FMCG

INDUSTRY ANALYSIS
Made By: Abhinav, Siddhant & Sonal
 Industry Overview
◦ FMCG sector is the 4th largest sector in the Indian economy.
◦ FMCG market in India is expected to grow at a CAGR of 23.15 per cent (currently
growing at 10% due to the economic slowdown) and is expected to reach US$
103.70 billion by 2020 from US$ 68.38billion in FY18.
◦ Retail market in India is estimated to reach US$ 1.1 trillion by 2020, with modern
trade expected to grow at 20-25 per cent per annum, which is likely to boost
revenues of FMCG companies.
 Major Players
1. Hindustan Unilever Ltd.
2. Colgate-Palmolive
3. ITC Ltd.
4. Nestle
5. Parle Agro
 Porters’ five force Analysis of Indian
FMCG Industry
1. Barriers to Entry and exit (favorable)
The Indian FMCG Industry is characterized with modest entry and exit barriers.
Integrated business model and increasing capital requirement in the industry
restrict new entrants. Huge investments in setting up distribution networks and
promoting brands and competition from established companies.
2. Threat of substitutes (unfavorable)
Being an essential commodity the demand for consumer products is elastic.
Multiple brands positioned with narrow product differentiation. Companies
entering a category /trying to gain market share compete on pricing which
increases products substitution. Hence, threat of substitute is high in the industry.
3. Buyer bargaining power (unfavorable)
High brand loyalty for some products, thereby discouraging customers’ product
shift. But low switching cost and aggressive marketing strategies under intense
competition within the FMCG companies, induce Customers to switch between
products, thereby driving value for money deals for consumers
4. Supplier bargaining power (favorable)
Prices are generally governed by international commodity markets, making
most FMCG companies price takers. Due to the long term relationships with
suppliers etc., FMCG companies negotiate better rates during times of high
input cost inflation
5. Industry Competition (unfavorable)
Competitiveness among the Indian FMCG players is high. With more MNCs
entering the country, the industry is highly fragmented. Advertising spends
continue to grow and marketing budgets as well as strategies are becoming
more aggressive. Private labels offered by retailers at a discount to mainframe
brands act as competition to undifferentiated and weak brands.
 PESTLE ANALYSIS
◦POLITICAL FACTORS
- The Government of India has provided a full tax rebate for an income up to Rs 5 lakh
(US$ 6,930), which is expected to boost disposable in come in the hands of the
common people.
- Initiatives like Food Security Bill and direct cash transfer subsidies reach about 40% of
households in India.
- The minimum capitalization for foreign FMCG companies to invest in India is US$100
million
- 100 per cent FDI is allowed in food processing and single-brand retail and 51per cent
in multi-brand retail.
◦ECONOMIC FACTORS
- The economy is showing definite signs of a slowdown, and it is being witnessed
across industries. FMCG industry growth rates have, in fact, hit a near two-year
low, and this is being felt across urban and rural markets. (Dairy industry remains
unaffected and is continuing to grow as expected)

- Tax rates on various FMCG products were lower post GST implementation.
Producers passed on the cost benefit to the consumers further pushing the
demand.

- Increase in disposable income is a positive indicator for the FMCG industry.

◦Socio-cultural Factors
- Favorable demographic factors and increasing consciousness among the
population indicates high future demand for personal care products and specifically
for natural products.
- The changing preferences of the middle class families from the urban areas gave
importance to food & beverages sector and thus, fueled the growth in the last few
years.
- Increasingly, consumers are looking to buy from companies and brands that not
only have great products at the right price, but also fit with their values. Brands that
address consumer needs and aspirations and have a purpose at their heart, are
delivering stronger and faster growth.
◦Technological factors
-A transformation is underway in the area of business operations. Artificial Intelligence
powered intelligent automation and predictive capabilities have the potential to
disrupt the current ways of working and lead to new business models.(voice-activated
assistants, self-checkout counters ,studying consumer behavior and inventory control)

-Digital technology continues to pervade modern life. It is changing the way people
engage with each other, how they consume goods and services and how they shop.
This connected ecosystem of social, mobile and e-commerce is on the rise, fueled by
increasing internet penetration. This is creating newer opportunities to connect with as
well as to service consumers.
◦Legal Factors
- FMCG companies are subject to laws and regulations in diverse areas such as
product safety, product claims, trademarks, copyright, patents, competition,
employee health and safety, the environment, corporate governance, listing and
disclosure, employment and taxes.
-Food Safety and Standards Authority of India (hereinafter referred to as
"FSSAI"),develops science based standards for food and to regulate and monitor the
manufacture, processing, storage, distribution, sale and import of food so as to ensure
the availability of safe and wholesome food for human consumption.
◦Environmental Factors
-Customer respond to the environmental impact of plastic waste and emerging
regulation by different state governments to ban the use of certain plastics,
requires FMCG companies to find solutions to reduce the amount of plastic they
use; increase recycling post-consumer use; and to source recycled plastic for use in
their packaging.

-Some of the FMCG companies spend millions of dollars per year on reducing the
carbon footprint.
Strategies adopted by FMCG companies
1. Promotions and offers
- Many players offer combo deals, for eg: in case of soaps and
cosmetics, 4 soap bars are offered in the price of 3 (helps in increasing
sales while generating profits), selling cosmetics, shampoo and
conditioners as a combo pack at a discounted price.
2. Product innovation
- With a wide range of choice, Indian consumers have become choosy
when it comes to loyalty to a brand
- Therefore, many prominent players are improving their game with
bringing innovative products in the market.
3. India as an export hub
-With emergence of India as a strong regional economy, domestic and multinational
FMCG players can leverage India as a strategic sourcing hub for cost-competitive
products to cater to international markets. This has been witnessed as a strategy of
several FMCG companies whose revenues from the international markets has been
increasing.
4. Research Online Purchase Offline (ROPO)
- The internet assists consumers to carry out their own research on the kinds of products
they want to purchase and the available choice of brands for the particular product
- 1 in 3 FMCG shopper goes online before going to the stores
5. Joint Ventures (JV)
- In January 2018, Eveready Industries India entered into a JV with the Wings Group, an
Indonesian large conglomerate and one of the major FMCG companies, Universal
Wellbeing. Through this JV, Eveready has plans to market and distribute a large basket
of FMCG products in India