Strategic Marketing

FMCG Sector

Group Members
• • • • • • Vivek Varun Saurabh Ayushi Ashima Neha

FMCG Sector
• FMCG are products that have a quick shelf turnover, at relatively low cost and don't require a lot of thought, time and financial investment to purchase • ‘Fast Moving Customer Goods’ is in opposition to consumer durables such as kitchen appliances that are generally replaced less than once a year • FMCG is characterized by strong presence of MNC and well established distribution network. • The intense competition between the organised and unorganised segments operating at low operational cost.

Marketer Point of View
• Product Analysis
– – – – Product Price Place Promotion

• Market Analysis
– – – – – Size ( Past , Present and Future) Growth ( Expected Trends ) Profitability Risks / Threats Distribution Channels

Market Analysis

SIZE

Growth

Risk

Profit

FMCG Sector Size
• The Indian FMCG sector is an important contributor to the country's GDP. • It is the fourth largest sector in the economy and is responsible for 5% of the total factory employment in India • This has been due to liberalization, urbanization, increase in the disposable incomes and altered lifestyle • The lower-middle income group accounts for over 60% of the sector's sales. Rural markets account for 56% of the total domestic FMCG demand

FMCG Sector Size (cont.)
• Fast moving consumer goods has gained importance with retailing gaining prominence. • Over the last one decade the market is growing at the rate of 18.7 %. • Total market size in excess of US$ 13.1 billion • Availability of key raw materials, cheaper labour costs and presence of highly effective supply chain system gives competitive advantage.

Growth Prospects
• The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. • The FMCG sector will witness more than 50 per cent growth in rural and semi-urban India by 2010. • Penetration level as well as per capita consumption in most product categories is low indicating the untapped market potential , hence the market potential of growth is very high.

Growth Prospects
• Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products. • With 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment in the food-processing industry. • With the retail gaining momentum, the FMCG prospective growth can be realized with increase in sales volumes.

Growth Prospects
• There is an increase in the disposable incomes and altered lifestyle which is being fueled by the increase in the per capita income. • The increase the population will increase the demands many fold.

Profitability of the sector
• Hindering ( Down)
– Increase in competition resist the growth of the profit margin. – Margins remain under pressure due to unprecedented rise in input costs.

• Pushing (Up)
– FMCG sector depends upon bulk sales only. High the volume of the sales , higher is the profit.

Profitability of the sector
• Balancing (Up/Down)
– Small packaging typically known as ‘Sachet’ - Is a two edged sword. Helps in trapping the bottom segment of the Customer Pyramid . – But it decreases the profit margin per unit sale. – In the long run increases the volume of sales. – Thus must be used very wisely.

Threats / Risks
• Due to cut throat competition there is severe pressure on margin for the manufacturers of FMCG products. • The rural and semi urban population is growing but the problem faced by the FMCG manufacturers is the logistics. • Some problems associated with rural markets is acute dependence on the vagaries of the monsoon, seasonal consumption linked to harvests, festivals and special occasions, poor roads and power problem.

Threats / Risks
• Once the product fails its not easy to revive it back. • When the company launches a new product its competitor will also launch the new product in the same line, within the short span. • Hopping from one product to another is too high , due to very large pool of products. Customer Loyalty is big issue. • Tolerance level in the customer satisfaction is quite low , due to easy availability of other options.

Hopping Nature
Customer Loyalty
Die Hard Loyalist Switcher s Fence Sitter Switcher s Die Hard Oppone nt

The major issue with this sector is the 80% of the customers are Fence Sitter. Hopping from one product to another is too high , due to very large pool of products.

Market Analysis

SIZE Distribution Channels

Growth

Risk

Profit

Distribution channel
• Existing distribution channels
– Can be described by how direct they are to the customer in other words how many channels it take the goods to reach customer.

• Trends and emerging channels
– New channels can offer the opportunity to develop a competitive advantage shorten the channel length.

• Channel power structure
– For example, in the case of a product having little brand equity, retailers have negotiating power over manufacturers and can capture more margin.

Distribution channel
This is typical example any FMCG company say HUL

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