA Argentina India

56 | P a g e
FMCG INDUSTRY

Ice Cream per capita consumption

25

20

15 Ice Cream per capita con-

sumption

10

0
USA Pakistan India

Indian FMCG market in the Urban Sector

Urban FMCG
12

10

8
Urban FMCG
6

0
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

57 | P a g e
FMCG INDUSTRY

Rural FMCG
14

12

10

8 Rural FMCG

0
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Most Indian FMCG companies focus on urban markets for value and rural markets for volumes. The
total market has expanded from US$ 17.6 billion in 2004-05 to US$ 22 billion in 2008-09 at current
prices. Rural demand constituted around 52.5 per cent of the total demand in 2008-09. Hence, rural
marketing has become a critical factor in boosting bottom lines. As a result, most companies' have
offered low price products in convenient packaging. These contribute the majority of the sales
volume. In comparison, the urban elite consume a proportionately higher value of FMCGs, but not
volume.

58 | P a g e
FMCG INDUSTRY

Local Kirana Shops

Products

Household care
The size of the fabric wash market is estimated to be US$ 1 billion, household cleaners to be US$
239 million and the production of synthetic detergents at 2.6 million tonnes. The demand for
detergents has been growing at an annual growth rate of 10 to 11 per cent during the past five years.
The urban market prefers washing powder and detergents to bars on account of convenience of
usage, increased purchasing power, aggressive advertising and increased penetration of washing
machines. The regional and small unorganized players account for a major share of the total
detergent market in volumes.

Personal care

59 | P a g e
FMCG INDUSTRY

The size of the personal wash products is estimated at US$ 989 million; hair care products at US$
831 million and oral care products at US$ 537 million. While the overall personal wash market is
growing at one per cent, the premium and middle-end soaps are growing at a rate of 10 per cent. The
leading players in this market are HLL, Nirma, Godrej Soaps and Reckitt & Colman. The oral care
market, especially toothpastes, remains under penetrated in India (with penetration level below 45
per cent) due to lack of hygiene awareness among rural markets. The industry is very competitive
both for organized and smaller regional players. The Indian skin care and cosmetics market is valued
at US$ 274 million and dominated by HLL, Colgate Palmolive, Gillette India and Godrej Soaps. This
segment has witnessed the entry of a number of international brands, like Oriflame, Avon and
Aviance leading to increased competition. The coconut oil market accounts for 72 per cent share in
the hair oil market. In the branded coconut hair oil market, Marico (with Parachute) and Dabur are
the leading players. The market for branded coconut oil is valued at approximately US$ 174 million.

Food and Beverages Food

According to the Ministry of Food Processing, the size of the Indian food processing industry is
around US$ 65.6 billion including US$ 20.6 billion of value added products. Of this, the health
beverage industry is valued at US$ 230 billion; bread and biscuits at US$ 1.7 billion; chocolates at
US$ 73 million and ice creams at US$ 188 million. The size of the semi-processed/ready to eat food
segment is over US$ 1.1 billion. Large biscuits & confectionery units, soya processing units and
starch/glucose/sorbitol producing units have also come up, catering to domestic and international
markets. The three largest consumed categories of packaged foods are packed tea, biscuits and soft
drinks.

Beverages
The Indian beverage industry faces over supply in segments like coffee and tea. However, more than
half of this is available in unpacked or loose form. Indian hot beverage market is a tea dominant
market. Consumers in different parts of the country have heterogeneous tastes. Dust tea is popular in
southern India, while loose tea in preferred in western India. The urban-rural split of the tea market
was 51:49 in 2000. Coffee is consumed largely in the southern states. The size of the total packaged
coffee market is 19,600 tonnes or US$ 87 million. The urban rural split in the coffee market was
61:39 in 2000 as against 59:41 in 1995. The total soft drink (carbonated beverages and juices) market
is estimated at 284 million crates a year or US$ 1 billion. The market is highly seasonal in nature
with consumption varying from 25 million crates per month during peak season to 15 million during

60 | P a g e
FMCG INDUSTRY

offseason. The market is predominantly urban with 25 per cent contribution from rural areas. Coca
cola and Pepsi dominate the Indian soft drinks market.

Exports
India is one of the world's largest producers for a number of FMCG products but its exports are a
very small proportion of the overall production. A total export of food processing industry was US$
2.9 billion in 2001-02 and marine products accounted for 40 per cent of the total exports. Though the
Indian companies are going global, they are focusing more on the overseas markets like Bangladesh,
Pakistan, Nepal, Middle East and the CIS countries because of the similar lifestyle and consumption
habits between these countries and India. HLL, Godrej Consumer, Marico, Dabur and Vicco
laboratories are amongst the top exporting companies.

