FMCG Industry in India

ACKNOWLEDGEMENT
It was indeed an opportunity for us to prepare a Project Report on the FMCG Sector during the programme PGDM for the subject Corporate Business Strategy. During our project development on the FMCG sector , we learnt many interesting things about this sector and many companies , along with the aspects potential and growth as a whole The experience of project has been successfully, thanks to all group members & colleagues with gratitude. We wish to acknowledge all of them. However, we wish to make special mention of the following. First of all we are thankful of our project guide Mr. V.V.Ratna under whose guideline we were able to complete our project. We are whole heartedly thankful to him for giving us his valueable time & attention & for providing us a systematic way for completing our project in time. My thanks and appreciations also go to all my group members in developing the project and people who have willingly helped us out with their abilities.

4 billion in 2015. which ensures new product launches in the Indian market from the parent's portfolio. Burgeoning Indian population. A distinct feature of the FMCG industry is the presence of most global players through their subsidiaries (HUL. With growing incomes at both the rural and the urban level. Colgate-Palmolive).6 billion in 2003 to US$ 33. Around 45 per cent of the population in India is below 20 years of age and the young population is set to rise further. A good number of malls. 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. intense competition between the organized and unorganized segments and low operational cost. The annual size of the rural FMCG market was estimated at around US$ 10. the market potential is expected to expand further. Availability of key raw materials. unleashing a latent demand with more money and a new mindset. It has a strong MNC presence and is characterized by a well established distribution network. The total number of rural households is expected to rise from 135 million in 2001-02 to 153 million in 2009-10. nearly 220 in the country. increased literacy and rising per capita income. Around 70 per cent of the total households in India (188 million) reside in the rural areas. Rapid urbanization. This presents the largest potential market in the world.5 billion in 2001-02.Industry Structure The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13. Growth is also likely to come from consumer 'upgrading' in the matured product categories. India needs around US$ 28 billion of investment in the food-processing industry. .cheaper labor costs and presence across the entire value chain gives India a competitive advantage. P&G. have all caused rapid growth and change in demand patterns. hair wash etc in India is low indicating the untapped market potential. would come up in the next four to five years in semi-urban areas that would lead to an increase in the demand for the products. particularly the middle class and the rural segments. Heinz. With 200 million people expected to shift to processed and packaged food by 2010. Nestle. presents an opportunity to makers of branded products to convert consumers to branded products.1 billion. Rural and semi-urban markets will drive the FMCG business in the country to a compounded annual growth of 50% for the next six years. toothpaste. Penetration level as well as per capita consumption in most product categories like jams. The FMCG market is set to treble from US$ 11. Aspiration levels in this age group have been fuelled by greater media exposure. skin care. leading to an explosion of new opportunities. An average Indian spends around 40 per cent of his income on grocery and 8 per cent on personal care products. Availability of key raw materials and cheap labor costs give India a competitive edge.

HUL is subsidiary of Unilever which holds 51. look good and get more out of life. HUL's brands. Chief Products Currently. With it began an era of marketing branded Fast Moving Consumer Goods (FMCG) in India. Kwality Wall’s. Wheel. Hamam. HUL as we see it now was born in 1956 through merger of 3 separate entities. Unilever sells Foods and Home and Personal Care brands in about 100 countries worldwide. Close-up. Bru Market Structure The FMCG structure in India: .55% of the equity. Dove.000 crores.Brief Background of the Firm In the summer of 1888. HUL is at the "Crossroads" of a major revamp in its strategy to appeal to the consumer segment. Home Care : Surf Excel. The major products of the firms are: Personal Care: Sunsilk. HUL has diversified product portfolio from all segments of FMCG. Rin. embossed with the words "Made in England by Lever Brothers". The theme of the project being "Crossroads". With 35 Power Brands. visitors to the Kolkata harbour noticed crates full of Sunlight soap bars. Ayush. Lakme. Clinic. Breeze. A Fortune 500 transnational. spread across 20 distinct consumer categories. Food : Brooke Bond. touch the lives of two out of three Indians. HUL is India's largest fast moving consumer goods company. we have chosen Hindustan Lever Limited (HUL) as: a) It being the market leader in the sector for most of the years. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of Rs. Kissan.10. with leadership in Home & Personal Care Products and Foods & Beverages. c) Thus. and personal care with brands that help people feel good. Lux. Lipton. hygiene. Peposodent. HUL meets everyday needs for nutrition. b) Facing stagnation in top line growth.

