Competitive Strategies Followed By Fmcg Sector In India

Introduction
Competitive Strategy consists of move of companies in order to attract customers. With stand competitive pressures and strengthen an organization's market position. The main objective of Competitive Strategy is to generate a competitive advantage, increase the loyalty of customers and to beat competitors. Five main competitive strategies are:

Overall low cost leadership strategy Best cost provider's strategy Broad differentiation strategy Focused low cost strategy Focused differentiation strategy Here competitive strategy varies from sector to sector and company to company. Thus, it is not easy to predict a single or to find a single strategy for the whole sector. When we come on to FMCG Sector main strategies lay behind market strategies, cost, and quality strategies. Here in this report you are going to get information about such type of strategies of FMCG giants. What are HUL and ITC Ltd.? HUL (Hindustan Unilever Ltd.) This Company is earlier known as Hindustan Lever Ltd. This is India's largest FMCG sector company with all type of household products available with it. It has Home & Personal Care products, and also food and Water Purifier available with it. According to Brand Equity, HUL has largest no of brands in most trusted brands list. 16 of HUL's brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008 in an annual survey. For the entire year ending March - 2009 net turnover of company is Rs. 20'239.33 Crore which is 47.99% higher than 31st December 2007's Rs. 13675.43 Crore driven mainly by dom estic FMCG's with net profit stood at Rs. 2'496.45 Crore. Products of HUL are: Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair & Lovely; Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight; Surfexcel; Vaseline; Wheel. ITC Limited This Company was earlier known as Imperial Tobacco Company of India Ltd. It is Currently headed by Yogesh Chander Deveshwar. Company mainly operates in the industry like Tobacco, Foods, Hotels, Stationary and Greeting Cards with the major products constitutes Cigarettes, packed foods, hotels, and apparels. For the entire year ending Mar-2009 the turnover of company is at Rs. 15388 Crore which is 10.3% higher than previous year's Rs. 13947.53 Crore, driven mainly by robust 20% growth in non cigarette FMCG business with net profit stood at Rs. 3324 Crore.

Analysis of Both Companies HUL & ITC are major companies in FMCG market in India. When we compare both companies on the basis of their strategies i.e. , their competitive strategies in the present market. When we look at the present segment breakup for both of the companies then we came to know that their different products vary too much in the market.

Now let us take a comparative analysis of both the companies under some heads: HUL ITC Hindustan Unilever (HUL) is the largest pure-play FMCG company in the country and has one of the widest portfolio of products sold via a strong distribution channel. It owns and markets some of the most popular brands in the country across various categories, including soaps, detergents, shampoos, tea and face creams. ITC is not a pure-play FMCG company, since cigarettes is its primary business. It is diversifying into non-tobacco. FMCG segments like foods, personal care, paper products, hotels and agri-business to reduce its exposure to cigarettes. Performance After stagnating between 1999 and '04, the company is back on the growth track. In the past three years, till 2008 HUL's net sales have witnessed a CAGR of 11%, while net profit has posted a CAGR of 17%. Despite diversification, ITC's reliance on cigarettes is still huge. The tobacco business contributes 40% to its revenues, and accounts for over 80% of its profit. This cash-generating business has enabled it to take ambitious, but expensive bets in new segments and deliver modest profit growth. Overall Strategy HUL always believes in customer friendly products with major emphasis on low cost overall without compromising on the quality of the product. They are leveraging the capabilities and scale of the parent company and focusing on the value of execution. The entire product product portfolio is also being tweaked to include premium offerings such as Pond's Age Miracle and dove shampoo in skin and hair care. TC is focusing on delivering value at competitive prices. Its tremendous reach through extensive distribution chain has been a competitive advantage. Additionally, the company's e-choupal model for direct procurement is well known under which ITC partners with over 100,000 farmers for spices and wheat procurement and an even larger number for oilseeds. This kind of rural pedigree is hard to beat. Growth Drivers The Company has been launching new products and brand extensions, with investments being made towards brand-building and increasing its market share. HUL is also streamlining its various business operations, in line with the One Unilever' philosophy adopted by the Unilever group worldwide. Introduction of premium products and addition of new consumers via market expansion will be HUL's growth drivers. ITC's backward integration to ensure that its products pass efficiently from the farms to consumers has helped it to cut down supply and procurement costs. ITC's non-cigarette FMCG business leverages the large distribution network the company has developed by selling cigarettes over the years. A rich product mix, along with ramp-up of investments in its new sectors, will be instrumental in charting ITC's growth path.