Investment in the FMCG sector

The FMCG sector accounts for around 3 per cent of the total FDI inflow and roughly 7.3 per cent of
the total sectorial investment. The food-processing sector attracts the highest FDI, while the
vegetable oils and vanaspati sector accounts for the highest domestic investment in the FMCG
sector.

Colgate-Palmolive India
Colgate Palmolive India is a 51 per cent subsidiary of Colgate Palmolive Company, USA. It is the
market leader in the Indian oral care market, with a 51 per cent market share in the toothpaste
segment, 48 per cent market share in the toothpowder market and a 30 per cent share in the
toothbrush market. The company also has a presence in the premium toilet soap segment and in
shaving products, which are sold under the Palmolive brand. Other well-known consumer brands
include Charmis skin cream and Axion dish wash. The company reported sales of US$ 226 million
in 2003-04. The company's strategy is to focus on growing volumes by improving penetration
through aggressive campaigning and consumer promotions. The company plans to launch new
products in oral and personal care segments and is prepared to continue spending on advertising and
marketing to gain market share. Margin gains are being targeted through efficient supply chain
management and bringing down cost of operations.

H J Heinz Co

61 | P a g e
FMCG INDUSTRY

A US$ 8.4 billion American food major, H J Heinz Co comprises 4,000 strong brand buffets in infant
food, sauces and condiments. The company was the first to commence manufacturing and bottling of
tomato ketchup in 1876. In India, Heinz has a presence through its 100 per cent subsidiary Heinz
India Pvt Ltd. Heinz acquired the consumer products division of pharmaceutical major Glaxo in
1994. Heinz's product range in India consists of Complan milk beverage, health drink Glucon-D,
infant food Farex and Nycil prickly heat powder, besides the Heinz ketchup range.

Hindustan Lever Ltd (HLL)

Hindustan Lever Ltd is a 51 per cent owned subsidiary of the Anglo-Dutch giant Unilever, which has
been expanding the scope of its operations in India since 1888. It is the country's biggest consumer
goods company with net sales of US$ 2.4 billion in 2003. HLL is amongst the top five exporters of
the country and also the biggest exporter of tea and castor oil. The product portfolio of the company
includes household and personal care products like soaps, detergents, shampoos, skin care products,
color cosmetics, deodorants and fragrances. It is also the market leader in tea, processed coffee,
branded wheat flour, tomato products, ice cream, jams and squashes. HLL enjoys a formidable
distribution network covering over 3,400 distributors and 16 million outlets. In the future, the
company plans to concentrate on its herbal health care portfolio (Ayush) and confectionary business
(Max). Its strategy to grow includes focusing on the power brands' growth through consumer
relevant information, cross category extensions, leveraging channel opportunities and increased
focus on rural growth.

Nestle India Ltd (NIL)

Nestle India Ltd a 59.8 per cent subsidiary of Nestle SA, Switzerland, is a leading manufacturer of
food products in India. Its products include soluble coffee, coffee blends and teas, condensed milk,
noodles (81 per cent market share), infant milk powders (75 per cent market share) and cereals (80
per cent market share). Nestle has also established its presence in chocolates, confectioneries and
other processed foods. Soluble beverages and milk products are the major contributors to Nestle's
total sales. Some of Nestle's popular brands are Nescafe, Milkmaid, Maggi and Cerelac. The
company has entered the chilled dairy segment with the launch of Nestle Dahi and Nestle Butter.
Nestle has also made a foray in non-carbonated cold beverages segment through placement of Nestea
iced tea and Nescafe Frappe vending machines. Exports contribute to 23 per cent of its turnover and
the company reported net sales of US$ 440 million in 2003.

62 | P a g e
FMCG INDUSTRY

PepsiCo
PepsiCo is a world leader in convenient foods and beverages, with revenues of about US$ 27 billion.
PepsiCo brands are available in nearly 200 markets across the world. The company has an extremely
positive outlook for India. "Outside North America two of our largest and fastest growing businesses
are in India and China, which include more than a third of the world's population" (Pepsico's annual
report). PepsiCo entered India in 1989 and is concentrating on three focus areas - soft drink
concentrate, snack foods and vegetable and food processing. PepsiCo's success is the result of
superior products, high standards of performance and distinctive competitive strategies.