Growth Opportunities . Food & Beverages segment is growing at 9% and dependent on the season.FMCG (HUL) Personal Care Home Care Foods and Beverages Kirana Stores Door To Door Internet Super Stores /Malls Consumer • • • • • • • • • FMCG(HUL) Home Care Personal Care Food & Beverages Internet Kirana Stores Super Store/Malls Door to Door Consumer Industry Performance Major Players & their Performance Revenue Sources Food & Beverages segment leads the revenue pack followed by Personal Care and Home care. Personal care segment leads the pack with the growth rate of 10% where Home care segment is growing at 9%.

As per this method we will weigh the recent data more heavily and smooth out cyclical fluctuations to forecast the trend. Greater focus on activation and point of sale demand creation. Ghari & Jyothi Laboratories giving the nation-wide brands a run for their money Bargaining power of consumer Lack of innovative approach in distribution channel Rising material. improved customer service. advertisement and distribution cost Strategic Initiatives • • • • • • • • • • New sales organization in place. Dabur. Regression Regression analysis models the relationship between one or more response variables .• • • Large untapped rural market Export potential Increasing disposable income levels will result in faster revenue growth. Nirma and Marico. Mushrooming of regional brands like Nirma. higher investment in infrastructure. The only company which matches HUL’s presence in the entire industry is P&G. Demand Forecasting The project aims to forecast the future of HUL using a combination of the following methods: Extrapolation In the extrapolation method we will use the historical data. ITC.Godrej. using which the forecast will be done. Present Challenges • • • • • Competition from the unbranded players in rural market . Nestle. We then calculate an average and trend from the data and use these to derive a forecast. Segmented approach to general trade and modern trade Improved customer service Continuous replenishment operational Lower trade stock Improved stock freshness Information Technology for business advantage Penetration in rural markets Combining corporate responsibility and business strategies to aid development of rural India • Consolidation of customers. The Major Players in the market are: HUL. Colgate-Palmolive. P&G. HUL is the biggest player in the industry with presence in all the segments of the FMCG sector.

batteries. . and the predictors (also called independent variables. sugarcane. A distinct feature of the FMCG industry is the presence of international players through their subsidiaries (HLL. FMCG may also include pharmaceuticals.developed markets. the chief raw materials required in the production of soaps and detergents. bulbs. as well as other non-durables such as glassware. India has an abundant supply of caustic soda and soda ash.. India is the one of the major producer of livestock.1.. Our country has a varied agro-climatic condition which enables to offer extended raw material base suitable for many FMCG sub sections like food processing industries etc. which enables the household section of the industry to excel and grow. intense competition between the organised and unorganised players and low operational cost. Method of Least Squares will be employed for curve fitting. India’s FMCG market is highly fragmented and a considerable part of the market comprises of unorganized players selling unbranded and unpackaged products. explained variables) (usually named Y). The sector has shown an average annual growth of about 11% per annum over the last decade. Mushrooming Indian population. Xp). milk. There are approximately 12-13 million retail stores in India. packaged food products etc.300 billion. paper products. Easy availability of important raw materials. Similarly. Penetration level and per capita consumption in many product categories is very low compared to world average standards representing the unexploited market potential. The accessibility of these raw materials gives India the locational advantage. Examples of FMCG commonly include a wide range of repeatedly purchased consumer products such as toiletries. spices and cashew and is the second largest producer of rice. P&G. and plastic goods. out of which 9 million are FMCG kirana stores. oral care products. well established distribution network. Unlike the . which ensures innovative product launches in the market from their parent's portfolio. mouth wash etc. which are prominently dominated by few large players. consumer electronics. Nestle). presents the huge untapped opportunity to FMCG players. India FMCG sectors’ significant characteristics can be listed as strong MNC presence. Products which have a swift turnover and relatively low cost are known as Fast Moving Consumer Goods (FMCG). particularly the middle class and the rural segments. Growth is also likely to come from consumer 'upgrading' in the matured product categories like processed and packaged food. shaving products and detergents.(also called dependent variables. FMCG items are those which generally get replaced within a year. coconut. INDUSTRY SECTOR The Indian FMCG sector is the fourth largest sector in the economy with an estimated size of Rs. cheaper labor costs and presence across the entire value chain gives India a competitive advantage. cosmetics. explanatory variables) usually named X1. wheat and fruits & vegetables. soap.We will be using simple linear regression for the purpose of forecasting.