Risk for both the companies For HUL Being an MNC operating in India, HUL is more conservative in its strategies than its Indian counterparts. Moreover, given increasing competition, it faces the risk of being overtaken by domestic players in various categories. Prolonged inflation may lead to margin contraction, in case HUL is not able to pass on this burden to consumers. The company's large size also poses a problem, since it does not give HUL the agility to address the competition it faces from national and regional players. For ITC Increased regulatory clamps on tobacco, along with rising tax burden, pose a business risk for ITC. So, it has started an ambitious diversification plan, which has its own set of risks. With its foray into the conventional FMCG space, ITC has entered the high-clutter branded products market. This will burden its resources in terms of ad spend and brand-building. Creating brand recall and building market share in new products are ITC's key challenges. Export ban and rising crop prices pose a threat for its agri-business, taxing its margins. Previous Conclusion HUL's up-and-running business model is a treat for investors seeking exposure in the FMCG segment. The company has delivered in the past and has the potential to do better in future. In the small and medium term. ITC's growth story is still evolving. ITC is eyeing the pie which HUL and other FMCG players currently enjoy. Though risky, the company's business model will pay off in the long run. ITC has proved its expertise in the cigarettes, hotels, paper and agri-businesses. Investors who want to bank on its execution ability in FMCG can consider the stock with a long-term horizon. Recommendations According to us the companies should continue with their CSR and also continue with their strategies. The thing that need to be changed is that, ITC should go for more diversification in Non cigarette segment (FMCG) while HUL should come up with the new strategies that could take the new product forward to create a new segment. A common recommendation for both is that they should focus on rural area more.

India: Strategies for Consumer Goods

To keep consumer goods flying off the shelves in India during the slowdown, companies have to focus on the right products at the right prices Heads didn't turn when Coca-Cola (KO) and Pepsi (PEP) hiked prices on some of their most popular beverages in India last fall. Even in the downturn, both companies have enjoyed double-digit volume growth. And despite projections that the world's second-fastest-growing economy will watch its 9% growth rate slow to 5.5% to 6% in 2009, India's makers of fastmoving consumer goods (FMCG) such as beverages, biscuits, and beauty aids historically have been somewhat insulated from economic slowdowns. Indeed, the FMCG industry in India is expected to register close to 15% growth in the financial year ended March 2009. But that

doesn't mean FMCG companies in Indiaboth multinational and domesticcan afford to be overconfident. The fact is, now is the time for them to keep their eyes on the ball. How is the slowdown in the Indian economy affecting consumer-goods companies in India? For one thing, it is forcing them to focus on traditional retail channels like small mom-and-pop stores. It's no secret that India's modern-trade retailers are aggressively closing stores or curbing expansion plans. For example, Subhiksha, once the poster child for India's fledgling modern retail industry, shut down nearly all of its 1,600 stores this year in response to a crippling cash crisis. The 12-year-old retail chain says it is left today with just 50 employees on its rolls, compared with the 5,000 it had in September. As modern trade slows its expansion, it will be traditional retail and distribution networkslower tech, lower cost, and smaller than their modern counterpartsthat will become more important to consumer-products companies. This is especially true in rural areas, where consumer spending has remained particularly strong. In 2008, rural and semi-urban markets contributed almost 80% to FMCG growth. Another distinct trend: Demand for high-end products is dropping. Indian consumers are still buying; it's just that they're avoiding the most expensive brands. That's why companies will need to become more sensitive to price by offering price reductions on existing products and introducing innovative new products at low price points for mainstream consumers. Hindustan Unilever realized in November 2008 that consumers are not seeing value in its Red Label 1kilogram tea carton pack and moved to a pouch format, passing on a significant reduction in packaging costs to consumers.

AN OPPORTUNITY TO BUILD AND INNOVATE

FMCG companies in India can use these trends to their advantageand as a foundation for overtaking their competitors in the recession. Downturns provide opportunities to reorder industries; to come out ahead of the pack requires using recessionary trends to build and innovate. But it's important to have a clear and comprehensive strategy. For example, passing along cost reductions in anticipation of weakening demand may be little more than stopgap measures unless it's part of a broader plan. FMCG companies in India are winning by systematically targeting four key areas to spur growth.