Procter & Gamble Hygiene and Health Care Limited

Richardson Hindustan Limited (RHL), manufacturer of the Vicks range of products, was
rechristened 'Procter & Gamble India' in October 1985, following its affiliation to the 'Procter &
Gamble Company', USA. Procter & Gamble Hygiene and Health Care Limited (PGHHCL) acquired
its current name in 1998, reflecting the two key segments of its business. P&G, USA has a 65 per
cent stake in PGHHCL. The parent also has a 100 per cent subsidiary, Procter & Gamble Home
Products (PGHP). The overall portfolio of the company includes healthcare; feminine-care; hair care
and fabric care businesses. PGHH operates in just two business segments - Vicks range of cough &
cold remedies and Whisper range of feminine hygiene. The detergent and shampoo business has

63 | P a g e
FMCG INDUSTRY

been relocated globally to Vietnam. The company imports and markets most of the products from
South East Asian countries and China, while manufacturing, marketing and export of Vicks and
sanitary napkins has been retained in India. The company reported sales of US$ 91 million in 2002-
03. The parent company has announced its plan to explore further external collaborations in India to
meet its global innovation and knowledge needs.

MARKET OPPORTUNITIES FOR INVESTMENT

According to estimates based on China's current per capita consumption, the Indian FMCG market is
set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. The dominance of Indian
markets by unbranded products, change in eating habits and the increased affordability of the
growing Indian population presents an opportunity to makers of branded products, who can convert
consumers to branded products.

The investment potential in rural markets

The Indian rural market with its vast size and demand base offers a huge opportunity for investment.
Rural India has a large consuming class with 41 per cent of India's middle-class and 58 per cent of
the total disposable income. With population in the rural areas set to rise to 153 million households
by 2009-10 and with higher saturation in the urban markets, future growth in the FMCG sector will
come from increased rural and small town penetration. Technological advances such as the internet
and e-commerce will aid in better logistics and distribution in these areas. Already Indian corporates
such as HLL and ITC have identified the opportunity and have initiated projects such as 'Project
Shakti' and 'e-Choupal' to first, expand rural income, and then, to penetrate this market.

PROJECT SHAKTI
FMCG giant Hindustan Lever initiated 'Project Shakti' to spur growth and increase the penetration of
its products in rural India while changing lives and boosting incomes. Through a combination of
micro-credit and training in enterprise management, women from self-help groups turned direct-
tohome distributors of a range of HLL products and helped the company test hitherto unexplored
rural hinterlands. The project was piloted in Nalgonda district in Andhra Pradesh (AP) in 2001, it has
since been scaled up and extended to over 5,000 villages in 52 districts in AP, Karnataka, Gujarat,
Chattisgarh, Orissa and Madhya Pradesh with around 1,000 women entrepreneurs in its fold. The

64 | P a g e
FMCG INDUSTRY

vision is to create about 11,000 Shakti entrepreneurs covering 100,000 villages and 100 million rural
consumers by 2012. For HLL, greater penetration in rural areas is also imperative since over 50 per
cent of its incomes for several of its product categories like soaps and detergents come from rural
India. The project has borne fruit for HLL. In Andhra Pradesh, so far, since the experiment began,
HLL has seen 15 per cent incremental sales from rural Andhra, which contributes 50 per cent to
overall sales from Andhra of HLL products.

National Players

Britannia India Ltd (BIL)

Britannia India Ltd was incorporated in 1918 as Britannia Biscuit Co Ltd and currently the Groupe
Danone (GD) of France (a global major in the food processing business) and the Nusli Wadia Group
hold a 45.3 per cent equity stake in BIL through AIBH Ltd (a 50:50 joint venture). BIL is a dominant
player in the Indian biscuit industry, with major brands such as Tiger glucose, Mariegold, Fifty-Fifty,
Good Day, Pure Magic, Bourbon etc. The company holds a 40 per cent market share in the overall
organized biscuit market and has a capacity of 300,000 tonne per annum. Currently, the bakery
product business accounts for 99.1 per cent of BIL's turnover. The company reported net sales of
US$ 280 million in 2002-03. Britannia Industries Ltd (BIL) plans to increase its manufacturing
capacity through outsourced contract manufacturing and a greenfield plant in Uttaranchal to expand
its share in the domestic biscuit and confectionery market.

Dabur India Ltd

Established in 1884, Dabur India Ltd is the largest Indian FMCG and ayurvedic products company.
The group comprises Dabur Finance, Dabur Nepal Pvt Ltd, Dabur Egypt Ltd, Dabur Overseas Ltd
and Dabur International Ltd. The product portfolio of the company includes health care, food

65 | P a g e
FMCG INDUSTRY

products, natural gums & allied chemicals, pharma, and veterinary products. Some of its leading
brands are Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola, Lal Dant Manjan, Pudin Hara and
the Real range of fruit juices. The company reported net sales of US$ 218 million in 200304. Dabur
has firmed up plans to restructure its sales and distribution structure and focus on its core businesses
of fast-moving consumer good products and over-the-counter drugs. Under the restructured set-up,
the company plans to increase direct coverage to gap outlets and gap towns where Dabur is not
present. A roadmap is also being prepared to rationalize the stockists' network in different regions
between various products and divisions.