Economy and Popular.23 per cent. P&G occupies second position with market share of around ~23 per cent. Personal Care Personal care segment includes personal wash products. This segment is dominated by Colgate-Palmolive with market share of ~49 per cent. toothpowder . Household care segment is featured by intense competition and high level of penetration. hair care products. growth in rural demand and upgrading to the premiumproducts are the key drivers for future demand growth in major FMCG categories. Colgate Palmolive. In washing powder segment. while HUL occupies second position with market share of ~30 per cent. Sachet makes up to 40 per cent of the total shampoo sale. oral care products. HUL is the leader with ~38 per cent of market share. Henkel and Proctor & Gamble. followed by CavinKare with a market share of ~12 per cent and Godrej with a market share of ~3 per cent. Colgate and Dabur are the major players. HUL is the leader with market share of ~53 per cent. The major players in this segment are Hindustan Unilever with a market share of ~54 per cent. In the branded coconut hair oil market. Personal wash can be further segregated into three segments namely Premium. increase in disposable incomes. The skin care market is at a primary stage in India. shampoos. Gillette India and Godrej.MAJOR SEGMENTS OF THE FMCG INDUSTRY: Household Care The detergents segment is growing at an annual growth rate of 10 to 11 per cent during the past five years. Other major players are Nirma. people are becoming more alert about personal grooming. the demand for the household care products is booming. cosmetics etc. In toothpowders market. The oral care market can be segmented into toothpaste . Marico (with Parachute) and Dabur are the leading players. The coconut oil market accounts for 72 per cent share in the hair oil market.greater product choice and availability. The preference is given to detergents in urban area compared to bars. and hair gels. Swelling disposable incomes of the Indian consumers. . With rapid urbanization. Godrej occupies second position with market share of ~10 per cent. toothbrushes – 17 per cent. The Indian skin care and cosmetics market is valued at $274 million and is dominated by HUL. The local and unorganized players account for a major share of the total volume of the detergent market. emergence of small pack size and sachets. Here also. Again the market is dominated by HUL with around ~47 per cent market share. With the change in life styles.60 per cent. The hair care market can be segmented into hair oils. hair colorants & conditioners.

The major share of tea market is dominated by unorganized players. India's share in world consumer spending is set to enlarge from 1.Food and Beverages This segment comprises of the food processing industry. Mjaor players in food segment are HUL. Britannia Industries 4. biscuits and soft drinks. Dabur India 10. Marico Industries OUTLOOK: India has 17% of the world's population and that half of these people are below the age of 25. Asian Paints (India) 2. Procter & Gamble Hygiene and Health Care 5. Income in the hands of younger consumers with a higher propensity to spend. Innovative products to cater to regional or local tastes and the needs of niche consumers is also benefiting in growth of the industry. ITC (Indian Tobacco Company) 7. ITC. health beverage industry. Asian Paints (India) 7. THE TOP 10 COMPANIES IN FMCG SECTOR 1. Leading branded tea players are HUL and Tata Tea. Mineral Water and ice creams. increasing numbers are joining the Indian workforce.9% in 2005 to 3. While spending on women's personal care products is also becoming far more acceptable. chocolates & confectionery. 6. Marico Industries 6. Procter & Gamble Hygiene and Health Care 10. Hindustan Unilever Ltd. Cadbury India 8. Key growth drivers to the Industry are as follows: Robust growth in India’s GDP Growing urbanization Evolving consumer life style Increased income in rural areas Spending Pattern Changing Profile and Mind Set of Consumer . Cadbury India 3. Indian hot beverage market is a tea dominant market. Britannia Industries 9.1% in 2020. The three largest consumed categories of packaged foods are packed tea. GCMMF (AMUL) 9. FMCG players are finding opportunities to introduce products in the convenience and health foods segments. is providing optimism to the economy while opening up new categories in the FMCG space. Nestlé India 8. Nestle and Amul. bread and biscuits. With a median age of 25 years. innovations like single use sachets to reach out to the rural and lower section of the economy is gaining demand. Godrej. Distribution of smaller pack sizes. India is under changing phase as more women are joining India's workforce.