Customers: Focusing on only the right products

Mainstream consumers in India are still buying, but their needs are changing. So winning consumer-products companies are delivering innovative products aimed at addressing those changes. Consumers tend to eat out less frequently during economic slowdowns. McDonalds's

(MCD) is trying to counter that by introducing a wider range of value meals and increasing what it spends to advertise its low-price menus.

STEPS TO SUCCESSFUL FAST-MOVING CONSUMER GOODS (FMCG) BUSINESS

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STEPS TO SUCCESSFUL FAST-MOVING CONSUMER GOODS (FMCG) BUSINESS

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Introduction -Competitive Strategy consists of move of companies in order to attract

customers. With stand competitive pressures and strengthen an organizations market position. The

main objective of Competitive Strategy is to generate a competitive advantage, increase the loyalty of customers and to beat competitors.

Five main competitive strategies are:

Overall low cost leadership strategy Best cost providers strategy Broad differentiation strategy Focused low cost strategy Focused differentiation strategy

Here competitive strategy varies from sector to sector and company to company. Thus, it is not easy to predict a single or to find a single strategy for the whole sector. When we come on to FMCG Sector main strategies lay behind market strategies, cost, and quality strategies. Here in this report you are going to get information about such type of strategies of FMCG giants. What are HUL and ITC Ltd.? HUL (Hindustan Unilever Ltd.) This Company is earlier known as Hindustan Lever Ltd. This is Indias largest FMCG sector company with all type of household products available with it. It has Home & Personal Care products, and also food and Water Purifier available with it. According to Brand Equity, HUL has largest no of brands in most trusted brands list. 16 of HULs brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008 in an annual survey. For the entire year ending March - 2009 net turnover of company is Rs. 20239.33 Crore which is 47.99% higher than 31st December 2007s Rs. 13675.43 Crore driven mainly by dom estic FMCGs with net profit stood at Rs. 2496.45 Crore. Products of HUL are: Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair & Lovely; Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight; Surfexcel; Vaseline; Wheel. ITC Limited This Company was earlier known as Imperial Tobacco Company of India Ltd. It is Currently headed by Yogesh Chander Deveshwar. Company mainly operates in the industry like Tobacco, Foods, Hotels, Stationary and Greeting Cards with the major products constitutes Cigarettes, packed foods, hotels, and apparels. For the entire year ending Mar-2009 the turnover of company is at Rs. 15388 Crore which is 10.3% higher than previous years Rs. 13947.53 Crore, driven mainly by robust 20% growth in non cigarette FMCG business with net profit stood at Rs. 3324 Crore

Competitive Strategies Followed by FMCG Sector in India

Related to Two Companies HUL & ITCOverall Strategy

Overall Strategy

HUL always believes in customer friendly products with major emphasis on low cost overall without compromising on the quality of the product. They are leveraging the capabilities and scale of the parent company and focusing on the value of execution. The entire product product portfolio is also being tweaked to include premium offerings such as Ponds Age Miracle and dove shampoo in skin and hair care. Growth Drivers The Company has been launching new products and brand extensions, with investments being made towards brand-building and increasing its market share. HUL is also streamlining its various business operations, in line with the One Unilever philosophy adopted by the Unilever group worldwide. Introduction of premium products and addition of new consumers via market expansion will be HULs growth drivers. Risk for both the companies For HUL

TC is focusing on delivering value at competitive prices. Its tremendous reach through extensive distribution chain has been a competitive advantage. Additionally, the companys echoupal model for direct procurement is well known under which ITC partners with over 100,000 farmers for spices and wheat procurement and an even larger number for oilseeds. This kind of rural pedigree is hard to beat. Growth Drivers ITCs backward integration to ensure that its products pass efficiently from the farms to consumers has helped it to cut down supply and procurement costs. ITCs non-cigarette FMCG business leverages the large distribution network the company has developed by selling cigarettes over the years. A rich product mix, along with ramp-up of investments in its new sectors, will be instrumental in charting ITCs growth path.