Indian Tobacco Corporation Ltd (ITCL)

Indian Tobacco Corporation Ltd is an associate of British American Tobacco with a 37 per cent
stake. In 1910 the company's operations were restricted to trading in imported cigarettes. The
company changed its name to ITC Limited in the mid-seventies when it diversified into other
businesses. ITC is one of India's foremost private sector companies with a turnover of US$ 2.6
billion. While ITC is an outstanding market leader in its traditional businesses of cigarettes, hotels,
paperboards, packaging and agri exports, it is rapidly gaining market share even in its nascent
businesses of branded apparel, greeting cards and packaged foods and confectionary. After the
merger of ITC Hotels with ITC Ltd, the company will ramp up its growth plans by strengthening its
alliance with Sheraton and through focus on international projects in Dubai and the Far East. ITC's
subsidiary, International Travel House (ITH) also aims to launch new products and services by way
of boutiques that will provide complete travel services.

Marico
Marico is a leading Indian Group incorporated in 1990 and operating in consumer products,
aesthetics services and global ayurvedic businesses. The company also markets food products and
distributes third party products. Marico owns well-known brands such as Parachute, Saffola,
Sweekar, Shanti Amla, Hair & Care, Revive, Mediker, Oil of Malabar and the Sil range of processed
foods. It has six factories, and sub-contract facilities for production. In 2003-04, the company
reported a turnover of US$ 200 million. The overseas sales franchise of Marico's branded FMCG
products is one of the largest amongst Indian companies. It is also the largest Indian FMCG company

66 | P a g e
FMCG INDUSTRY

in Bangladesh. The company plans to capture growth through constant realignment of portfolio along
higher margin lines and focus on volume growth, consolidation of market shares, strengthening
flagship brands and new product offerings (2-3 new product launches are expected in 2004-05). It
also plans to expand its international business to Pakistan.

Nirma Limited
Nirma Ltd, promoted by Karsanbhai Patel, is a homegrown FMCG major with a presence in the
detergent and soap markets. It was incorporated in 1980 as a private company and was listed in fiscal
1994. Associate companies' Nirma Detergents, Shiva Soaps and Detergents, Nirma Soaps and
Detergents and Nilnita Chemicals were merged with Nirma in 1996-1997. The company has also set
up a wholly owned subsidiary Nirma Consumer Care Ltd, which is the sole marketing licensee of the
Nirma brand in India. Nirma also makes alfa olefin, fatty acid and glycerine. Nirma is one of the
most successful brands in the rural markets with extremely low priced offerings. Nirma has plants
located in Gujarat, Madhya Pradesh and Uttar Pradesh. Its new LAB plant is located in Baroda and
the soda ash complex is located in Gujarat. Nirma has strong distributor strength of 400 and a retail
reach of over 1 million outlets. The company reported gross sales of US$ 561 million in 2003-04. It
plans to continue to target the mid and mass segments for future growth.

6.1 Opportunities in the FMCG sector in India

In the past few years, FMCG sector in India is growing at a rate of 11%. This double-digit growth
rate year by year indicates that the consumer demand has been increasing. There has been 17%
growth in this sector in last five years. The shows tremendous growth in the FMCG sector in India.

67 | P a g e
FMCG INDUSTRY

Changing customer demand is the important factor that FMCG should focus on and moreover,
companies are trying their level best to keep up with that. By doing this, they want to be a leader in
the sector and outperform than their competitors. This very fact indicates that the growth is inevitable
in the sector.

Moreover, rural area accounts for more than 700 million consumers, which is 70% of the Indian
population and 50% of the total FMCG market. Right now, there is approximately 400 million
working rural population. Average citizens in rural India have less purchasing power than urban
counterparts. Regardless of this, FMCG market has great potential, and FMCG consumers are
shifting from economy to premium products such as packaged water.

6.2 Comparison of FMCG industry with different Countries

6.2.1 Brazilian FMCG companies

Brazil is a very highly competitive market that is further divided between the two big abroad brand
owners Unilever and P&G, and other small but strong foreign brands such as Reckitt Benckiser as
well as small brands such as Hypermarcas and Ypê. About 21 companies, each with revenues almost
above US$ 65 million 65 million a year, account for 74% of the FMCG market.
 