Background Industrial manufacturers are faced with a difficult operational situation in the Fast Moving Consumer Goods (FMCG) sector: Sluggish consumption on European markets. • Control Innovation: deploy the processes and an organization to cut time to market and secure product launches. • Changes in retailers’ procurement models in Europe. pressure on pay. minimize manufacturing cost prices from the design phase. etc. the potential transfer of stock and. Revision of quantitative scales. rising energy prices. reactivity and guaranteed availability. The luxury goods sector is covered elsewhere. both on the manufacturing side (impact of these changes on overall margins) and the retailer’s side (associated issues). cut costs and reduce dependency on fixed costs (optimization of purchasing. assessment of the issues all along the chain to the door of the shop. that result in a reduction in the size of the batches supplied. introduction of variable costs. education. urbanization. • management of complexity due to marketing policies based on special offers and new product launches. identification of solutions to share infrastructures. combined with increased production costs (rises in raw material prices. the advent of modern retail. industrial performance plans. with the growing population. • . operational excellence has become a major factor of competitive performance for industrial manufacturers and is now an essential lever in their quest for profitable and durable growth. in order to enter future negotiations in an informed position. while working to keep complexity under control. thee exists there huge untapped opportunities. • Improve Operational Efficiency.) that erode their profitability due to diminished coverage of their fixed costs. consequently. increased logistics costs and the corresponding potential drop in margins.Growth of Modern FMCG The FMCG sector has a great opportunity for growth in the country. There is a potential for all the FMCG companies as the per capita consumption of almost all products in the country is very low compared to world standards. etc. in particular with the growth of cross-docking and consolidation hubs. regulatory pressure. plus stricter demands in terms of deadlines. the rising disposable incomes.). reduction of complexity and the increase in product ranges. and a consumption-driven society. of the logistics organization. The Challenges: In just a few years. flows and stocks. development of delayed differentiation. INDUSTRY PRACTICES Scope This sector covers all the industrial manufacturers that supply retailers and specialized retailers. Efforts are required in a number of fields: Clarify the commercial promises made to retailers.

while allowing for unforeseeables (variations in demand. • logistics strategy and reconfiguration of distribution networks. • change management and staff mobilization (change strategy.). personal care. The Indian FMCG sector having a market size of US$13. • optimization of stocks and the working capital requirement. • How can Argon Consulting assist you? FMCG involves in-depth knowledge of the issues and the competitive levers in the FMCG sector. Collaborative forecasting. Cadbury. • excellence in logistics and transport. Fagor Brandt. etc. MapaSpontex. inter-company supply chain collaboration (flowcasting. performance management indicators). Some of the skills required to achieve durable results which can transform the operations: service strategy and segmentation of service policies. household care and food & beverages. communication.). etc. Colgate. Sara Lee. etc. optimization of capacity and efficiency. management of promotions. Masterfoods. etc. Loeul et Piriot. and a flexible logistics network can all offer leverage. S&OP. capable of rapid arbitration in the choice of production sites. Danone. planning. • industrial strategy and make or buy decisions.). • optimization of information systems (master plan. Poult. support). This sector is also buoyed by intense competition. Saint Louis Sucre. assistance in making decisions. FMCG . • optimization of industrial performance (lean manufacturing initiatives. Talent Mappers would help our clients to meet up to the recruitment requirement. The Indian FMCG industry is largely classified as organized and unorganized. with a focus on decision-making processes (sales forecasts. FMCG industry is also marked by a robust distribution network coupled with increasing influx of MNCs across the entire value chain. Keeping this promise involves developing an agile supply chain. production incidents. • reduction of the complexity of product ranges. Henkel. • overhaul of the supply chain processes. reaction to demand signals. productivity and introduction of variable costs). training. The sector consists of consumer non-durable products which broadly consists. assistance). control of flows and capacity. Energizer. Reckitt. logistics circuits and the deployment of stocks. data synchronization. • management of innovations and product life cycles. • management and control of operational costs (ABC.Improve Supply Chain Management: optimize product availability. Some FMCG players include Bahlsen Lorenz.1 billion is the fourth largest sector in the economy. • • FMCG & Consumer Durable – The Fast Moving Consumer Goods (FMCG) industry in India is one of the largest sectors in the country and over the years has been growing at a very steady pace. Besides competition. Thus. GPA and GMA. Now gradually people are shifting to processed and packaged food and the figures are expected to 200 million people by 2010. This left India with the requirement of US $28 million in the food processing Industry.