Being an MNC operating in India, HUL is more conservative in its strategies than its Indian counterparts. Moreover, given increasing competition, it faces the risk of being overtaken by domestic players in various categories. Prolonged inflation may lead to margin contraction, in case HUL is not able to pass on this burden to consumers. The companys large size also poses a problem, since it does not give HUL the agility to address the competition it faces from national and regional players. For ITC Increased regulatory clamps on tobacco, along with rising tax burden, pose a business risk for ITC. So, it has started an ambitious diversification plan, which has its own set of risks. With its foray into the conventional FMCG space, ITC has entered the high-clutter branded products market. This will burden its resources in terms of ad spend and brand-building. Creating brand recall and building market share in new products are ITCs key challenges. Export ban and rising crop prices pose a threat for its agribusiness, taxing its margins. Conclusion HULs up-and-running business model is a treat for investors seeking exposure in the FMCG segment. The company has delivered in the past and has the potential to do better in future. In the small and medium term. ITCs growth story is still evolving. ITC is eyeing the pie which HUL and other FMCG players currently enjoy. Though risky, the companys business model will pay off in the long run. ITC has proved its expertise in the cigarettes, hotels, paper and agri-businesses. Investors who want to bank on its execution ability in FMCG can consider the stock with a long-term horizon. According to us the companies should continue with their CSR and also continue with their strategies. The thing that need to be changed is that, ITC should go for more diversification in Non cigarette segment

(FMCG) while HUL should come up with the new strategies that could take the new product forward to create a new segment. A common recommendation for both is that they should focus on rural area more.

Comparison of two FMCG majors; HUL & ITC

Kiran Kabtta, ET Bureau Aug 18, 2008, 05.17am IST

This week, ETIG presents a comparison between two FMCG majors, HUL and ITC. Risk-averse investors interested in stable business & steady dividend income can consider HUL, while ITC is suited for adventurous investors who are hungry for growth, rather than stability. HUL Hindustan Unilever (HUL) is the largest pure-play FMCG company in the country and has one of the widest portfolio of products sold via a strong distribution channel. It owns and markets some of the most popular brands in the country across various categories, including soaps, detergents, shampoos, tea and face creams.

Executive Summary
Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars. Indias FMCG sector is the fourth largest sector in the economy and creates employment for more than three million people in downstream activities. Its principal constituents are Household Care, Personal Care and Food & Beverages. The total FMCG market is in excess of Rs. 85,000 Crores. It is currently growing at double digit growth rate and is expected to maintain a high growth rate. FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and unorganized segments. The Rs 85,000-crore Indian FMCG industry is expected to register a healthy growth in the third quarter of 200809 despite the economic downturn. The industry is expected to register a 15% growth in Q3 2008-09 as compared to the corresponding period last year. Unlike other sectors, the FMCG industry did not slow

down since Q2 2008. the industry is doing pretty well, bucking the trend. As it is meeting the every-day demands of consumers, it will continue to grow. In the last two months, input costs have come down and this will reflect in Q3 and Q4 results. Market share movements indicate that companies such as Marico Ltd and Nestle India Ltd, with domination in their key categories, have improved their market shares and outperformed peers in the FMCG sector. This has been also aided by the lack of competition in the respective categories. Singleproduct leaders such as Colgate Palmolive India Ltd and Britannia Industries Ltd have also witnessed strength in their respective categories, aided by nnovations and strong distribution. Strong players in the economy segment like Godrej Consumer Products Ltd in soaps and Dabur in toothpastes have also posted market share improvement, with revived growth in semiurban and rural markets.

Swot Analysis
Strengths: Low operational costs Presence of established distribution networks in both urban and rural areas Presence of well-known brands in FMCG sector Weaknesses: Lower scope of investing in technology and achieving economies of scale, especially in small sectors Low exports levels "Me-too products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market. Opportunities: Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Large domestic market- a population of over one billion. Export potential

 High consumer goods spending Threats: Removal of import restrictions resulting in replacing of domestic brands Slowdown in rural demand Tax and regulatory structure Industry Category and Products Household Care Personal Wash:The market size of personal wash is estimated to be around Rs. 8,300 Cr. The personal wash can be segregated into three segments: Premium, Economy and Popular. The penetration level of soaps is ~92 per cent. It is available in 5 million retail stores, out of which, 75 per cent are in the rural areas. HUL is the leader with market share of ~53 per cent; Godrej occupies second position with market share of ~10 per cent. With increase in disposable incomes, growth in rural demand is expected to increase because consumers are moving up towards premium products. However, in the recent past there has not been much change in the volume of premium soaps in proportion to economy soaps, because increase in prices has leme consumers to look for cheaper substitutes Detergents:The size of the detergent market is estimated to be Rs. 12,000 Cr. Household care segment is characterized by high degree of competition and high level of penetration. With rapid urbanization, emergence of small pack size and sachets, the demand for the household care products is flourishing. The

demand for detergents has been growing but the regional and small unorganized players account for a major share of the total volume of the detergent market. In washing powder HUL is the leader with ~38 per cent of mar-ket share. Other major players are Nirma, Henkel and Proctor & Gamble.