As a matter to their development and market position, maximum number of Brazilian FMCG
companies have been acquired by abroad FMCG companies. Anheuser-Busch Inc Bev now controls
Brazilian powerhouse AmBev. It is the merger of two market leading Guaraná Antarctica, the
development of famous soft drinks in Brazil. Right now there is fight going on between Pão de
Açúcar which is the largest Brazilian retail chain and Casino, its French partner, for control of
Carrefour in Brazil. Casino declared Brazil as the starting of 50% of its global development in the
next five year
As a contrast, Chinese cosmetic companies like Baojia and Shanghai Jahwa are trying hard earnestly
to ignore being acquired by abroad companies and compete with those international brands both at
home and abroad. Shanghai Jahwa United Co., a maker and distributor of cosmetics, household
cleaning products, items and perfumes, bought a change by restructuring and shifted a 9% percent
stake to Shanghai Chengtou Corporation and Shanghai Juice Corporation in the hopes of
solidification of its grip in China. Currently, it is already selling their products in more developed
markets in countries like Europe and the US, so, Shanghai Jahwa is in a noble situation to enter
developing markets of Brazil if it can continue to develop its brand recognition.

68 | P a g e
FMCG INDUSTRY

In 2010, the non-refrigerated food sector led the FMCG logistics spending in Brazil with a share of
53.2 percent. The beverages sector shadowed with a 26.1 percent share of the entire FMCG logistics
expenditure. Assumed the huge and under-tapped markets in Brazil in the FMCG market such as in
mueslis, soaps and cosmetics, there is still a lot of development in Brazil. .
 For itself, not many have offered abroad to tout their properties. Instead, Brazilian companies are
progressively looking outwards for production in its place. The Brazilian footwear company,
Vulcabras, newly proclaimed that it would buy a factory in India to decrease manufacture costs.

6.2.2 Chinese FMCG companies

China-based FMCG companies have their work decoration for them in their own nationwide market.
The very impression of wrapped foods goes in contradiction of traditional Chinese food purchasing
patterns, with consumers frequently choosing for new foods. Moreover, a fresh survey by the China
Market Research Group designates that creation safety is the top importance amid Chinese shoppers
– something that Chinese brands are not typically related with.  A review by Global Intelligence
Alliance (GIA) between consumer and retail manufacturing professionals in different countries like
China, India and South East Asia in November 2010 exposed that 94 percent of customers in China
prefers foreign brands. With Chinese consumers showing a hunger for fresh foods and international
products, coupled with food care anxieties, Chinese FMCGs until lately have not had the motivation
– or abilities – to enlarge globally. Its old populace and the need to increase to younger customer
markets could though, become an upcoming driving force behind Chinese FMCG companies’. 

As a telling device of China’s mounting FMCG market, FMCG logistics expenditure in China
produced at a CAGR of 6.5 percent amid 2005 and 2010 rendering to a June 9, 2011, account by
Data monitor. The same account predictions logistics expenditure for FMCG to produce at CAGR
(6.3)

In 2010, the non-refrigerated food subdivision led the FMCG logistics expenditure in China
secretarial for a share of 51.6 percent. Drinks sector followed with 22.2 percent share of the spending
(FMCG).
Given the cumulative spending propensities among the central and upper lessons, as well as a liking
for western goods, these statistics are probable to grow. Though, as businesses like Kraft and
Unilever surge their labours in China, the Chinese FMCG market will develop progressively modest,

69 | P a g e
FMCG INDUSTRY

giving all the more incentive for Chinese FMCG businesses to enlarge to other evolving markets in
the forthcoming.

6.2.3 Indian FMCG companies

A mounting Indian populace, particularly the intermediate class and the pastoral segments, dowries
an prospect for manufacturers of branded foodstuffs to entice these novel regulars as well as
construction local makers of these things targets for MNC procurement in the FMCG sector. 

In 2010, an unique number of inland and world-wide FMCG troupes alike took lead of this occasion
in India office for US$797.8 million in M&A deal-making, linked to a mere US$47.9 million the
year earlier due to gradually recovering global economy.

By contrast, the 34 M&A contracts within the FMCG group for 2010 in India were chiefly driven by
Indian companies observing to enlarge beyond their limits. Large Indian FMCG companies, such as
Dabur, Godrej and Emami, are flying up their international growth among ambitions to develop truly
multinational and worries about increased domestic flocking. Given India's important long-term
possible, persistent and cumulative FDI influxes into the country have heightened race within the
FMCG sector in India—struggle that could erode current market stocks and latent for future growing
domestically. Therefore, Indian FMCG companies are very determinedly watching to strengthen
their global attendance.

