INDUSTRY AWARENESS

FAST MOVING CONSUMER GOODS (FMCG)

Made by Group 7 Section A

Contents
The FMCG Industry - Introduction Trends & Growth Major Players (Domestic) Major Players (International) Government Regulations FDI Policy Milestones in FDI International Players Mergers & Acquisitions Trends & Innovation Financial Analysis Financial Growth Drivers Recent Developments Impact of Union Budget 2012-13

The FMCG Industry

Low Price, High Volume Products

Is a Rs 1.3 trillion Industry contributing 2.2% of the GDP

17% growth may be expected over the next decade, leading to an overall industry size of Rs 6.2 trillion by 2020

Indians still have the lowest levels of per capita consumption of FMCG
Indians are increasingly becoming a brand conscious consumer

Trends and Growth

Govt. policy favoring small scale industry restricted growth from 50s to 80s Market Evolution in the 80s and 90s Late 90s Second Phase of Evolution

Liberalization Entry of MNCs

Shift of focus to rural and low income segment Sachet Bug Rise of regional players

Major Players (Domestic)

Hindustan Unilever ITC Dabur Nestle India Limited Britannia India Limited

Marico
Nirma Limited

Major Players (International)

Cadbury Coca Cola Colgate Palmolive H J Heinz Co. PepsiCo

Procter and Gamble

Cargill Reckitt Benckiser

Government Regulations
Up to 100 per cent foreign equity for most of the food processing sector restrictions removed Five-year tax holiday for new food processing units in fruits and vegetable processing For export production Capital goods freely importable, including second hand ones De-reservation of most FMCG categories from SSI

100 percent export oriented units can be set up by government approval and use of foreign brand names is now freely permitted

FDI Policy
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 percent 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.

Milestones in FDI

International Players
Hindustan Unilever Ltd Procter & Gamble Colgate Palmolive

Reckitt Benckiser
Nestle India Limited

Mergers & Acquisitions

Many multinational companies are focusing the Indian Middle Class with high consumption capacity and increasing income to strengthen their presence in India. Indian players are also actively expanding into the emerging markets to increase global market share and for achieving better stability in earnings
Chart Title
1200 125

1000
800 600 120 400 200

878 FY10

1093 FY11

126 125 124 123 122 121 120 119 118 117

Deal Value (USD Million) No. of Deals

Trends & Innovations

Use of Technology to innovate at every front Companies use various data modeling and simulation techniques to minimize the cost of product and improve the supply chain. Companies are using technologically advanced user friendly methods to deliver the products in a customized way. FMCG products are provided with consumer feedback channels on every pack to enhance consumers trust to the brand, promotions on various social media platforms like websites, blogs, etc to increase visibility and interaction among consumers. Companies are making use of technology in their strategy to innovate products, maintain connection with retailers & consumers and expand their share in the market.

Financial Analysis
COMPANY DPS 3.5 EPS 8 EBITDA Margin P/E 35.7 29.5 ROE 32.7 ROCE 45.7 NET PROFIT MARGIN Asset Turnover Debt Equity 25.6 1.3 0

ITC

NESTLE MARICO
BRITANNIA HUL DABUR P&G COLGATE PALMOLIVE

48.5
0.7 8.5 7.5 1.2 22.5

105.7
5.2 15.63 11.9 3.3 46.48

24.3
11.9 6.79 14.9 16.4 16.64

42.1
36.4 29.74 37.2 32 51.2

95.7
28 35.91 74.6 37.2 25.11

89.6
30.5 70.25 97.2 37.7 30.08

12.8
9.9 3.75 13 13.3 14.54

3.3
17 2.51 6.3 1.9 3.2

0.8
0.7 0.05 0 0.6 0

22

29.6

22.1

34.9

37.2

37.7

13.3

1.9

0.6

Motilal Oswal Research Reports

EPS
150 100 50 0 EPS 1 0.8 0.6 0.4 0.2 0

Debt Equity

Debt Equity

NET PROFIT MARGIN

30 25 20 15 10 5 0 20 15 10 5 0

Asset Turnover

NET PROFIT MARGIN

Asset Turnover

P/E
ROCE
150 100 50 0 60 40 20 0 P/E

ROCE

EBITDA Margin DPS

60 40 20 0 DPS 40 30 20 10 0

EBITDA Margin

Financial Growth Drivers

Disposable Income Organized Retail Distribution Depth- Rural Penetration Buying Pattern Shift Favourable Indian Economy and demographics

Recent Developments
Acquisition of Halite Personal care India Pvt. Ltd. by Marico from Reckitt Benckiser in May 2012 Sahara India in Sep2011 announced a mega expansion plan in retail space Plans to launch a range of food items at over 10,000 retail outlets across 285 cities UK-based PE major Apax Partners had discussions with CavinKare for investment of USD 150 million in Sep2011 Jyothy Laboratories recently acquired the Indian arm of Germany-based Henkel AG for close to Rs 620 crore

Impact of Union Budget 2012-13

FMCG goods fall under the 10 per cent excise bracket The Union Budget 2012-13 had two significant changes 2 % raise in both excise duty and service tax Increase has direct impact on prices Manufacturers and service providers were not happy with the budget and found it inflationary. Customs duty reduced on 65 mm cigarettes Additional ad valorem duty of 10 per cent on existing prices This ad valorem duty would be chargeable on 50 per cent of the retail sale price declared on the pack, Finance Minister Pranab Mukherjee said

THANKS