Personal Care Skin Care:The total skin care market is estimated to be around Rs. 3,400 Cr. The skin care market is at a primary stage in India. The penetration level of this segment in India is around 20 per cent. With changing life styles, increase in disposable incomes, greater product choice and availability, people are becoming aware about personal grooming. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent, fol-lowed by CavinKare with a market share of ~12 per cent and Godrej with a market share of ~3 per cent. Hair Care:The hair care market in India is estimated at around Rs. 3,800 Cr. The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels. Marico is the leader in Hair Oil segment with market share of ~ 33 per cent; Dabur occu-pies second position at ~17 per cent. Shampoos:The Indian shampoo market is estimated to be around Rs. 2,700 Cr. It has the penetration level of only 13 per cent in India. Sachet makes up to 40 per cent of the total shampoo sale. It has low penetration level even in metros. Again the market is dominated by HUL with around ~47 per cent market share; P&G occupies second position with market share of around ~23 per cent. Antidandruff segment constitutes around 15 per cent of the total shampoo market. The market is further expected to increase due to increased marketing by

players and availability of shampoos in affordable sachets.

Oral Care:The oral care market can be segmented into toothpaste - 60 per cent; toothpowder - 23 per cent; toothbrushes - 17 per cent. The total toothpaste market is estimated to be around Rs. 3,500 Cr. The penetration level of toothpowder/toothpaste in urban areas is three times that of rural areas. This segment is dominated by Colgate-Palmolive with market share of ~49 per cent, while HUL occupies second position with market share of ~30 per cent. In toothpowders market, Colgate and Dabur are the major players. The oral care market, es-pecially toothpastes, remains under penetrated in India with penetration level ~50 per cent. Food & Beverages Food Segment :The foods category in FMCG is gaining popularity with a swing of launches by HUL, ITC, Godrej, and others. This category has 18 major brands aggregating Rs. 4,600 Cr. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, ready to eat rice by HUL and pizzas by both GCMMF and Godrej Pillsbury. Tea :The major share of tea market is dominated by unorganized players. More than 50 per cent of the market share is capture by unorganized players. Leading branded tea players are HUL and Tata Tea.

Coffee :The Indian beverage industry faces over supply in segments like coffee and

tea. However, more than 50 per cent of the market share is in unpacked or loose form. The major players in this segment are Nestl, HUL and Tata Tea. Growth Prospect Large Market India has a population of more than 1.150 Billions which is just behind China. According to the estimates, by 2030 India population will be around 1.450 Billion and will surpass China to become the World largest in terms of population. FMCG Industry which is directly related to the population is expected to maintain a robust growth rate

INTRODUCTION Competitive Strategy consists of move of companies in order to attract customers. With stand competitive pressures and strengthen an organizations market position. The main objective of Competitive Strategy is to generate a competitive advantage, increase the loyalty of customers and to beat competitors. FIVE MAIN COMPETITIVE STRATEGIES ARE:
Overall low cost leadership strategy Best cost providers strategy Broad differentiation strategy Focused low cost strategy Focused differentiation strategy Here competitive strategy varies from sector to sector and company to company. Thus, it is not easy to predict a single or to find a single strategy for the whole sector. When we come on to FMCG Sector main strategies lay behind market strategies, cost, and quality strategies. What are HUL and ITC Ltd.? HUL (Hindustan Unilever Ltd.) This Company is earlier known as Hindustan Lever Ltd. This is Indians largest FMCG sector company with all type of household products available with it. It has Home & Personal Care products, and also food and Water Purifier available with it. According to Brand Equity, HUL has largest no of brands in most trusted brands list. 16 of HULs brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008 in an annualsurvey. For the entire year ending March - 2009 net turnover of company is Rs. 20239.33 Crore which is 47.99% higher than 31st December 2007s Rs. 13675.43 Crore driven mainly by domestic FMCGs with net profit stood at Rs. 2496.45 Crore. Products of HUL are: Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair & Lovely; Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight; Surf excel; Vaseline; Wheel. ITC Limited This Company was earlier known as Imperial Tobacco Company of India Ltd. It is Currently headed by Yogesh Chander Deveshwar. Company mainly operates in the industry like Tobacco, Foods, Hotels, Stationary and Greeting Cards with the major products constitutes Cigarettes, packed foods, hotels, and apparels.