Indian FMCG companies complete a total of 13 attainments in 2010, most of them global.
For instance, Dabur, Godrej and Emami are not latent on their leading locations in India, and are in
its place looking to increase wealth expenditures after US$218.8 million to US$656.5 million, in
instruction to found a tougher market position abroad. Godrej complete seven international
attainments in 2010, Marico complete in two attainments, Dabur made it in two attainments and
Emami was the one who did it in one attainments.

In difference, their FMCG complements in Brazil and China are not increasing globally at closely the
same rate.

6.2.4 Market entries overseas for popular first target

70 | P a g e
FMCG INDUSTRY

As Brazilian, Chinese and Indian FMCG companies flex their strengths and in which markets they
probable want to enter GIA mainly forecasts additional emerging republics nation. Countries like
Egypt, Vietnam, Indonesia, Russia and Nigeria will be very nice-looking. These countries have
conventional a lot less care from global companies in general and consequently.

Dabur, India's fourth major FMCG company, has set its highlights on international markets such as
the Persian Gulf, US, Egypt and Nigeria as it airs to scale up the role of foreign markets to entire
sales to 25 percent from the recent 20 percent. Dabur ended its first ultramarine acquisition in the
second half of 2010, obtaining Turkish peculiar care firm Hobi Kozmetik Group for US$69 million
as share of its approach to strengthen its in Middle east.

Extra Indian FMCG Company, Godrej Group's Godrej Consumer Products leading African personal
care brand Tura from Nigeria's Tura Group late in 2010. T, acquired hey also later bought Latin
American hair colour firm Issue Group and Argentinian-brand Argentous. While Issue Group is a
market leader present in countries like Argentina, Peru, Uruguay and Paraguay, argentous is one of
the most mid-sized Argentine hair care company throughout the world. The combined sales of the
two Argentine companies is said to be over US $45 million. In Indonesia, Godrej is one of the
learned baby care products manufacturer PT Megasari.

India’s hungriness for the FMCG market in South East Asia is also tangible. Marico Ltd, a Mumbai-
based private care crops maker, has elect up an 85 percent impartiality in Vietnam-based FMCG firm
International Consumer Crops Corporation (ICP). Vietnam, which has showed tremendous
development in the FMCG market since 2006 when the industry produced 20 percent year-on-year,
has continued to be good-looking. Driven by increasing youth expenditures, better delivery networks
and robust economic evolution, Vietnam’s rapid development in consumer asset has already
concerned in foreign reserves FMCG. Personal care product brands such as Colgate, Olay, Ginvera
have arrived the Vietnam market and are all execution well. Trials continue for less industrialised
FMCG brands though as 70 percent of the delivery and sales of FMCG crops, such as individual care
products, still happen within old-style channels such as “mom and pop” stores and traditional
medication stores. That said, given the achievement of these more developed FMCG companies, the
evolution of the Vietnamese market and its appeal to Chinese and Indian FMCG corporations will
not abate anytime. The Russian FMCG market is similarly one that has inordinate potential for
evolution, but relics largely unused. Russia is the ninth most packed country in the world and has a
market family that has existed for two decades. However, Russia is a logistical frightening for
FMCG companies given its topographical size. A severe empathetic of regional markets in Russia

71 | P a g e
FMCG INDUSTRY

will therefore be vital for any FMCG company eager to enter. The welfares would be well worth the
energy though. The overall food market capacity in the country touched US$ 270 billion and is
expected to produce by about 15 percent CAGR through to 2014. Emerging market FMCG
Contestants are set to conquer their home-base and soon other emerging markets.

6.3 Future outlook of FMCG in India

In the year 2020, FMCG is expected to be an industry of Rs. 400,000 crore. The anti-ageing skincare
category has grown five times between the year 2007 and 2008. Today it’s the fastest-growing
segment in the skincare market. The famous brand such as Olay that is the premium anti-ageing
skincare brand of Procter & Gamble captured 20 per cent of the market within a year of its launch in
2007 and now dominates it with 37 per cent share. Indian consumers have become so much
conscious about skincare. In addition to this, oral hygiene has become a daily habit for the Indian
consumers. Mouth rinsing seems to be picking up as a habit. So mouthwash penetration is growing at
35 per cent a year. Rural penetration of shampoos increased to 46 per cent last year, way up from 16
per cent in 2001. Rural areas are slowly making tremendous use of FMCG products.