tear-down. We help clients in reducing set-up. therefore. Matching applicants' eligibility for right positions is a complex process if it is focused to achieve satisfaction and long-term results for both the clients and the applicants. consumer health care. registration and distribution costs by taking over the time consuming and costly HR planning concerns. centers on the use of job competencies and behavioral assessment to ensure the selection of right candidates to meet our clients' needs across the following disciplines: • • • • • • • • Sales and Customer Service Marketing and Innovation General Management Human Resources Operations and Supply Chain Finance and Administration Information Technology Technical Services FMCG /Retail It provides temporary as well as full-time staffing solutions for consumer and retail sectors. Our recruitment team has the resources. For consumer and retail sectors. Our recruitment process. personal care. we provide staffing solutions for • • • • • Business Development/Sales Managers Pre and Post Sales Managers Receptionist/Switchboard Operators Accounting Administrative Assistants . expertise and versatility to provide clients with motivated professionals who add value to their teams. Benchmark's comprehensive recruiting practices produce highly qualified specialists. We take pride in providing the best employees possible who keep clients' business operating at peak capacity. Our unique recruitment program constantly makes available a pool of the most competent and accomplished FMCG professionals in their fields. food etc.It specializes in recruiting professionals and managers for FMCG industry. household care. Our services cover sectors like beverage. Fmcg provides employee to meet the clients' flexible or responsive staffing support to cover peak workloads or special projects. offering a comprehensive recruitment and selection service for various positions within the fast moving consumer goods industry.

boosting purchasing power in the countryside. the demand in urban areas would be the key growth driver over the long term.1 billion is the fourth largest sector in the economy.e. female hygiene. However. Better infrastructure facilities will improve their supply chain. rural India accounts for more than 40% consumption in major FMCG categories such as personal care. home and personal care category. urban India accounts for 66% of total FMCG consumption. and hot beverages. Because of the low per capita consumption for almost all the products in the country.2% of the world population in the villages of India. FMCG Sector is expected to grow by over 60% by 2010. the Indian rural FMCG market is something no one can overlook. male grooming. Hair care. In urban areas. Indian Competitiveness and Comparison with the World Markets The following factors make India a competitive player in FMCG sector: Availability of raw materials Because of the diverse agro-climatic conditions in India. there is a large raw material base suitable for food processing industries.• • • • • • Data-Entry Operators Office Automation Specialists Clerks Account Managers Sales & Marketing professionals Telemarketing Executives Attractiveness Of The FMCG Sector The Indian FMCG sector with a market size of US$13. says an HSBC report. and dairy are long-term growth categories in both rural and urban areas. fabric care. if they are able to take the consumers to branded products and offer new generation products. i. increase in the urban population. spices and cashew and . household care and feminine hygiene. It is expected that the rural income will rise in 2007. India is the largest producer of livestock. bakery. it has been able to make a fine recovery since then. That will translate into an annual growth of 10% over a 5-year period.For example. along with increase in income levels and the availability of new categories. Though the sector witnessed a slower growth in 2002-2004. hence providing better growth prospects to the FMCG companies. intense competition between the organized and unorganized segments characterize the sector. FMCG sector is also likely to benefit from growing demand in the market. milk. Within the foods segment. And if the companies are able to change the mindset of the consumers. coconut. with rural India accounting for the remaining 34%. At present.100 crores in 2010. and the chocolates and confectionery categories are estimated to be the fastest growing segments. they would be able to generate higher growth in the near future. will keep growing at relatively attractive rates.500 crores in 2005 to Rs 92. With the presence of 12. it is estimated that processed foods. would help the urban areas maintain their position in terms of consumption. FMCG companies have immense possibilities for growth. sugarcane. Also. An estimated double-digit growth over the next fewyears shows that the good times are likely to continue. It has been estimated that FMCG sector will rise from around Rs 56. household care. including skin care. Increased focus on farm sector will boost rural incomes. A well-established distribution network. Hindustan Levers Limited (HLL) has shown a healthy growth in the last quarter. However.

right from the supply of raw materials to packaged goods in the food-processing sector. Amul supplies milk as well as dairy products like cheese. For example. This brings India a more cost competitive advantage.is the second largest producer of rice. India also produces caustic soda and soda ash. The availability of these raw materials gives India the location advantage Labor cost comparison Presence across value chain Indian companies have their presence across the value chain of FMCG sector. wheat and fruits &vegetables. which are required for the production of soaps and detergents. .

.CONCLUSION Based on our observations and analysis. which has been left untapped till now. In FMCG sector customers are the lifeline and are huge asset so each company which try to satify and select an appropriate strategy to target various classes of people because this is the only way to generate maximum business for the compaies .Customers provide a very strong feedback to the company and companies must do all possible efforts to satisfy requirements of the customers to a great extent as this the only way out to capture the market which has large potential and companies can make huge amount of profit from this market. India being a country having a huge population of around one billion people with most of the FMCG companies in India seek to capture the market which has a vast potential. we can conclude that FMCG companies are utilizing marketing policies and are taking every steps to ensure future profitability .

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