For the entire year ending Mar-2009 the turnover of company is at Rs. 15388 Crore which is 10.3% higher than previous years Rs. 13947.53 Crore, driven mainly by robust 20% growth in non cigarette FMCG business with net profit stood at Rs. 3324 Crore. Analysis of Both Companies HUL & ITC are major companies in FMCG market in India. When we compare both companies on the basis of their strategies i.e. , their competitive strategies in the present market. When we look at the present segment breakup for both of the companies then we came to know that their different products vary too much in the market. HUL Segment Breakup ITC Segment Breakup COMPARATIVE ANALYSIS OF BOTH THE COMPANIES UNDER SOME HEADS: HUL ITC Hindustan Unilever (HUL) is the largest pure-play FMCG company in the country and has one of the widest portfolio of products sold via a strong distribution channel. It owns and markets some of the most popular brands in the country across various categories, including soaps, detergents, shampoos, tea and face creams. ITC is not a pure-play FMCG company, since cigarettes is its primary business. It is diversifying into non-tobacco. FMCG segments like foods, personal care, paper products, hotels and agri-business to reduce its exposure to cigarettes.

PERFORMANCE After stagnating between 1999 and 04, the company is back on the growth track. In the past three years, till 2008 HULs net sales have witnessed a CAGR of 11%, while net profit has posted a CAGR of 17%. Despite diversification, ITCs reliance on cigarettes is still huge. The tobacco business contributes 40% to its revenues, and accounts for over 80% of its profit. This cash-generating business has enabled it to take ambitious, but expensive bets in new segments and deliver modest profit growth. Risk for both the companies HUL ITC Being an MNC operating in India, HUL is more conservative in its strategies than its Indian counterparts. Moreover, given increasing competition, it faces the risk of being overtaken by domestic players in various categories. Prolonged inflation may lead to margin contraction, in case HUL is not able to pass on this burden to consumers. The company's large size also poses a problem, since it does not give HUL the agility to address the competition it faces from national and regional players Increased regulatory clamps on tobacco, along with rising tax burden, pose a business risk for ITC. So, it has started an ambitious diversification plan, which has its own set of risks. With its foray into the conventional FMCG space, ITC has entered the high-clutter branded products market. This will burden its resources in terms of ad spend and brand-building. Creating brand recall and building market share in new products are ITCs key challenges. Export ban and rising crop prices pose a threat for its agri-business, taxing its margins. OVERALL STRATEGY

HUL ITC HUL always believes in customer friendly products with major emphasis on low cost overall without compromising on the quality of the product. They are leveraging the capabilities and scale of the parent company and focusing on the value of execution. The entire product portfolio is also being tweaked to include premium offerings such as Ponds Age Miracle and dove shampoo in skin and hair care. ITC is focusing on delivering value at competitive prices. Its tremendous reach through extensive distribution chain has been a competitive advantage. Additionally, the company's e-choupal model for direct procurement is well known under which ITC partners with over 100,000 farmers for spices and wheat procurement and an even larger number for oilseeds. This kind of rural pedigree is hard to beat Growth Drivers HUL ITC
The Company has been launching new products and brand extensions, with investments being made towards brand-building and increasing its market share. HUL is also streamlining its various business operations, in line with the One Unilever philosophy adopted by the Unilever group worldwide. Introduction of premium products and addition of new consumers via market expansion will be HULs growth drivers. ITCs backward integration to ensure that its products pass efficiently from the farms to consumers has helped it to cut down supply and procurement costs. ITCs non-cigarette FMCG business leverages the large distribution network the company has developed by selling cigarettes over the years. A rich product mix, along with ramp-up of investments in its new sectors, will be instrumental in charting ITCs growth path.

Conclusion
HULs up-and-running business model is a treat for investors seeking exposure in the FMCG segment. The company has delivered in the past and has the potential to do better in future. In the small and medium term. ITCs growth story is still evolving. ITC is eyeing the pie which HUL and other FMCG players currently enjoy. Though risky, the companies business model will pay off in the long run. ITC has proved its expertise in the cigarettes, hotels, paper and agri-businesses. Investors who want to bank on its execution ability in FMCG can consider the stock with a long-term horizon.