Consumption patterns have changed rapidly in the last five to ten years. The consumer is trying to
experience new things. Consumers are looking for products with better functionality, quality, value,
and more. What consumer ‘needs’ is fast getting replaced with what consumer ‘wants’. There are
numerous drivers of growth for the FMCG in India in the past ten years and there will be big drifts
and elements that will impact its upcoming.

The FMCG Industry witnessed robust year-on-year growth of approximately 11 per cent in the last
decade; this indicates that there was a boost in size from Rs. 47,000 crore in 2000 and 2001 to Rs.
130,000 crore.

The ultimate drivers of growth of this FMCG industry is robust GDP growth, opening up of rural
markets, increased income in rural areas, growing urbanisation along with evolving consumer
lifestyles and buying behaviours.

72 | P a g e
FMCG INDUSTRY

In the year 2020 the FMCG industry is expected to grow at least 12 per cent annually to become Rs.
400,000 crore in size. In addition to this, if some of the aspects work out well, like GDP grows a
little faster, the government removes tailbacks, infrastructure investments speed up, there is more
resourceful spending on government subsidy and so on, then growth can be drastically higher. In the
year 2020, it is expected to be 17% leading to an overall industry size of Rs. 620,000 crore. The
industry will become larger, more responsible and will be more single-minded to its customers by
2020.

Over the next ten years, there will be some important trends that will change the face of the industry.
Some fundamental ones related to advancement of consumer segments are as follows:

 Accelerating ‘premiumisation’

The rising income of Indian consumers has accelerated the trend towards ‘premiumisation’. The
movement can be spotted notably in two income groups that are the rich with annual income of more
than Rs. 10 lakh and the upper middle class with annual income that ranged between Rs. 5 lakh and
Rs. 10 lakh. The behaviour of rich people indicate that they are willing to spend on premium
products for their ‘emotional value’ and ‘exclusive feel’. They are well informed about various
product options, and want to buy products that suit their style. The upper middle class wants to
imitate the rich and up-trade towards higher-priced products that offer greater functional benefits and
experience compared to products for mass consumption.

While these two income groups account for only 3 per cent of the population, it is estimated that by
2020 their numbers will double to 7 per cent of the total population. In 2020 the rich will grow to
approximately 30 million. Similarly, in the very year the upper middle segment will be a population
of about 70 million, which is more than the population of the UK.

 Evolving categories
Categories are sprouting at an abrupt pace in the market for the middle and lower-income segments.
With their rise in their economic standard, consumers are moving from “need” products to “want”
products. For suppose, consumers have moved from toothpowders to toothpastes and are now also
demanding mouthwash within the same category.

Consumers have started demanding customised products, specifically personalised to their individual
tastes and needs. Complexities have started to develop in this category, as there are too many
varieties. For an instance, before there used to two variety of shampoo that is normal and ant-

73 | P a g e
FMCG INDUSTRY

dandruff but now anti-dandruff shampoo itself comes in so many variety for different category of
people like short hair, oily hair, curly hair, dry hair and so on

The inclination towards mass-customisation of products will strengthen the FMCG players
categorizing the buyer as per the age, personal taste & preference, ethnical background and
professional desires.

The beauty products are expected to grow by 20 per cent per annum because of the women whose
socio- cultural lifestyle is changing. Middle-class women are now more conscious of their
appearance and are willing to spend extra on enhancing it. Products such as colour cosmetics that is
growing by 46 per cent and sun care products that is growing at 13 per cent have following this trend
briskly.

 Value at the bottom

A consumer who earns less than Rs. 2 lakh per annum per household constitutes about 900 to 950
million people whom we term as low class people. Talking about the middle class segment that
consists of largely urban, well served and competitive in nature, whereas the low class markets are
contrary of middle class that are largely rural, poorly served and uncompetitive in nature. A lot of the
basic needs of lower economic level of consumers are yet unmet.

FMCG companies have already been catering to lower class of people but now, they need to focus
more on delivering products that add more values.

Population of lower class is estimated to be about 78 per cent of the total population of that category.
This sector is becoming an important source of consumption, as it is not just limited to the ‘survival’
approach. As a result of rise in purchasing power of consumers, the 18 per cent growth of FMCG
market in rural areas a year has surpassed 12 per cent growth of urban markets a year. Moreover, the
rural market covers only 34 per cent of the total FMCG market, given the current growth rates, in the
year 2020 its contribution is expected to increase to 45-50 per cent. It will require tailored products at
highly affordable prices with the potential of large volume supplies.

Products that had no demand in the rural sectors such as fruit juices and sanitary pads have suddenly
started creating their presence in that particular market. Most FMCG companies have achieved
success in creating adequate access to their products in rural areas, now the next move is expected to
come from growth of customised products and movement of rural consumers towards higher-priced
and better products.

74 | P a g e
FMCG INDUSTRY

Another big trend is the emerging idea of many Indians. The market in India is of homogenous
nature despite the presence of different languages and cultures. There is one product for the whole
nation. We can take the example of Diet Coke; it is same for Karnataka and West Bengal, or for
Punjab and Assam. In addition, there is same advertisement for these products throughout the
country.

Soon there will be differentiation of products not just only in country level but only in the state level.
Suppose, Pepsi has a different product in Andhra Pradesh which is not found anywhere else.

FMCG companies now need to grow ‘regional’ in their thinking and shift towards an increasingly
decentralised operating standard in India. As consumer tastes & preferences alter as per regions and
states, it will be beneficial for companies to follow a regional strategy in terms of product
ingredients, positioning and marketing. In conclusion, regionalisation will become an increasingly
key topic for FMCG companies.

75 | P a g e
FMCG INDUSTRY

CHAPTER 7

CONCLUSION
In India, FMCG Industry is a boom. This industry has been growing day by day from the day it has
been established. Economic condition, political condition and social condition will be affecting less
to this sector. The very reason for this is no matter what happens, people will not stop buying the
products that are essential to them in day-to-day life. Moreover, in the current scenario, there is an
upliftment in the living standard of people in India. They are moving to middle-level category which

76 | P a g e
FMCG INDUSTRY

means there is increase in their purchasing power. This has contributed to the rise of FMCG
companies in India.

As there are more competition in the FMCG sectors, people are also having more options to choose
from. This has also made shopping of FMCG more fun and has helped to make the life of people
easier.

Advertisement and promotional activities are one of the factors that influences the purchasing
decision of the people. If FMCG companies want to increase their sale, attract more customers and
create brand loyalty then they have to invest heavily in creating a better brand through
advertisements and giving wide variety of range by undercutting the price of the products so that it
can defeat its competitors and build an easily accessible distribution networks to reach its customers.

There are less barriers to entry and exit in the FMCG industry in India but the main problem here is
the sustainability. As there is large number of competitions, survival becomes tough in this sector.
The key ingredients for survival is to create brand value and brand awareness among the consumers.
For the FMCG Company to succeed, it should understand the behavior of the consumers and try to
provide right products at the right time.

One of the major obstacles in FMCG industry is, consumers can be brand loyal for a short period of
time but in the long term, there can shift to a different brand. This change can result because of
change in taste & preference, availability of value-added products, more features, price, accessibility,
income and more. In order to hold customers in short as well as in long run, FMCG should nail in all
the above areas.

Among the five companies (ITC, HUL, Dabur, Godrej, P&G) that we have analyzed, ITC has been
the leader among the rests. The reason for this is ITC has made huge investment in FMCG segment
which helped it to grow at such a fast pace.

77 | P a g e
FMCG INDUSTRY

Bibliography

Business Standard. (2010, November). Retrieved from

http://www.business-standard.com/article/management/the-future-of-fmcg-
110112900006_1.html

capitaline. (n.d.). Retrieved from www.capitaline.com

cii. (n.d.). Retrieved from http://www.cii.in/Sectors.aspx?

enc=prvePUj2bdMtgTmvPwvisYH+5EnGjyGXO9hLECvTuNvwUH5MWzEuAiG8dfH+/
Z7F

economic times. (n.d.). Retrieved from http://economictimes.indiatimes.com/news/news-by-

industry/cons-products/fmcg

eiu. (n.d.). Retrieved from http://www.eiu.com/industry/consumer-goods/commodity/all/articlelist

first post. (n.d.). Retrieved from http://www.firstpost.com/tag/fmcg

ibef. (2014, October ). Retrieved from http://www.ibef.org/industry/fmcg-presentation

maps of india. (n.d.). Retrieved from http://business.mapsofindia.com/fmcg/

market research. (2013, March). Retrieved from http://www.marketresearch.com/IS-Advisors-

v3900/FMCG-Sector-India-Strategic-Review-7429151/

money control. (n.d.). Retrieved from money control: www.moneycontrol.com

Nagasimha Balakrishna Kanagal. (n.d.). Retrieved from http://tejas.iimb.ac.in/articles/103.php

Nielsen. (n.d.). Retrieved from http://www.nielsen.com/in/en/insights/reports/2014/whats-in-store-

for-indias-fmcg-market.html

Purohit, S. S. (n.d.). info shine. Retrieved from http://info.shine.com/industry/fmcg/6.html

78 | P a g e